Accommodating energy price volatility in life cycle cost analysis of asphalt pavements

Mirzadeh, Iman and Birgisson, Bjorn (2016). Accommodating energy price volatility in life cycle cost analysis of asphalt pavements. Journal of Civil Engineering and Management, 22 (8), pp. 1001-1008.

Abstract

Energy price is related to more than half of the total life cycle cost of asphalt pavements. Furthermore, the fluctuation related to price of energy has been much higher than the general inflation and interest rate. This makes the energy price inflation an important variable that should be addressed when performing life cycle cost (LCC) studies re- garding asphalt pavements. The present value of future costs is highly sensitive to the selected discount rate. Therefore, the choice of the discount rate is the most critical element in LCC analysis during the life time of a project. The objective of the paper is to present a discount rate for asphalt pavement projects as a function of interest rate, general inflation and energy price inflation. The discount rate is defined based on the portion of the energy related costs during the life time of the pavement. Consequently, it can reflect the financial risks related to the energy price in asphalt pavement projects. It is suggested that a discount rate sensitivity analysis for asphalt pavements in Sweden should range between –20 and 30%.

Publication DOI: https://doi.org/10.3846/13923730.2014.945951
Divisions: Engineering & Applied Sciences
Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis in Journal of Civil Engineering and Management on 18/12/15, available online: http://www.tandfonline.com/10.3846/13923730.2014.945951
Uncontrolled Keywords: discount rate,life cycle cost,pavement design,road & highways,Civil and Structural Engineering,Strategy and Management
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Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
Published Date: 2016
Authors: Mirzadeh, Iman
Birgisson, Bjorn

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