A Parametric Simulation Model for Evaluating Cost Effectiveness of Remote Monitoring for Risk Reduction in Rural Water Supply Systems and Application to the Tazewell County, Virginia System

A simulation model analyzes cost effectiveness of remote facility monitoring for risk reduction in rural water supply systems by performing a break-even analysis that compares operating costs with manual and remote monitoring.

Water system operating cost includes the value of water loss (i.e., realized risk) resulting from operating excursions which are inversely related to mechanical reliability. Reliability is controlled by facility monitoring that identifies excursions enabling operators to implement mitigating measures.

Cost effectiveness refers to the cost relationship among operating alternatives that reveals changed economic conditions at different operating rates inherent in the inverse relationship between fixed and variable costs. Break-even analysis describes cost effectiveness by identifying the operating rate above which the more capital intensive alternative will result in lower operating cost.

Evidence indicates that increased monitoring frequency associated with remote monitoring can reduce water system operating cost by improving reliability, but whether remote monitoring is cost effective depends upon system-specific factors. The lack of a documented tool for evaluating this type of cost effectiveness led to the project objective of developing a model that performs break-even analysis by simulating water system operating costs as functions of system size (delivery rate).

When the spreadsheet-based static deterministic parametric simulation model is run for the Tazewell County, Virginia water system based upon 1998 data, break even is predicted at approximately fifty-five percent of annual capacity (116,338,000 gallons) with operating cost of $1,043,400. Maximum annual operating cost reduction from a $317,600 investment provides payback in nine years.