|
Welcome to the third edition of Artemis News for Strategic Asset Optimization
Eight Steps to Optimize Your Plant, Using Portfolio Management
Today’s primary opportunity to create additional value from your fleet of generating assets
 |
In today’s power industry, station managers see themselves increasingly as asset managers, responsible for maximizing the economic value of their plants within given safety and regulatory constraints. Portfolio management now offers the primary opportunity for these managers and their companies to grow the return on their generating assets
|
The techniques of portfolio management enable managers to analyze every possible use of funds within a plant, identifying where to cut, sustain or invest in order to obtain the optimal mix of investments and activities. The following changing market forces are driving the relevance of this portfolio approach:
|
-
New earnings focus. We see generating companies re-focusing on core operations, squeezing production costs in order to grow earnings. This trend is being driven by the transfer of assets from regulated utilities to unregulated utilities and merchant generators. Over 40% of total US generation capacity has now been deregulated, up from 16% in 2000. These companies have few opportunities to grow top-line revenues, so must focus on operational effectiveness instead.
-
Large potential savings. Running a power station involves huge capital investment and operating expense. So only a fractional improvement in efficiencies can yield significant value. These savings are passed straight to the bottom line, and can often accrue year in, year out, multiplying the return. Regulated plants have also not historically been focused on earnings growth, so the opportunities for savings are there. One study found that up to 30% of annual plant capital investment actually destroyed shareholder value, but was justified based on engineering procedure alone.
-
Competitive challenge. The Department of Energy estimates that 19 gigawatts of new generating capacity will be required each year to meet US demand to 2025. This will bring new, highly efficient stations on-line. Over the same period, electricity prices are forecast to remain flat at around 7 cents/kWh in real terms. Plant operators must therefore laser-focus investments to maximize competitive viability as a base-loaded, intermediate, peaking or combined-cycle generator. Managers will have to trade-off opportunities to improve plant operating life, capacity factor, production costs, or cycle flexibility, based on their chosen competitive strategy, while still meeting ever-increasing environmental and safety regulations.
|
If implemented successfully, portfolio management will help plant operators increase short-term earnings and position the plant for superior economic returns over the longer term. Portfolio management also provides other non-financial rewards. These include better collaboration across multiple departments and organizational layers, faster management processes based on real-time information and lower administrative workload by using an automated portfolio management system.
|
Portfolio management can be applied to individual plants or entire fleets of generating stations, and can support the complete plant life cycle, from initial acquisition or installation through to in-life operations and then final retirement.
|
To get started on such a large scope, Colin Palomobo, VP of US Consulting for Artemis International describes an eight-step process to implement portfolio management for a single power station during its operational, revenue generating, life cycle phase. These steps can then be applied to extend portfolio management to fleets of assets or to the other phases in a plant’s life cycle.
|
|
| |
 Click here for the complete article
|
| Local Sites
