Economics in Transformer Management: Focus on Life Cycle Cost, Design Review, and the Use of Simple Bayesian Decision Methods to Manage Risk

This chapter aims to demonstrate that risk awareness, or risk aversion, has a clear mathematical basis that makes it a sound background for understanding how to manage a risk profile in a company. Risk and uncertainties is an important part of the life cycle cost (LCC) method. A sound design, a sound maintenance, monitoring, and reinvestment policy have a positive aspect of deferred outage and repair cost which should be part of an LCC analysis. The chapter provides a relevant example of how to use simple Bayesian methods and to underline that it is possible to manage uncertainties without getting lost in the process. In the field of utilities and power generation, power transformers are decisive to the performance, reliability and productivity of the system. Specifically, the technical complexities, high capital costs, and long life expectancy of transformers pose unique decision-making challenges to asset managers.