Accenture Utilities Podcast Series A perspective on enterprise asset management in the power generation sector

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1 Accenture Utilities Podcast Series A perspective on enterprise asset management in the power generation sector An interview with Todd Knapp, Accenture s Enterprise Asset Management Lead in Accenture Utilities power generation group for North America.

2 Welcome to our latest Accenture power generation podcast in the Utilities Podcast Series. Today, we re covering a discussion with Todd Knapp, Accenture s North America lead for enterprise asset management in the power generation sector. We re going to be talking about some of the challenges the power generation industry faces right now and how the industry is going about addressing these challenges. Through the course of this discussion, we may find that these challenges and solutions are applicable to other industries. Todd, welcome. Could you start by giving us a little bit of background about yourself? Sure. My name is Todd Knapp, and I ve been working with Accenture for 11 years in the North American power generation practice. I ve worked primarily with power generation companies to help them develop new ways of doing business through the use of information technology solutions that allow them to take advantage of automation and adopt new streamlined, systematic, information-based ways of doing business. Prior to working with Accenture, I was an officer in the US Navy specializing in nuclear power generation. That s great. So what do you consider to be some of the challenges power generation companies face, not only in North America but across Europe and Asia Pacific? The power generation industry is a mature asset-intensive industry, so if you think of a power plant, it comprises assets such as turbines, pumps, motors, heat exchangers, piping systems and control systems. These assets require a great deal of technical expertise to maintain and operate. The industry itself is going through a tremendous amount of change that is both exciting and challenging. First, the power generation industry, like many other industries, is under a great deal of cost pressure, particularly in light of growing global electricity demand and increased fuel costs. In the two decades since 1990, we know global population growth was 27 percent. However, over the same period, global electricity generation grew nearly 40 percent, outpacing population growth by 13 percent. That means per-person electricity consumption is growing globally. Likewise, during the same period, the cost of fuels such as oil, coal and natural gas have more than tripled. Power generation companies find themselves pinched right in the middle of these trends and are feeling the pressure from a global consumer base that is consuming more electricity but does not want to pay ever-increasing costs. Second, power generation companies are facing several demographic challenges. The demographic challenges in North America and Europe are associated with an aging workforce. In the majority of European Union countries, for example, more than one-third of the utilities workforce is over 50. Decreasing participation rates among older workers means utilities are facing a crisis of decreasing head count and fewer experienced workers. Additionally, in the United States, 50 percent of existing skilled technicians and engineers will need to be replaced by 2015 due to retirement or attrition. The demographic challenges in emerging markets are a bit different, but they pose similar problems. In China, for example, the industry is facing a significant shortfall in nuclear power engineers and administrators that is nearing a critical stage, with 27 new reactors under construction. Under China s long-term project to increase the number of nuclear power plants, 6,000 new hires are needed each year in the nuclear power sector, but only several hundred college students are being put into the workforce to meet these requirements. As a whole, the industry needs to figure out ways to make its existing workforce as productive as possible, given these demographic challenges. At the same time, the industry must find ways to make the career path attractive to a new generation that is much more information technology savvy, yet also requires a great deal of knowledge transfer from very experienced employees who are used to doing business in a completely different way. Finally, the industry is seeing a dramatic shift in the fuels and methods of power generation with a focus on clean technology, carbon scrubbing and renewable, environmentally friendly energy sources such as wind, solar, hydro, 1

3 tidal, geothermal and biofuel. Global renewable energy production represents about 19 percent of all generation. Additionally, some renewable energies are seeing rapid growth, such as wind power, which is growing globally at a rate of 30 percent. With the global shift toward more renewable energy, while still maintaining a heavy reliance on traditional fossil generation, the industry must develop ways to manage a more diverse fleet of power plant assets while keeping costs in check. Thank you, Todd, for the insights into how cost pressures, demographic issues and new technologies such as renewables are playing out in emerging and mature markets. What do you see as some of the things the industry is doing to address some of those challenges? The industry is doing a lot, but one thing we are seeing is a focused investment in information technology systems. These systems are helping the industry to reduce maintenance, operating and supply chain costs by automating traditionally manual business processes, allowing them to be more competitive and profitable. Additionally, these information technologies systems improve equipment reliability and up time by providing accurate historical information, allowing power generation companies to reduce equipment downtime and generate a greater return on their asset base. These systems tend to improve the ability to capture and transfer institutional knowledge by simplifying the way important organizational data is structured, stored and applied by end users, allowing them to retain organizational intelligence in light of their many demographic challenges. Finally, these systems allow power generation companies to more effectively manage a diverse fleet of generation plants comprising fossil, natural gas, nuclear and renewable energy on one consolidated technology platform, providing standardization and cost reduction. It s interesting to understand how IT systems can help the utilities industry face some of the broader challenges. I d like to move on to the types of information technology systems and what they are and how you see them being employed to realize these benefits. There are many solutions available to help these businesses operate more effectively. However, we re seeing an uptick in the adoption of comprehensive enterprise asset management, or what s known as EAM systems. In the power generation industry, the cost of installing, maintaining, operating and decommissioning physical assets forms the most significant portion of operating expenses. It s important that these companies maximize the return on asset investment, and enterprise asset management systems allow them to do that. The objective of EAM systems is to extract, maximum productivity from the asset and minimize the costs involved in its acquisition, operation and maintenance. EAM is a vast area, but some of the key components include planning the work to be performed on the asset, such as routine maintenance and corrective maintenance, scheduling the technicians to perform the work, cataloging the asset data in the most useful and valuable way for the business, and managing the supply chain functions needed to support the asset. I m going to briefly talk about each of these four areas, starting with planning. Planning is an engineering function that develops detailed, step-by-step work plans that technicians use to perform corrective and preventative maintenance on assets. EAM systems allow engineers to better plan work in a number of ways. First, they allow the plans to be created once, based on things like manufacturers recommendations. They also allow for the continued reuse of these plans through the life of the asset. Next, EAM systems provide extensive amounts of historical data from the work that s performed. This aids the planning process because engineers can use the data as a feedback mechanism, allowing them to improve their work plans and optimize the frequency when work needs to be performed. This leads to greater equipment reliability, improved safety and reduced operating costs. The next area is scheduling, the process of organizing and prioritizing the work performed by plant technicians and crews. Today s EAM systems are providing advanced graphical tools that allow managers to schedule crews in 2

4 logical daily, weekly and monthly buckets, so that the limited resources in a power generation plant are utilized in the most optimal way and work on the most important activities. These tools in the scheduling area lead to reduced cost, increased capacity and improved business control. The next area is cataloging asset data. It s another critical factor of EAM, in that it allows an asset of a power plant to be organized in such a way as to represent the physical systems, subsystems and components of the power plant. Once the data is structured in that way, management can use the information to make sound business decisions based on historical facts, and meaningful data structures that represent how the business works. EAM systems now provide a means to systematically catalog the physical plant in a hierarchy, giving the business a means to capture all of the historical work, costs and activities associated with individual assets and the subsystems and systems in which the assets operate. This provides management a detailed and summary understanding of power plant performance. The final main area under the EAM umbrella is supply chain. Historically, supply chain systems were separated and disjointed from the systems that manage work assets and plant resources. With the advent of advanced EAM systems, supply chain and the associated planning, scheduling and asset management functions are seamlessly integrated under one umbrella. This means supply chain functions such as purchasing, inventory management, warehousing and payment processing are directly tied to the work areas that drive them. This leads to a significant reduction in overall supply chain costs in every discipline. As organizational barriers are removed, data accuracy is improved and realtime information is shared across the supply chain and the work management disciplines. So what we re seeing overall is that typical EAM business cases can yield about a 15 percent reduction in maintenance and supply chain costs, while at the same time improving equipment reliability, safety and plant performance. It s very useful to understand the key components of EAM systems and the various solutions available there. I d like to move on to discuss how these EAM systems are actually helping utilities to more effectively operate their core systems. These systems are at the heart of how a power generation company performs its business, manages its assets, allocates its resources and determines its profitability. They allow a significant portion of these core business processes to be conducted in a systematic, controlled and automated way. At the same time, these systems allow businesses to catalog, capture and use important business information that improves their ability to make decisions, forecast trends, manage risks and serve up specific local business knowledge. Finally, EAM systems provide the flexibility and standardization to manage a diverse fleet of generation disciplines. These systems are flexible enough to take into account the uniqueness associated with different types of generation plants, such as nuclear and fossil, while allowing businesses to standardize core business functions across all types of plants. Thank you. It s great to get an understanding of how EAM systems are helping utilities operate their core processes. What I d like to move on to is how those EAM systems are bringing business benefits with the solutions they provide. One of the things EAM systems are allowing is the creation of holistic end-to-end processes that bring work management functions and supply chain functions together under one process and one technology platform. Additionally, these systems allow processes to be developed that are automated, systematic and controlled. Finally, the technology that is currently available has improved over the last several years and incorporates leading industry practices and their out-of-the-box solutions. EAM software companies have invested heavily to improve the functionality of their products so that businesses can develop leading industry processes across a wide array of business functions. Todd, given the number of financial and business benefits utilities can achieve through an EAM implementation, when a business decides to go after these benefits, what do you see as the key trends that allow EAM implementations to be as successful as possible? 3

5 Each implementation can be very different and may require a unique set of answers to achieve the desired results. However, I will comment on one trend that, if done properly, improves the probability of a business getting the full benefit of an EAM project, while adhering to project costs and budget. Can you tell us what exactly that trend is? Sure. A little bit of history first, though. For decades, software companies have employed a development methodology called Agile to allow them to quickly release changes to their software products. This methodology is based on an editorial process that gathers requirements, prototypes and tests the requirements, and allows these companies to quickly deploy the results. Recently there has been a trend to try to use this type of methodology for certain parts of large-scale EAM implementations. While I don t want to get into much detail about how the mechanics of this methodology work, it s based on similar principles that use rapid prototyping between information technology developers and business users to demonstrate how an EAM solution will be used for a particular business process. A typical EAM implementation can Copyright 2013 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. run 12 to 14 months, with the phases of work separated into design, build and test activities. With this timeline, it s often very late in the project, typically during the testing phase, that the business has a full appreciation of how the EAM solution will work. The use of these Agile methods puts more emphasis on building out key parts of the solution, particularly those areas that most affect the user experience, early in the project life cycle. These methods require greater resource investment from business and information technology resources early in the project life cycle. However, they do pay dividends down the road. First, the business builds a much more comprehensive understanding of how the solution will work for them, because it s built side by side with the developers. Second, it allows for better change management and training early in the project life cycle because key components of the solution can be demonstrated and trained on well before the complete solution is ready for production. Finally, it has a tendency to reduce scope creep in later phases of the project because there is less ambiguity between what is intended during design and what is eventually built. Using Agile is not without its challenges. Stronger governance and management is necessary to get the best results. Additionally, firm boundaries and timelines need to be established and maintained to allow teams to attain a final solution. Todd, it s good to understand how Agile methods can contribute to the success of an implementation. In conclusion, can you briefly summarize the key messages you would like our audience to take away from our interview? In summary, the power generation industry is a very exciting industry that s going through a significant transformation on a global scale. Broadly, information technology solutions, and specifically EAM solutions, are being employed to help the industry face these challenges. As the industry changes, so do the methods of implementing EAM solutions, and new methods like Agile are playing a key role in reshaping how these solutions are deployed. Thank you very much, Todd. That s a very interesting set of observations around how enterprise asset management is operating in today s power generation sector. We hope you ll be able to join us in a future podcast, along with our listeners, of course. I d like to take this opportunity to thank our listeners for joining us for this installment of the Utilities Podcast Series and to advise everyone that to learn more about Accenture s utilities industry capabilities, please visit our website,www.accenture.com/ utilities. Thank you. 4

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