Since 2008, declining coal prices and the increasing availability of renewable capacity have caused a 43% decline in annual revenue potential per gigawatt of installed capacity for European owners of conventional generation.
The power generation industry is experiencing unprecedented challenges. Growth has flattened, distributed generation sources are taking market share, renewable energy sources are on the rise, and government policies are being redesigned. This is not a cyclical phenomenon but indications of a transformation that will reshape the industry.
Since 2008, declining coal prices and the increasing availability of renewable capacity have caused a 43% decline in annual revenue potential per gigawatt of installed capacity for European owners of conventional generation.
Thriving in this market requires power producers to rethink their business strategy. They need to increase their efficiency to remain competitive and change their way of working to achieve continuous improvements in productivity.
For sustainable, long-term success, the power industry should take a cue from traditional manufacturing. The general manufacturing industry in the US has managed a half-century of pricing pressures using advanced measures to achieve 2% to 3% improvements in productivity annually.
To gain similar results, power producers should take a comprehensive approach:
Although most power generators have already embarked on cost and efficiency improvement programs, they can do more in several areas:
Power generators must make sure that their changes will increase savings potential in the long run. In order to achieve sustainable operational excellence, they must take steps to establish a continuous improvement pathway. For example, generators can take steps to:
The power industry can take advantage of a range of emerging digital tools and techniques—from sensoring tools that trigger alarms through digital operational centers to fault prediction—to achieve changes in efficiency across the power generation value chain and optimize the output of plants in short and long term. Digital tools offer an opportunity for power producers to master the challenges of continuously improving operational efficiency and setting a new standard of operations across leading power plants.
The pressures facing the power industry are here to stay. Power producers must rethink all aspects of their operations and make changes that generate significant short- and long-term impact. Those who lead this change will emerge as long-term winners in the market.
Power Generation: Digitization Health Check
Today’s power generators must exploit digital technologies to the fullest in order to achieve operational excellence. BCG’s digitization health check can help.
Power Generation Model
BCG’s power generation model provides a detailed look at key factors that affect wholesale regional power markets, supporting strategic planning and investment decisions.
BCG’s consultants and industry experts partner with leaders in the power industry to create sustainable, long-term success. These are our experts on this topic.
Managing Director & Senior Partner
Budapest
Managing Director & Partner
Vienna
Managing Director & Partner
Madrid
Managing Director & Partner
Mumbai
Partner
Singapore
Lead Knowledge Analyst
Düsseldorf
Managing Director & Partner
Philadelphia
