New Paths to Productivity in Power Generation
The survival of conventional power producers requires improving productivity long term. Lean management systems and new digital technologies can complement utilities’ belt-tightening efforts.
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.
Thriving in today's 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.
Declining coal prices and the increasing availability of renewable capacity over the past decade have caused a 43% decline in annual revenue potential per gigawatt of installed capacity for European owners of conventional generation.
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:
Quickly improving efficiency and reducing power plant cost.
Making changes last and increasing savings potential.
Leveraging newest technological trends for best in class performance.
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.
The survival of conventional power producers requires improving productivity long term. Lean management systems and new digital technologies can complement utilities’ belt-tightening efforts.
BCG’s Center for Digital in Power & Utilities helps implement digital changes that touch virtually all work processes, fundamentally changing them and placing power companies in a vastly different competitive position.
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.
