Total Cost Of Ownership Model Research Articles

Modeling the Total Cost of Ownership of an Electric Car Using a Residential Photovoltaic Generator and a Battery Storage Unit—An Italian Case Study

As electric vehicles gain acceptance, an increasing number of households consider the possibility of buying the bundle including an electric car, a photovoltaic system, and a battery storage unit. Apart from the attractive environmental benefits, a relevant uncertainty concerns the economic convenience of such a choice. Since many variables play a role, we set up a total cost of ownership model to evaluate whether, and under which conditions, the bundle is cost-competitive relative to buying an electric car only (and charging it from the electrical grid) or a conventional combustion engine car. By combining, for the first time, such an economic model with an energy model and a driving profile model, we find that the degree of electricity self-production used to charge the electric car might be very high, varying from 90% to 62%, depending on the annual distance traveled. The cost of such electricity varies widely and can be lower than the grid electricity price when fiscal incentives are available and for long annual distances traveled. A smart charging practice based on both economic factors and weather forecast can greatly enhance self-sufficiency, i.e., independence from the electrical grid. We estimate that, given the current Italian financial incentives, 10,000 km/year are needed to make the electric car cost-competitive with respect to an equivalent petrol-fueled one. Such threshold increases to more than 25,000 km/year if financial incentives are removed.

Building a Total Cost of Ownership model to support manufacturing asset lifecycle management

This paper proposes a methodology to build a Total Cost of Ownership (TCO) model aimed to support decision-making for manufacturing asset lifecycle management. Existing challenges for TCO adoption in industry are identified through literature review and through an explorative multiple case study involving eight manufacturing companies. Based on it, a general methodology is proposed for building a novel asset-centric performance-driven TCO model. The methodology is based on an integrated modelling approach that puts together technical performance analysis and economic analysis, enabling the asset users linking their knowledge about asset performance with offers specifications by the asset providers. In this way, the TCO model becomes a decision-making tool for the asset users that can also guide the relationship with providers. An application case within a chemical production company is described, showing how challenges are addressed through the proposed methodology, within a real context.

Effectiveness of carbon pricing policies for promoting urban freight electrification: analysis of last mile delivery in Madrid

This research analyzes the effect of carbon pricing policies in transport electrification. It combines a heuristic algorithm to solve the Green Vehicle Routing Problem with Multiple Technologies and Partial Recharges with an economic Total Cost of Ownership model. The paper compares the performance of battery electric (BEV) and internal combustion vehicles (ICEV) for last mile delivery, using real data of Madrid (Spain). The results show that carbon pricing is scarcely effective when daily mileage is low (precisely when BEVs require incentives), and its effectivity increases as mileage increases (precisely when it is not so necessary to incentivize BEVs). Hence, carbon pricing is not an effective tool for promoting electric vehicles in the short term, and as a result, any political decision to fix CO2 prices must be adopted with a long-term view in mind. Specifically for the case of Spain, this research shows that current aids to BEVs are insufficient, with the exception of some regions like Madrid, which complement national subsidies with regional ones.

Selected Issues of the TCO Model for the Conversion of the Conventional Bus Fleet to Electric One

National and European transport policy is now moving towards zero-emission transport. One way to achieve public transport policy objectives is to replace conventional buses with electric ones. However, due to the technical characteristics of electric buses, this process will be complicated. Tools are therefore required to support this process. The objective of the research project ERANET Electric Mobility Europe project "PLATON - Planning Process and Tool for Step-by-Step Conversion of the Conventional or Mixed Bus Fleet to a 100% Electric Bus Flee” is to support the stakeholders involved in the process of fleet renewal using an IT tool. Proper development of the tool requires the analysis of many aspects related to the process. The article presents selected elements influencing the total cost of ownership (TCO). The focus of the paper is on the technical and organizational aspects related to the replacement of bus fleet. Authors also shows the main aspects of the structure of TCO analysis.

Most Consumers Don’t Buy Hybrids: Is Rational Choice a Sufficient Explanation?

Although federal regulation of vehicle fuel economy is often seen as environmental policy, over 70% of the estimated benefits of the 2017–2025 federal standards are savings in consumer expenditures on gasoline. Rational-choice economists question the counting of these benefits since studies show that the fuel efficiency of a car is reflected in its price at sale and resale. We contribute to this debate by exploring why most consumers in the United States do not purchase a proven fuel-saving innovation: the hybrid-electric vehicle (HEV). A database of 110 vehicle pairs is assembled where a consumer can choose a hybrid or gasoline version of virtually the same vehicle. Few choose the HEV. A total cost of ownership model is used to estimate payback periods for the price premiums associated with the HEV choice. In a majority of cases, a rational-choice explanation is sufficient to understand consumer disinterest in the HEV. However, in a significant minority of cases, a rational-choice explanation is not readily apparent, even when non-pecuniary attributes (e.g., performance and cargo space) are considered. Future research should examine, from a behavioral economics perspective, why consumers do not choose HEVs when pricing and payback periods appear to be favorable.

Investment and Management Decisions in Aluminium Melting: A Total Cost of Ownership Model and Practical Applications

The well-established Total Cost of Ownership (TCO) concept has been applied to several durable goods industries, including machinery. However, none of the existing TCO models explicitly focus on such highly energy-intensive equipment as metal melting furnaces. In this paper, an application of the TCO concept to aluminium melting furnaces is explored. A TCO model is created and tested through seven case studies in the aluminium die casting industry. Results indicate that the capital expenditure (CAPEX) incurred by the sample companies accounts for only 3–5% of a furnace TCO. Moreover, the melting technology implemented in the furnace highly impacts its TCO, as both the furnace’s thermal efficiency and melting loss (i.e., the fraction of aluminium burnt during the melting process) significantly affect the costs incurred. Moreover, the sample furnaces’ cost effectiveness clearly relies on scale. This evaluation leads to identify technological and managerial levers to reduce a furnace TCO, e.g., by adopting energy-efficient furnaces and by installing centralized, large-sized furnaces to pursue scale economies.

Total Cost of Ownership of Fuel Cell Electric Vehicles Using Expert Assessments

We calculated the total cost of ownership (TCO) of fuel cell electric vehicles (FCEVs) in 2017, 2020, 2035, and 2050. Our TCO model incorporates proton exchange membrane fuel cell (PEMFC) cost and durability data that we obtained during our expert elicitation interviews [1]. Our assumptions, including hydrogen storage system and fuel costs, are consistent with those published by the U.S. Department of Energy [2, 3]. We characterized the uncertainty associated with FCEV life cycle costs, and we compared our FCEV projections to the DOE’s 2035 projections for internal combustion engine vehicles (ICEVs), battery electric vehicles (BEVs), hybrid-electric vehicles (HEVs), and plug-in hybrid electric vehicles (PHEVs). In our sensitivity analyses, we studied the dependence of FCEV TCO on vehicle lifetime, hydrogen fuel cost, and hydrogen storage system cost. All monetary values are expressed in 2017 USD. On median, we estimated the FCEV TCO to be $0.42/mile in 2017, $0.33/mile in 2020, $0.19/mile in 2035, and $0.18/mile in 2050 (Figure 1). Our 2017 and 2020 estimates ranged widely. Our 2017 estimates ranged from $0.40 to $0.75/mile and 2020 estimates ranged from $0.31 to $0.51/mile. By 2035, FCEVs could be competitive with ICEVs, BEVs, HEVs, and PHEVs, as long as the PEMFC stack lasts sufficiently long. If the FCEV’s lifetime falls below 11 yrs, FCEVs could become more expensive than competing vehicles. At about 11 yrs, the FCEV’s TCO exceeds that of the BEV. If stack durability remains a challenge, replacing the stack could be economical. Achieving a hydrogen fuel cost below $4/kg H2 and hydrogen system cost below $390/kg H2 could further improve FCEVs’ competitiveness.

BackHauling-as-a-Service (BHaaS) for 5G Optical Sliced Networks: An Optimized TCO Approach

Due to their initial overestimation of demand, many network operators are overprovisioning their infrastructure. Overdesigned networks vastly increase operational costs without generating expected revenues. In particular, high-density cell architecture in future 5G networks will face big technical and financial challenges due to avalanche of traffic volume and massive growth in connected devices. Planning scalable 5G mobile backhaul (MBH) transport networks becomes one of the most challenging issues. However, existing planning solutions are no longer appropriate for coming 5G requirements. New 5G MBH architecture emphasizes on multitenancy and network slicing, which requires new methods to optimize MBH planning resource utilization. In this paper, we introduce an algorithm based on a stochastic geometry model (Voronoi Tessellation) to define backhauling zones within a geographical area and optimize their estimated traffic demands and MBH resources. Then, we propose a novel method called backhauling-as-a-service (BHaaS) for network planning and total cost of ownership (TCO) analysis based on “you-pay-only-for-what-you-use” approach. Finally, we enhanced the BHaaS performance by introducing a more service-aware method called traffic-profile-as-a-service (TPaaS) to further drive down the costs based on yearly activated traffic profiles. Results show BHaaS and TPaaS may control and enhance 22 ${\%}$ of the project benefit compared to traditional TCO model.

A probabilistic total cost of ownership model to evaluate the current and future prospects of electric cars uptake in Italy

In order to evaluate the current and future prospects of electric cars’ in Italy, we develop a probabilistic total cost of ownership (TCO) model, which includes stochastic and non-stochastic variables, vehicle usage and contextual assumptions. We find that electric cars are currently not cost-competitive in Italy with the conventional petrol or diesel cars. However, they are cost-competitive with the hybrid electric cars when more than 10,000 km are annually traveled. With incentivizing policies (a €5,000 subsidy and a €400 parking and access fee annual savings), currently in place in a limited number of Italian Regions and cities, electric cars perform in monetary terms better than hybrid electric cars and some diesel cars, especially if they are charged at home. However, electric cars are expected to gain market share in the year 2025 if fuel prices follow past trends, even without subsidies. The driving force could be a drop in their retail price, thanks to declining battery pack costs, and a possible revision of the taxes on diesel.

I/O Workload Management for All-Flash Datacenter Storage Systems Based on Total Cost of Ownership

Recently, the capital expenditure of flash-based Solid State Driver (SSDs) keeps declining and the storage capacity of SSDs keeps increasing. As a result, all-flash storage systems have started to become more economically viable for large shared storage installations in datacenters, where metrics like Total Cost of Ownership (TCO) are of paramount importance. On the other hand, flash devices suffer from write amplification, which, if unaccounted, can substantially increase the TCO of a storage system. In this paper, we first develop a TCO model for datacenter all-flash storage systems, and then plug a Write Amplification model (WAF) of NVMe SSDs we build based on empirical data into this TCO model. Our new WAF model accounts for workload characteristics like write rate and percentage of sequential writes. Furthermore, using both the TCO and WAF models as the optimization criterion, we design new flash resource management schemes (MINTCO) to guide datacenter managers to make workload allocation decisions under the consideration of TCO for SSDs. Based on that, we also develop MINTCO-RAID to support RAID SSDs and MINTCO-OFFLINE to optimize the offline workload-disk deployment problem during the initialization phase. Experimental results show that MINTCO can reduce the TCO and keep relatively high throughput and space utilization of the entire datacenter storage resources.

Conceptualising the impact of information asymmetry on through-life cost: case study of machine tools sector

Information asymmetry (IA) in terms of contextual variety and importance is one of the most challenging aspects of through-life costing in product-service systems (PSS). IA is an imbalance in the information, data and knowledge shared among the parties involved in a contractual agreement. In manufacturing systems under PSS, interaction and effective communication among several parties who are involved in a contractual agreement, rely on the continuity and accuracy of information and context. In such systems, contextual variety exhibits complexity and uncertainty in through-life costing and subsequently in PSS cost assessment. Although the economic aspect of PSS has been studied previously, the impact of IA on through-life cost and for different PSS solutions has not been detailed. Considering manufacturing value chains, this paper introduces a new concept of PSS-hierarchy to perform through-life costing in the presence of IA for various PSS solutions. Moreover, this paper proposes a generic life-cycle model for different PSS solutions to assess the total cost of ownership (TCO). The proposed model has been developed to support decisions on contract design in manufacturing systems. This study considers the manufacturer, service provider and customer perspectives to develop the TCO model using a machine tool manufacturing case study.

A consumer-oriented total cost of ownership model for different vehicle types in Germany

In Germany, market penetration by alternative powertrains has been generally processing at a slow pace. Therefore, reaching the 2020 target of one million registered electric vehicles (EVs) is a major challenge. We analyze the German market by advancing and refining existing consumer-oriented total cost of ownership (TCOC) models and demonstrate the validity of our model by comparing the cost-efficiency of EVs and internal combustion engine vehicles (ICEVs) including the battery resale value for second use and second life. The TCOC model was calculated for the ten most frequently registered battery electric vehicles (BEVs) and hybrid electric vehicles (HEVs) and compared with ICEVs in the same vehicle segments. The results are further validated through applying three typical annual mileage driver profiles and by Monte Carlo simulations under various scenarios. Results reveal that only a few BEVs and HEVs are economical without subsidies when compared with ICEVs in all considered scenarios. The subsidies only barely change the results. The mini and the medium vehicle segment remain uneconomical in all tested scenarios. Overall, we conclude that subsidies support the competitiveness of BEVs, but fail to lead to favorable TCOC within several vehicle segments and several tested annual mileages.

A TCO Model for Supporting the Configuration of Industrial Plants

In the current industrial context, where processes are extremely flexible to meet the changes of the market demand, the traditional strategies for managing the design and investment of industrial assets are too restrictive. Indeed, such strategies just consider the procurement price of an asset rather than its lifecycle cost. In this framework, the paper proposes a Total Cost of Ownership (TCO) model that can be adopted in B2B context for establishing the best asset configuration and procurement strategy by considering its CAPEX and OPEX. Such a TCO model has been implemented into an Enterprise Application Software for supporting the TCO evaluation. The presented model and software tool have been applied within an Italian food company for supporting the assets investment management.

Total cost of ownership and its potential implications for battery electric vehicle diffusion

Battery electric vehicles (BEVs) have been slow to diffuse on the international as well as the Swedish market. Previous studies have indicated situational factors such as economic factors, size and performance to be of major importance for vehicle purchasers in their choice of vehicle. In this paper, the authors explore a consumer centric total cost of ownership (TCO) model to investigate the possible discrepancy between purchase price and the TCO between internal combustion engine vehicles (ICEVs), hybrid electric vehicles (HEVs) and BEVs. The creation and testing of the TCO model reveals that computation could be a challenging task for consumers due to bounded access of relevant data and the prediction of future conditions. The application of the model to the vehicle sample found that BEVs could be cheaper compared to ICEVs and HEVs. The findings in this paper could prove to be of importance for policy and marketing alike in designing the most appropriate business models and information campaigns based on consumer conditions in order to further promoting the diffusion of BEVs in society.

Total Cost of Ownership for Product-Service System: Application of a Prototypal Model to Aluminum Melting Furnaces

The well-established Total Cost of Ownership (TCO) concept can support the development or assessment of Product-Service Systems (PSS), since it adopts a lifecycle perspective, therefore enabling a “whole cost” evaluation, that may lead to eco-efficient choices by customers. This paper explores an application of the TCO concept to aluminum melting furnaces, a specific example of highly energy-intensive equipment.A TCO model is created, validated and tested through 8 case studies of small- and medium-sized aluminum die casting producers located in Lombardy. Empirical findings of the analyses carried out through the model suggest the main determinants of furnaces TCO and possible levers to reduce costs of such equipment. On average, operating costs of an aluminum melting furnace, such as materials, labor and energy, combine for about 95% of the furnace TCO. Based on current operational modalities, the studied companies incur costs ranging from about 127 to 400 Euros per ton of molten aluminum, due to furnaces ownership and utilization. This evaluation leads to identify actions to reduce such costs (e.g. through energy-efficient furnaces, scale economies by installing centralized, large-sized furnaces) and ideas for the development of use or result-oriented PSS types.

Risk adjusted total cost of ownership model for strategic sourcing decisions

The aim of this research is to develop a strategic sourcing decision model that incorporates the cost elements and risk elements. This paper demonstrates the effect of supply chain disruptions on total cost of ownership (TCO) in sourcing decisions. A suitable methodology was designed to conduct this research. Brainstorming method was used to identify relevant cost and risk factors in a sourcing context. Then, failure mode and effects analysis and analytic hierarchy process was used for quantifying and prioritising supply chain risks in sourcing context. This research propounds that an actual cost of sourcing is much higher than TCO. When buying firm considers only TCO model, then TCO comes at 156.75 M INR and when buying firm considers combined TCO and risk, then total cost comes out to be 270.89 M INR. Riskiness of supplier and susceptibility of supplier's environment to risks greatly affects total cost of doing business.

Electrifying light commercial vehicles for city logistics? A total cost of ownership analysis

Different measures are considered by the authorities to tackle the negative impacts of city logistics. Among them, battery electric vehicles are seen as a promising solution, but high purchase cost represents an important barrier to their adoption. However, these vehicles benefit also from low operational costs. This different cost structure between electric and conventional vehicles makes therefore a comprehensive cost analysis necessary for fleet managers who want to assess the real competitiveness of the vehicles. Hence, we developed a total cost of ownership model to assess the competitiveness of quadricycles and light commercial vehicles for freight transport companies. This paper presents the results for 7 battery electric vehicles, 5 diesel vehicles and 3 petrol vehicles. The results of a sensitivity analysis explored also the possible measures that can support their competitiveness. The model shows that battery electric vehicles have a better competitive position than petrol vehicles but they do not compete yet with diesel vehicles. A sensitivity analysis shows however that their total cost of ownership can become lower than diesel vehicles depending on their utilization, future market conditions or government support. Still, electric quadricycles appear to be currently an affordable solution for transport operators to adopt electric vehicles since their total costs of ownership is lower than diesel light commercial vehicles.

Battery Sizing for Plug-in Hybrid Electric Vehicles in Beijing: A TCO Model Based Analysis

This paper proposes a total cost of ownership (TCO) model for battery sizing of plug-in hybrid electric vehicles (PHEVs). The proposed systematic TCO model innovatively integrates the Beijing driving database and optimal PHEV energy management strategies developed earlier. The TCO, including battery, fuel, electricity, and salvage costs, is calculated in yearly cash flows. The salvage cost, based on battery degradation model, is proposed for the first time. The results show that the optimal battery size for PHEVs in Beijing is 6–8 kWh. Several additional scenarios are also analyzed: (1) 10% increase in battery price or discount rate leads to an optimal battery size of 6 kWh, and 10% increase in fuel price shifts the optimal battery size to 8 kWh; (2) the longer and more dispersive daily range distribution in the U.S. increases the optimal battery size to 14 kWh; (3) the subsidy in China results in an optimal battery size of 13 kWh, while that in the U.S. results in 17 kWh, and a fuel savings rate based subsidy policy is innovatively proposed; (4) the optimal battery size with Li4Ti5O12 batteries is 2 kWh, but the TCO of Li4Ti5O12 batteries is higher than that of LiFePO4 batteries.

Total cost of ownership along the supply chain: a model applied to the tinting industry

Total Cost of Ownership (TCO) is a consolidated purchasing tool applied across different industries. However, in some cases, existing models are not satisfactory. The paper analyses the tinting industry, where manufacturers of colourant dispensing machines sell products and related services to paint producers, who install them in retail stores to sell the colour paints to the final consumers. Authors develop a TCO model integrating those existing in literature and including the following specifications: (i) all relevant costs along the product life cycle are considered; (ii) both goods and service-related costs are considered; (iii) both explicit and hidden costs are considered; (iv) the model adapts to the perspectives of various actors in the supply chain. The TCO model is tested with real data and provides useful insights on real costs sustained by each actor.

Electric versus conventional vehicles for logistics: A total cost of ownership

Today, different measures are investigated to solve the challenge of a sustainable urban freight transport. Among them, electric vehicles are often viewed as an interesting solution but the purchase cost of these vehicles is commonly seen as a barrier to their adoption. However the different cost structure between electric and conventional vehicles makes an analysis of every cost particularly needed if fleet managers want to assess the real competitiveness of the vehicles. As a result, we developed a total cost of ownership model to assess the competitiveness of light commercial vehicles in the Brussels-Capital Region. This paper presents the results of the total cost of ownership analysis on 8 battery electric vehicles, 5 diesel vehicles and 2 petrol vehicles. The results of a sensitivity analysis of the model are also presented. The electric vehicles were found to be competitive with conventional vehicles in the category of the quadricycles and the light commercial vehicles with a payload lower than 1,000kg: five out of six battery electric vehicles had a cost lower than the conventional vehicles of their category. The situation is inverted for the battery electric vehicles with a payload above 1,000kg where the costs are always higher than the conventional vehicles because of the expensive purchase and battery costs. Since battery electric vehicles are found to be a viable solution for some parts of the logistics, the next challenge should be to convince the fleet managers of the benefits of battery electric vehicles.