The transition from one-off ultrasound–based non-destructive testing systems to permanently installed monitoring techniques has the potential to significantly improve the defect detection sensitivity, since frequent measurements can be obtained and tracked with time. However, the measurements must be compensated for changing environmental and operational conditions, such as temperature, and careful analysis of measurements by highly skilled operators quickly becomes unfeasible as a large number of sensors acquiring signals frequently is installed on a plant. Recently, the authors have developed a location-specific temperature compensation method that uses a set of baseline measurements to remove temperature effects from the signals, thus producing “residual” signals on an unchanged structure that are essentially normally distributed with zero-mean and with standard deviation related to instrumentation noise. This enables the application of change detection techniques such as the generalized likelihood ratio method that can process sequences of residual signals searching for changes caused by damage. The defect detection performance offered by the generalized likelihood ratio when applied to guided wave signals adjusted either via the newly developed location-specific temperature compensation method or the widely used optimal baseline selection technique is investigated on a set of simulated measurements based on a set of experimental signals acquired by a permanently installed pipe monitoring system designed to monitor tens of meters of pipe from one location using the torsional, T(0,1), guided wave mode. The results presented here indicate that damage on the order of 0.1% cross section loss can reliably be detected with virtually zero false calls if the assumptions of the study are met, notably the absence of sensor drift with time. This represents a factor of 20–50 improvement over that typically achieved in one-off inspection and makes such monitoring systems very attractive. The method will also be applicable to bulk wave ultrasound signals.