Power 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.

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:

  • Make rapid cost reductions to regain competitiveness in the short term and fund the journey.
  • Implement a sustainable improvement culture to maintain results in the long term.
  • Adopt digital generation technologies to prepare for the future.

Rapid Cost Reductions

Although most power generators have already embarked on cost and efficiency improvement programs, they can do more in several areas:

  • Benchmarking. By benchmarking their performance against that of their peers, generators can understand their current competitiveness and quantify the potential of cost and efficiency improvements.
  • Applying battle-tested measures. There are 100-plus measures generators can apply to improve their efficiency in asset operations, asset management, working capital reductions, or support functions. By selecting and applying the relevant ones, producers can tap into a global best practice experience and achieve benefits much faster.
  • Improve top-line results through increased availability. Efficiency improvements are not only about cost cutting. By optimizing outages or reduction of time back to service, generators can grow their revenues.

Sustainable Improvements

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:

  • Assess power plant processes to identify maturity gaps and best practices within the organization.
  • Implement a lean production system and establish a sustainable cost improvement culture.
  • Establish a culture of continuous improvement.

Digital Generation Operations

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.

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