Exercise 29: Varying costs with the age of a resource

So far we have looked at the evolution of a cost trend over time. Now we are going to consider the age of an asset. STEM tracks the numbers of installed units of resources. For any individual resource, these units may have been installed at a number of different times, typically to meet increasing demand or a pre-defined roll-out plan via planned units. STEM tracks each installation age separately, and thus can differentiate between the operating costs for old equipment compared to new.

To avoid confusion with the cost trends, we will revert to WiMAX-DSL27 (in order to keep the same charts).

1. Close the current model and re-open WiMAX-DSL27.

Age factor

Suppose the DSLAM will be maintained by the vendor for the first three years after it is installed.

2. Go to the Maintenance Cost Age Factor input for the DSLAM chassis (Advanced/Cost Trends) and define an Interpolated Series as follows:

Here ‘Y3’ means the third year installed in the network, as opposed to the more general third year from model start date. Set the initial period to Y3 first: then the Y4 will be added automatically when you enter the 1.0.

3. Check the Maintenance Cost result now.

There is no maintenance cost in 2007 (the installation year), and it achieves its usual value in 2010, which is the fourth year of installation.

4. What is going on in 2009?
5. If you can’t figure this out, go back to the Editor and try graphing the Age Factor (dialog menu/Graph button).

Step interval for a time-series input

6. How could you re-define the Age Factor to avoid this problem?
7. What do you think the Step input in the Interpolated series is for?

When you graph the Age Factor input, Y3 is shown relative to the run period from 1 Jan 2006, i.e., as 2008; whereas Y3 is actually interpreted as the third year of an installed resource’s lifetime, i.e., 2009 for a unit installed in 2007.

8. If there is time, try copying the age factor for the DSLAM chassis to the DSL shelf resource (copy and paste at the input field level) and re-run the model. The three-year ‘maintenance holiday’ applies separately to the three separate installation ages of the DSL shelf. (Think carefully about when these separate ages are installed.)

Of course the cost trend and age factor mechanisms work together in a multiplicative sense. Try doing all of this manageably in a spreadsheet!

Unlike cost trends, age factor inputs are not normalised. This is because nominal unit costs are entered for a calibration period in absolute calendar time, whereas the age factor is defined in relative time from installation. In this very common example, the age factor for the only installed age is zero in the calibration period, which would prohibit normalisation.

9. Why are there no age factors for capital cost or connection cost?