Depreciation Strategies for Electric Device Assets

With the ever-progressing power industry restructuring, application-oriented research and empirical analysis on Life Cycle Asset Management (LCAM) have received more and more attention. Asset Depreciation (AD), as a cost in the accounting sense, needs to be considered in LCAM. Therefore, it is necessary to study the AD strategies for devices in a given power system. This paper first introduces the Fixed Asset Depreciation (FAD), relevant policies and regulations, and device service life assessment. Then, the impacts of various AD years on the profit of a power grid company are analyzed, based on the cost-plus-income profit mode which is widely employed for transmission and distribution pricing around the globe. Next, the impacts of Asset Early Depreciation (AED) on the income of the power grid company are addressed. Finally, a numerical example is served for demonstration.