Novel methodology for efficiency-based long-term investment planning in water infrastructures

Abstract

Uncertainties are a key issue for long-term capital investment planning in asset intensive organizations. Amongst the sources of uncertainty are the quality and accuracy of readily available data and the assumptions underlying the several estimations involved in capital investment plans, namely those related to renewals, replacements and expansion costs and the useful lives of the assets. This article proposes a novel methodology for efficiency-based long-term investment planning in water infrastructures and discusses the effect of uncertainties in the investment strategies. An industrial water supply system of the Industrial and Logistics Zone of Sines (ILZS), installed in the Portuguese seacoast around 40 years ago, is used as a case study to demonstrate the proposed methodology. The study includes stochastic and deterministic approaches to an asset management key-performance indicator (KPI) that is currently being tested in the Portuguese water sector—the Infrastructure Value Index (IVI).