As digital changes how we use energy, shouldn’t we change how we use energy assets?

!{LinkedContent-author-by}

Igor Sadimenko

EY Asia Pacific Power & Utilities EAM Leader

Business strategy professional. Transformation leader.

11 !{ArticleDetails-ReadTime} 29 Aug 2018

!{ResourceList-Close}

Power and utility organizations need to maximize asset performance in a digital and increasingly sustainable world.

Aging infrastructure, the growing cost of power generation and the need to respond to disruptive technologies are all intensifying the pressure on utilities to invest in maintaining, growing and modernizing their service delivery assets. All the while, the transforming sector is turning the established and formerly stable value chain on its head.

Many utility assets in operation today — particularly large-scale generation, transmission and distribution — were commissioned during the investment booms of the 1960s, ‘70s and ‘80s. But since then, investment levels have not always kept pace with the need to grow and replace asset bases.

The P&U sector is undergoing a period of radical transformation, spurred on by technology innovation, shifting population dynamics and burgeoning economic growth.

  • Technology innovation. Disruption along the traditional value chain, from decentralized generation and demand-side operations to energy storage and the rise of electric vehicles, is changing the way utilities operate. 
  • Population growth. Global population is forecast to grow to 9.2 billion by 2040 according to “World Energy Outlook, 2016”, International Energy Agency, mostly in non-OECD countries where an increasing, aspirational middle class is driving greater energy demand.
  • World GDP growth. “Global Data Workstation, 2016” Oxford Economics, forecasts GDP growth from US$74.5t in 2015 to US$136.7t in 2040, an increase of 83%. Past trends show a strong link between GDP and electricity demand.
New and existing infrastructure projects can transform value by embedding asset management throughout the organization, using data better and adopting new technology faster, learning from parallel industries.

Utilities face transforming challenges and opportunities

Utilities are moving toward a new value chain, augmented and interconnected by digital technologies, with power and information flowing in both directions. These far-reaching changes in technologies, markets and public policies are transforming utilities and the challenges they face.

The asset management capability needed to achieve the necessary optimization of cost, risk and performance is far greater than what we have seen before. To maximize this investment, utilities need to intimately understand and manage the whole life cost, risk and value of assets.

Our research reveals this to be a topic of key concern for P&U businesses.

Technology helps but ROI remains a challenge

Our survey of top sector executives sought to understand where they see challenges and improvement opportunities in managing infrastructure assets. While acknowledging that new technology is making asset management significantly more efficient, the vast majority of respondents told us that maximizing return on asset investment was an ongoing challenge. Respondents also confirmed that they had not identified specific innovations to overcome challenges in asset management.

70% of executives view asset management as challenging, and 68% have not identified innovations to improve asset management performance.

The heart of the matter: unlocking value

As the sector transforms, optimizing the commercial and strategic value of utility assets is a tough balancing act. Asset owners and operators need to deliver greater stakeholder value — in particular to customers — while reducing risk and minimizing costs.

Further, in markets where the wholesale price of electricity is falling below the level required to provide acceptable ROI in power plants, generators are challenged with optimizing whole-life costs.

Now is the time for utilities to take stock, develop and refine their asset management capabilities and leverage new technologies that will create value and set the business up to perform amid ongoing disruption. This can best be achieved through a fresh approach to people, processes and technology that:

  • Leverages the power of asset management systems, using data and analytics as a strategic asset and differentiator, to drive informed decision-making and value creation.
  • Fully coordinates the roles all organizational levels and functions play in effective, end-to-end asset management, in a holistic way.

Utilities that adopt these principles should be able to unlock value, gain competitive advantage and outperform their peers. Those that don’t adopt them face a widening capability and stakeholder expectation gap on performance, service and cost.

Now is the time to focus hard on developing intelligent asset management as a fundamental driver of value, for today and for the future.
Claus V. Jensen
EY Global Program Management Leader

Intelligence driving value

The nature of asset management depends increasingly on intelligence and insight from data. New technologies are transforming how asset information is collected, collated and analyzed, providing a foundation for utilities to run operations in a completely new way from an “intelligent hub.” Physical distance between assets is less of an obstacle to operational efficiency, with devices now capable of remotely monitoring and transmitting asset data in real time.

In today’s transforming sector, utilities are increasingly challenged to make decisions based on intelligent asset management that fully grasps the relationship between asset cost, risk and performance, and the entire organization and supply chain. This holistic approach provides executives with vital information to understand, manage and exploit asset portfolios, gain greater control of costs, reduce risks, and improve customer and shareholder value.

Organizations that undertake improvement initiatives in asset management can reap significant rewards — boosting productivity and cutting down on maintenance and renewals costs, equipment downtime and costly reactive work.

Creating a broader appreciation of asset management

Recent studies from UMS Group Europe and IES Asset Management suggest that organizations which adopt a leading practice approach to asset management can achieve financial benefits equivalent to roughly 20% of their total spending portfolio within 3–5 years.  The evolution of the asset management discipline and its international standards (ISO 55000) provide a framework for leading practice and a reference for utilities to identify improvement opportunities. Our Excellence Model is a holistic, systemic approach aligned to ISO 55000. Based on a data-rich, risk-informed decision process, our model outlines the key components required to deliver a joined-up and systematic approach to asset management across the asset life cycle. 

Three leading practices to create value

Our survey of senior executives identified three key challenges: asset ROI, asset data and asset management capabilities. Based on our experience supporting major enterprise asset management (EAM) programs worldwide, we identified three leading practices that could help to create new value and transform asset management performance, now and in the future.

  • Leading practice 1: Align asset strategy to corporate objectives

    It is critical to take a holistic, strategic approach to EAM, applying responsibilities across functional boundaries. Utilities should design and implement a comprehensive approach embracing systems, people, processes and tools.

    Three key pillars support a holistic approach:

    1. Strong recognition and support at board and executive level: leadership teams drive and promote the asset management agenda as an essential component of corporate strategy, and ensure it is integrated with customer, commercial and other key agendas.
    2. A clear line of sight between strategic objectives and asset management activities: the route from corporate objectives all the way to the physical asset is mapped out and established. Individuals and teams understand how their day-to-day actions align with long-term corporate goals.
    3. Long-term, strategic relationships with suppliers: the supplier relationship is focused on developing capabilities and optimizing value, based on a shared understanding of goals and supported by technology that enables the sharing of information. Incentive structures are based on success through interdependency.
  • Leading practice 2: Make the data work for you

    Data informs every management decision throughout the asset life cycle and supply chain. It needs to flow effectively and lead to actionable insight. The more an organization values data and information as a strategic asset and a differentiator in its own right, the greater the efficacy of its asset management and the likelihood of maximizing ROI.

    Exercising tight planning and controls to manage data quality makes organizations far better equipped for timely, cost-effective interventions. But collecting and managing the right data throughout the asset life cycle requires robust organizational discipline, particularly where large asset fleets are concerned, as these demands increase with the exponential growth in data volumes.

    To turn asset management into asset excellence, leading organizations incorporate the following four data considerations into their asset strategy:

    1. Treat data as an asset class: Data and data culture need to be key priorities for the organization. Data has strategic significance, can be leveraged and monetized, and requires appropriate management
    2. Identify specific outcomes:
      • Identify, collect and standardize asset data critical to decision-making.
      • Establish governance and processes to manage information — how it is acquired, cleansed, stored, secured and evaluated.
      • Create a data-driven culture with accountability around data
      • Take a commercial view of data and prioritize investment accordingly, balancing short- and long-term costs and benefits.
    3. Seek out further opportunities to exploit data in the organization: Data should be integrated across platforms — such as operational technology, finance and asset systems to unlock additional insight and promote truly joined-up thinking.
    4. Pursue insight through enabling technologies and analytical capabilities: Organizations need to commit to consistent investment and development of enabling technologies across the P&U value chain.
    Improving asset information and data management remains a big opportunity. Proper risk assessment and mitigation can only be well understood if the right data exists to support it.
    Steve McCabe
    Americas EAM Regional Lead, EY
  • Leading practice 3: Revolutionize field force capabilities

    Field force productivity plays a particularly significant role in the effective execution of asset management plans. But it is often hindered by a range of “human” factors — from site access and outdated ways of operating, to lengthy journey times and safety issues.

    New technologies can help overcome these and other limitations and revolutionize many of the physical aspects of asset management while transforming the productivity, safety and job satisfaction of the field workforce.

    Advanced technologies are changing how field work is done, enabling real-time interaction with users, devices and systems, and allowing operatives to take on more of a decision-making role.

    Applying the right technology in the right way will boost the chances of reducing costs, maximizing ROI, maintaining operations and improving customer satisfaction.

    The P&U sector is at the start of a journey that will see the workforce empowered and safety, compliance and productivity progressively transformed.
    Andre Winarto
    Global Power & Utilities and Energy Knowledge Lead, EY

Where to start

There are big opportunities to realize the full potential of asset management to improve operations, reduce costs, better manage risk and meet overall corporate goals in today’s data-driven, technology-enabled, connected world. But first, “asset excellence” needs to be strategically prioritized with more effective decision-making capability underpinned by better analytics to plan, forecast and optimize performance.

Transformational digital technologies provide a foundation to reinvent EAM, creating new information and customer-centric business models. With disruption come competitors that are cash-rich, agile and aggressive. How are you preparing?
Benoit Laclau
EY Global Energy Leader

Just the beginning

Benchmark: a good basis for change is to benchmark your organization’s performance. Running a maturity assessment of your asset excellence capability will reveal how much value you could be losing and help you decide what to target first.

Explore: develop a view of how integrated your systems and data really are. Do you have a robust asset intelligence framework? Is your asset information complete and accurate? Are you able to integrate service delivery assets, risk and commercial data to drive better performance and improve strategic decision-making?

Align: your data strategy must align with the processes and desired outcomes of your asset management function to unlock wider strategic and commercial value.

Move fast: innovative technologies — analytics in particular — will create a disruption effect; early adoption will provide competitive advantage and help to secure your organization’s short-term priorities and long-term goals. Consider the potential speed of technology and sector change and how your organization must adapt.

This is just the beginning of the journey to better value for power and utility organizations. Acting fast and focusing on integrating asset management with overall strategic capability will put utilities in a position of strength for the future.

!{ArticleSummary-Heading}

Achieving excellence in asset management is critical to optimize return on investment in P&U organizations. Taking the initiative now to adopt an intelligent approach, refine capabilities and leverage new technologies will help create value and set P&U organizations up to thrive as the sector transforms.

!{AboutThisArticle-Heading}

!{LinkedContent-author-by}

Igor Sadimenko

EY Asia Pacific Power & Utilities EAM Leader

Business strategy professional. Transformation leader.