ETL 1110-2-550
30 May 97
Appendix E
maintenance costs, or changes in repair or
Economic Models (Event Trees)
replacement costs.
d. The event tree also facilitates coordination
of the engineering reliability analysis with the
E-1. General
economic evaluation. In the Corps' planning frame-
work, the event tree assists in developing a clear
Engineering reliability analysis coupled with
definition of the without-project condition. For
traditional engineering judgment offers a more
major rehabilitation studies, the without-project
effective and objective way of identifying future
condition is a description and evaluation of the
events and consequences than engineering judgment
consequences that are expected to occur during the
alone. Detailed economic studies including risk and
period of analysis in the absence of rehabilitation.
uncertainty analysis provide decision makers with a
Use of event trees requires planners (and project
more comprehensive picture of the range and like-
engineers) to graphically depict what is expected to
lihood of the economic consequences of any par-
happen to various components in any given time
ticular project proposal. This appendix provides
period. This process helps clarify critical elements
guidance for the use of event trees and incorporating
and possible solutions. It highlights any apparent
engineering reliability and hydropower benefits
data gaps and serves as a road map for building the
studies in the economic analysis of major rehabilita-
economic spreadsheet model.
tion projects.
E-3. The Economic Model
E-2. Event Trees
In its most simplistic form, the economic model that
An event tree is simply a diagram of the potential
is developed for a major rehabilitation analysis
events and outcomes that could occur to a given
could be described as a basic accounting spread-
component or group of components in one time
sheet. In its final evolution it can span many mega-
period or in subsequent time periods.
bytes of computer disk space and devour hundreds
of hours of computer time. The Institute for Water
a. Event tree diagrams are used to identify
Resources (IWR) has developed, and is continuing
possible occurrences of satisfactory or unsatisfac-
to improve, a PC-based program that will handle the
tory performance and their consequences, given
economic modeling requirements much faster and
specific events. For example, a mechanical/
easier than using spreadsheet-based software. The
electrical component such as a turbine runner or a
basic spreadsheet model is described below because
generator, during any time period, may be fully
it is relatively easily understood.
operational, out of service from a prior period, or
exhibiting unsatisfactory performance.
a. The spreadsheet model is first created to
mirror the single unit event tree diagram for the
b. These possible events or branches of the
without-project condition. This incorporates both
tree identify all of the pathways that may occur
the physical and economic consequences of possible
during each time period. The event tree is devel-
events and the engineering reliability analysis for
oped for each component to be evaluated for each
each component. A Monte Carlo simulation pro-
time period of the analysis.
cedure is used to calculate variance and expected
values.
c. The consequences of each pathway are also
identified. The consequences may consist of
b. Monte Carlo simulation is a process in
changes in system hydropower generation costs due
which random numbers are generated from a range
to unit outages or changes in unit generating
of possible values, usually between zero and one,
efficiencies, increases or decreases in operation and
E-1
Previous Page
