Understanding Future Demand and Risk

Explaining the “Service Levels, Growth, Risk, Lifecycle Management Diagram” in the previous post, Ross talked about “Levels of Service.”

In this post, Ross explains “Future Demand” and “Risk” and he cites a significant risk management lesson from the Christchurch earthquake.

Future Demand

Future Demand is about, is the demand for the services growing, is it staying the same? Is it decreasing? Is it growing in one part of your network and decreasing in another?

It’s around congestion, so you have to use the Auckland example. Do I have enough roads? Do I have enough capacity? And it’s around managing demand.

Okay, it can be around transportation, it can be around tolling, it could be around that sort of stuff that London is doing work where if you come into the inner circle then you’re paying an absolute fortune.

It can be around pollution control and things like that as well. All that sort of stuff, all comes into this future demand management area.

So the answer as an engineer is not always what it used to be, oh we’ve got demand, we’ll build something. Oh, hang on can we modify that demand?

Is it only peak demand? Are there ways of spreading the demand and so those sorts of things.

So it’s around, there’s a whole field of study just on how do you manage demand and then what would that do to the assets?

One of the things that asset management planning has taught us is just how expensive assets are because we now can measure the cost of them through the whole lifecycle.

It used to be, you would go, oh you build a road, you build a bridge or you build a water supply. Cool, that’s 10 million or 100 million dollars. Good, what’s the next project?

Well, now it’s not 100 million dollars. That’s just the initial purchase cost. It’s the cost of servicing the money so there’s a whole finance cost. There’s the cost of operating and maintaining and replacing that asset and the whole of life cost to that $100 million-asset might be $500 million.

And so you start going, well actually no they are quite expensive. So if we don’t have to build one of those, we shouldn’t. And so you start looking at those sorts of things.

Risk

Now Risk is the other thing. And we talk a little bit about that because engineering risk in itself is a recently simple concept and I’m sure you’ve covered it in your study somewhere but the trade-off between service levels, between demand, between failure risks and service delivery risks so you can have absolute failures on natural events or disaster or whatever or collapse.

But there’s also the failure to provide services, business failure. There’s a knock on the cost of failure and stuff like that.

So there are some quite interesting interrelationships between these. And then what do I do in terms of lifecycle management to manage those risks.

Some of those risks you can never manage. If you’ve got a big earthquake or big volcanic eruption, not much you can do about it. You just have to worry about what’s left. And where do we go from there?

Lessons from the Christchurch earthquake

Exactly what we did in Christchurch but you can do things to arm a system or harden them up or provide alternate capacity or things like that.

One of the classic examples in Christchurch was, prior to the earthquake, the electricity provider had done some risks analysis and they’ve gone, oh hang on our substations aren’t quite as good as if we have a decent earthquake, our substation buildings would fall down and some of our electrical gear isn’t tied down quite as well could be on plinths and things like that.

Let’s just do quite a simple exercise or just get in there and so some almost operations and maintenance work to fix up those buildings and we’ll just make sure that all of our electrical kits are tied down well for earthquakes. So they had done that prior to the earthquakes.

So when the earthquakes came through, they didn’t lose a substation, which means they lost lines but lines are quick, they can get them back that reasonably quick.

You lose a substation because everything falls over, knocks, and burns, it takes you months to get it back. And they didn’t lose a single one.

So just simple things like that, we can go… oh, that’s a risk but the cost of fixing that risk isn’t particularly high.

And those sorts of things apply around when you put your headwalls on bridges and culverts, to stop scour and things – just little things can often make quite a difference. So that’s where your risk analysis drops in there.

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