economic analysis for implementation of corrosion...

The Corrosion Society

Economic Analysis

for

Implementation

of

Corrosion Control Strategies for

Water and Wastewater Infrastructure

Ron Bianchetti, P.E

The Corrosion Society

Asset Management

• Utilities have Tens of Millions to Billions of

dollars in fixed assets.

• Utilities would like to maximize the life of the

asset beyond the actuarial life.

• To extend the life of the asset corrosion control

plays and important role in that analysis.

• Corrosion control is typically not a key part of a

Utilities Asset Management Program.

Water Source

Transmission

Treatment

Distribution

Storage

The Corrosion Society

• Industry Sector Analysis– 26 Sectors in 5 categories

• Infrastructure

• Utilities

• Transportation

• Production and Manufacturing

• Government

Congressional Study – 2002a.k.a.(Cost of Corrosion Study)

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• Total Annual Estimated Direct Cost of

Corrosion in the U.S. is:

$137 B (US) based on Sector Analysis

or

$276 B (US) or 3.1% of the GDPbased on extrapolation to include the

full U.S. economy

Cost of Corrosion Study

The Corrosion Society

The Category for Utilities Included:

– Gas Distribution

– Drinking Water and Sewer Systems

– Electrical Utilities

– Telecommunications

The study annual cost for this category was

$47.9 B or 34% of the $137 B total.

Cost of Corrosion Study

The Corrosion Society

• Drinking Water and Sewer Systems sector

costs were estimated at $36 B or 76% of

the category total of $47.9 B.

• The Breakdown:

– Drinking Water Systems B$ 19.25

– Sewer Systems B$ 13.75

Cost of Lost Water B$ 3.00» Total:B$36.00

Estimated at B$56.0 in 2010 dollars

*

Cost of Corrosion Study

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Goals of a Corrosion Control Program

Maximize the useful life of new infrastructure

Extend the useful life of existing infrastructure

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• Material Selection

• Coatings

• Cathodic Protection

Corrosion Control Techniques

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• Material Selection

• Coatings

• Cathodic Protection

Material

selection

Material

selection

Material

selection

Material

selection

The Corrosion Society

• Material Selection

• Coatings

• Cathodic Protection

The Corrosion Society

• Material Selection

• Coatings

• Cathodic Protection

Cathodic

Protection

Cathodic

Protection

Cathodic

Protection

The Corrosion Society

0

10

20

30

40

50

60C

UM

UL

AT

IVE

CO

RR

OS

ION

LE

AK

S

193

0

194

0

195

0

196

0

197

0

198

0

199

0

200

0

YEAR

Actual Aqueduct Corrosion Leak History

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• Methods used in this analysis will include:

– Discounted Cash Flow

– Future Value of Cash Flows

– Net Present Value

Economic Evaluation Methods

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where

• DPV is the discounted present value of the future cash flow (FV);

• FV is the nominal value of a cash flow amount in a future period;

• i is the interest rate, which reflects the cost of tying up capital; Assumed

4.5% for these case studies

• N is the number of years before the future cash flow occurs.

Discounted Present Value

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Future Value

where,

PV is the present value, n is the number of

compounding periods, and i stands for the

interest rate per period. (i -is assumed at 3.5% for theses case studies)

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• Typical expected actuarial asset life:

– Distribution Pipelines 50-75 years

– Treatment Plants 75 years

– Pumping Plants 50- 75 years

– Transmission Pipelines 75-100years

– Dams 100 years

– Reservoirs 50 -75 years

Expected Asset Life

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Decision Matrices: Various individuals and

agencies have developed corrosion control

evaluation matrices to better qualify the need

for corrosion control of buried pipelines.

o USBR

o Spicklemire

o Olstad

o DIPRA

Analytical Model Components

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Environmental Considerations

Parameter

In

cre

asi

ng

Co

rro

sivi

ty

Resistivity pH Chlorides Moisture

Low

High

Low

High

High

Low

High

Low

High

Low

Sulfates

1,000

ohm-cm

2,000

ohm-cm

5,000

ohm-cm

4.5

6.5

8.5

1000

ppm

500

ppm

250

ppm

Wet/Dry

Cycling

Continuously

Wet

Intermittently

Wet

Redox

High

Low

2000

ppm

1000

ppm

500

ppm50 mV

100 mV

> 100 mV

Se

ve

reM

od

era

teM

ild

Ne

glig

ible

High

Stray

Current

Low

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• Stray current from DC or AC sources.

• Changes in site conditions

– Cyclic water table

– Third party damage

– Foreign utilities

– Leaking joints

• Microbiologically Influenced Corrosion (MIC)

• Cathodic protection shielding

• Structural losses due to corrosion

• Collateral damage

Analytical Model does not include:

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• Rossum Equation Leak Analysis

Utilizes soil characteristic data (pH, aeration, resistivity)

Pipe wall thickness

Pipe Diameter

Pipeline Length

Output data

Estimated Year to first leak

Estimated Year of each subsequent leak or leaks

Estimated cumulative leaks over pipeline design

life (75 years)

Pipeline Case Study

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Economic Analysis

• Case Study:– Transmission Pipeline

• 35,000 lineal feet (10,668 m), 60-inch (1524mm)

diameter dielectrically coated steel water

transmission main.

• Assume 10% coating damage

• 40-foot (12.19m) sections non-welded joints

• Installation in urban and rural areas. Approximately

50% in each area.

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Soil parameters:

– pH 7.5

– resistivity range 500 to 7,000 ohm-cm

(use 2,000 for example)

– chlorides 500 to 2350 ppm

– sulfates 170 to 1100 ppm

– Redox negative

– aeration fair

Pipeline Case Study (con’t)

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• Decision Options Evaluated:– Do Nothing Option: This option provides no additional

corrosion control improvements other than the selected coating

on the pipeline.

– Corrosion Monitoring Option/Deferred CP: This

option includes installation of joint continuity bonds, dielectric

insulating joints, and test stations for corrosion monitoring and

deferred CP.

– Cathodic Protection Option: Includes option 2 items

and the initial capitalization and the installation of a

cathodic protection system

Pipeline Case Study (con’t)

The Corrosion Society

Do Nothing Option: This option provides no additional

corrosion control improvements other than the selected coating

on the pipeline.

Assumes future leaks due to corrosion will

be minimal.

Installation of corrosion control components

in the future may be cost prohibitive.

Assumes life extension beyond expected

design life may not be achieved.

Pipeline Case Study (con’t)

The Corrosion Society

Do Nothing Option:

Project leak frequency and quantity and year leak occurs

evaluated using Rossum analysis. Based on that analysis the

first leak occurs at year 9 and accumulated leaks over the

design life (75 years) is 85.

Leak repair cost is estimated at $10,000 (2009 dollars)

Determine FV of leak repairs based on Rossum analysis.

Calculate total cost and DPV for Option over expected 75

year life.

Total cost is $5,493,929 and the DPV is $1,101,870

Pipeline Case Study (con’t)

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Corrosion Monitoring and Deferred CP Option:

This option includes installation of joint continuity bonds,

dielectric insulating joints, and test stations for corrosion

monitoring.

Assume implementation of a CP system will be installed

following the second leak (year 13) as determined from the

Rossum analysis.

Calculated FV for repairs of 2 leaks and installation of

corrosion monitoring components and cathodic protection in

year 13 following leak 2.

Total cost $844,898 and the DPV is $201,911

Pipeline Case Study (con’t)

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Cathodic Protection Option :

This option includes installation of joint continuity bonds,

dielectric insulating joints, and test stations for corrosion

monitoring and cathodic protection as part of the pipeline

installation.

Calculated FV for installation of corrosion monitoring

components and cathodic protection.

Total cost $770,017 and the DPV is $209,442

Pipeline Case Study (con’t)

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Summary Pipeline Case Study(75-year)

Options DPV Total Cost

Do Nothing $1,101,870 $5,493,929

Corrosion

Monitoring/Deferred

CP

$201,115 $844,898

Cathodic Protection $209,442 $770,017

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• Base Assumptions:

– 3MG Steel shell with knuckle roof.

– Average water resistivity 3,500 ohm-cm

– Marine atmospheric environment

– Non-freezing area

3MG Steel Reservoir Case

Study

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• Decision Options Evaluated:– Do Nothing Option: This option provides no additional

corrosion control improvements following initial construction.

Minor maintenance coating repairs every 2 years.

– Ongoing Recoating and Cathodic Protection :

This options includes Recoating Exterior Yr 20,40 and 60.

Recoating interior Yr 30 and 60.

Initial CP installation costs and anode replacement

Yrs. 20,40 and 60.

3MG Steel Reservoir Case

Study

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Summary Steel Reservoir

Case Study (75 year)

Options DPV Total Cost

Do Nothing $7,679,508 $40,302,665

Maintenance

Recoating and CP$2,883,493 $6,669,560

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• Economic analysis applied to key infrastructure

components for any utility asset is a useful tool

to evaluated the benefits of a corrosion control

program.

• Based on the case studies presented the

benefit-to-cost ratios when properly

implementing sound corrosion control strategies

is 6.8 and 6.0 times that of the Do Nothing

Option.

Conclusions

Questions ????

and

Possible Answers !!!!!

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