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

Iman Mirzadeh*, Bjorn Birgisson

*Corresponding author for this work

Research output: Contribution to journalArticle

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%.

Original languageEnglish
Pages (from-to)1001-1008
Number of pages8
JournalJournal of Civil Engineering and Management
Volume22
Issue number8
Early online date18 Dec 2015
DOIs
Publication statusPublished - 2016

Bibliographical note

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

Keywords

  • discount rate
  • life cycle cost
  • pavement design
  • road & highways

Fingerprint Dive into the research topics of 'Accommodating energy price volatility in life cycle cost analysis of asphalt pavements'. Together they form a unique fingerprint.

Cite this