An optimal sensor placement methodology is proposed based on detection theory framework to maximize the detection rate and minimize the false alarm rate. Minimizing the false alarm rate for a given detection rate plays an important role in improving the efficiency of a Structural Health Monitoring (SHM) system as it reduces the number of false alarms. The placement technique is such that the sensor features are as directly correlated and as sensitive to damage as possible. The technique accounts for a number of factors, like actuation frequency and strength, minimum damage size, damage detection scheme, material damping, signal to noise ratio (SNR) and sensing radius. These factors are not independent and affect each other. Optimal sensor placement is done in two steps. First, a sensing radius, which can capture any detectable change caused by a perturbation and above a certain threshold, is calculated. This threshold value is based on Neyman-Pearson detector that maximizes the detection rate for a fixed false alarm rate. To avoid sensor redundancy, a criterion to minimize sensing region overlaps of neighboring sensors is defined. Based on the sensing region and the minimum overlap concept, number of sensors needed on a structural component is calculated. In the second step, a damage distribution pattern, known as probability of failure distribute, is calculated for a structural component using finite element analysis. This failure distribution helps in selecting the most sensitive sensors, thereby removing those making remote contributions to the overall detection scheme.

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