Buying Utility Assets - Failure Should Not Be An Option
Buying Utility Assets - Failure Should Not Be An Option
Buying Utility Assets - Failure Should Not Be An Option
Despite what the Apollo 13 crew What’s the difference between the
believed, failure is an option that industries? A large part of the answer
many companies in the fossil power lies with asset optimization. After being
generation industry seem willing among the early adopters of asset
to risk. optimization best practices, the airline
and nuclear power generation industries
An unfair statement? Perhaps, but each achieved dramatic improvements
consider how the fossil power in their failure rates. Meanwhile, except
generation industry stacks up against for a handful of visionary companies
other major industries in terms of within it, the fossil power generation
failure rates. From 1994 to 2004, industry’s failure rate improved only
the airline industry saw its failure slightly. And billions of dollars of
rate improve by 78 percent, according opportunity were missed.
to the National Transportation Safety
Board (NTSB). Yet another unfair statement? Again, the
facts speak for themselves. Among other
Meanwhile, the nuclear generation benefits, asset optimization best practices
industry recorded a 68 percent can enable fossil power generation
improvement rate, according to companies to predict and avoid forced
the Institute for Nuclear Power outages. Considering that just a single
Operations (INPO). Yet, during that forced outage on a medium-sized unit
same time period, the fossil power can create a $10-million loss, imagine
generation industry’s failure rate how many billions of dollars the
improved by just 10 percent according industry could have saved had it
to the Generating Availability Data embraced asset optimization in the
System (GADS). same way that the airline and nuclear
generation industries have.
When utility companies buy fossil What Are Asset Optimization
power generation plants, their first Best Practices?
consideration is rarely whether the Asset optimization best practices go
price is right. Instead, the companies’ beyond the traditional constructs and
corporate development teams are ideas associated with asset management.
typically more focused on operational They extend to the deployment of
margin calculations related to age, effective process improvement and
condition, and generation costs versus innovative technology to predict failures
market settlement price. And they and improve reliability.
almost never factor asset optimization
practices into the equation, even Best practices are achieved through
though they can—and normally do— the integration of world-class diagnostic
improve not only the purchase price, and predictive failure technologies,
but the long-term business value of together with effective operations
the plant. and maintenance (O&M) and outage
planning and scheduling systems.
Which all begs the questions: What
are asset optimization best practices, Because only a few visionary fossil power
and how can and should the fossil generation organizations have achieved
power generation industry adopt them? such a high level of integration, the
industry is, by and large, missing the
benefits that asset optimization best
practices can deliver.
Airlines 78
0 10 20 30 40 50 60 70 80 90 100
Sources: Generating Availability Data System (GADS); National Transport Safety Board (NTSB); and Institute for
Nuclear Power Operations (INPO)
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Preventative maintenance — provision of tender loving care on a regular basis, and hope
for continuous operation until the next planned maintenance activity.
And that’s not all that the two industries best practices
have in common. In fact, one of the ■ Funding of semi real-time hosted
key components of the airline and
systems to capture, track and record
nuclear generation industries’ success
the performance characteristics of
has been their willingness to share
thousands of operational units to
critical data, through third-party solution
create a comparative database (airlines)
providers. Using asset optimization best
■ Standard operational philosophies
practices, competitors openly share
operational, performance and failure associated with maintenance
mode information. This practice has ■ Adoption of an operational
100
90
Number of Accidents
80
70
60
50
40
30
20
10 89 92 83 80 75 72 54 54 51 34 37 38 19 20
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
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At the same time, both the airlines BPO gives companies the ability to
and nuclear generation entities have leverage a comprehensive asset base
maintained their competitiveness, beyond its own boundaries. This has
improved the overall reliability been demonstrated in the airline
standards within their respective industry, where the world’s leading
industries, reduced failure costs airlines have adopted this approach
and increased operational margins. in their development of outstanding
asset optimization models. If the fossil
How Can Fossil Power power generation industry is to make
Generation Leverage Asset the next critical step, it needs to make
Optimization Best Practices? a similar paradigm shift.
Leading-edge companies in today’s
increasingly competitive operational and A New Journey for Fossil
commercial environment are looking to Generation Companies
organizations with the experience and Geoffrey Moore (Crossing the Chasm,
skills to develop and deploy integrated 1991) argued that the difference
maintenance technologies that can between early adopters of technology
deliver predictive asset optimization (enthusiasts and visionaries), and
functionality integrated with world class the majority (the pragmatists), exists
O&M philosophies. because of the differences in expectations
that these groups exhibit. It is clear
Sharing critical data within hosted that some industries—the airlines and
centers of excellence enables companies nuclear generation among them—fall
to leverage an extensive knowledge into the category of early adopters.
base without jeopardizing their Yet the fossil power generation
competitive advantages. This approach industry—while not a laggard—is
also enables organizations to move clearly in the pragmatists group.
away from traditional constructs of
preventative maintenance, RCM and The fossil power generation industry
“hope and pray” philosophies prevalent can be viewed, in Everett Rogers’ terms
in the last millennium. (Diffusion of Innovations, 1962), as
being part of the late majority.
However, fossil power generation
companies cannot expect to achieve The categorization of the fossil power
these goals rapidly on their own. To generation industry as a late majority
bridge the gap, they will need to bring player is based on its willingness, or
in a third party with the capability to lack of, to adopt innovation and the
enable implementation and transition general level of awareness, interest, and
the companies toward a completely acceptance of technologies and the
diagnostic and predictive operational speed with which it adopts and adapts
environment. The adoption of a business to innovative ideas and technologies.
process outsourcing (BPO) approach
also can help bridge the chasm, and The most visionary fossil power
deliver improvements in availability and generation companies are taking the
in measurable service level agreements first steps on this journey to realize the
and key performance indicators. benefits of asset optimization best
found not only in reduction to achieve the standards of excellence generation reliability, is greater than
exhibited by nuclear generation and $445,000 on one mid-sized base
of the failure rate, but also the airline industries and enable them loaded unit per year, according to
in the hidden costs related to adopt a philosophy that positions the FERC’s 2006 Equivalent Forced
to market interaction and them as members of the early majority? Outage Rate (EFOR) Study
the ability to effectively
manage and maintain
market presence.
Adoption of Innovation
Laggards
Late Majority
Early Majority
Early Adoptions
Innovators
0 5 10 15 20 25 30 35 40
Adoption Percentage
6
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