In an increasingly volatile environment determined by changing energy policies, fluctuating fuel prices and geopolitical conflicts, fossil power producers need to adjust asset management and supply chain strategies to remain competitive, writes Paul Wise of GE.
There is no doubt that the world is becoming increasingly volatile for conventional power producers. As efforts to decarbonise the energy sector to address climate change are intensifying, political tensions and conflict in some parts of the world are adding to the uncertainty.
One evident result is high amplitude fluctuation of fossil fuel prices, raising new questions on asset management strategies, asset lifetimes, and operations and maintenance.
For over 100 years, fossil power generation management has been driven by regular maintenance intervals and strategic investments to ensure reliable baseload generation for the decades to come.
This required long-cycle planning of service and maintenance resources and a reliable and efficient supply chain, including spare parts, and over the past decade also investments in digital technology to increase efficiency and enable predictive maintenance.
This article was originally published in The Guide 2022-2023,
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Today, we are seeing a paradigm shift that is – for the first time in history – truly shaking the industry and changing the game for fossil power plant operators.
Many of them now find themselves in an environment where the long-term consistent operation of their assets is no longer certain, or the early shutdown of their assets ahead of the planned lifecycle may even have already been mandated by government policy.
In this situation, investments in upgrades to increase efficiency or reliability are being cut, and asset management is being shifted from long-term planning to short-term reactive maintenance.
This strategy shift comes with sweeping consequences for the operators’ own service and maintenance resources, but also for their supply chain of service and spare parts providers.
“Today, we are seeing a paradigm shift that is for the first time in history truly shaking the industry.”
The ability to respond rapidly, not only in the field but also in the supply chain, is paramount to a market that is shifting the management of its assets from longterm strategy to a shorter lifecycle outlook determined by high volatility from both a market and a policy perspective.
Without a clear ROI outlook for planned outages and predictive maintenance measures, some plant operators are moving towards a higher risk ‘run-to-fail’ (RTF) mode, where ageing assets are operated beyond their maintenance cycle until they fail, at which point reactive maintenance is performed.
Once a failure event occurs, reactive maintenance must happen very quickly to avoid months of downtime and limit financial losses.
An agile supply chain that can provide spare parts, tools and repairs very timeously is essential to successfully – and profitably – operate in RTF mode. OEMs with their deep technical expertise and readily available drawings, documentations and knowledge play a particularly important role here. Service and spare parts providers will need to adjust their business models to meet the new requirements.
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Field service resources have to be available on short notice with higher time and location flexibility; spare parts need to be delivered in significantly shorter cycle times, and in certain cases stocking up the shelves may be adjuvant.
As time is of the essence here, suppliers may need to invest in technology and resources that enable greater speed and flexibility, such as digitally-integrated production lines that allow faster production of spare parts, like generator stator bars, at lower risk for quality errors.
Another game-changing factor for fossil power producers are the increasingly volatile fuel prices, which lead to opportunistic operating models.
When gas prices are high, coal units are being operated at full capacity and power producers may decide to skip maintenance cycles to benefit from increased profitability.
That, in turn, comes with a higher risk of equipment failures, in which case, again, fast response is required to allow return to the higher profitability as soon as possible.
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The fuel price is somewhat linked to the electricity price at which operators can sell their power on the market. With today’s volatility, we see power producers anticipate outages at short notice because they see an electricity price hike coming which they want to use in its entirety.
In other cases, planned outages are being postponed when they coincide with an ongoing price hike. Again, fast and flexible response of O&M and supply chain are paramount.
While many power producers have clear line of sight of their fossil units’ lifetimes, either at the end of the planned lifecycle or at mandated early decommissioning, others are asked for life prolongation of their fossil assets to ensure dependable power supply while bridging to other generation technologies is ongoing.
Some may be faced with the need to bring units already retired or in ‘coldreserve’ back to the grid for short periods to support energy supply security.
“Higher risk asset management requires very fast and flexible reactive maintenance.”
These power producers’ challenges are similar in the sense that they need to keep ageing assets running reliably, yet upgrades may not make sense because the lifetime extension may not be long enough for the investment to pay off.
In other words, these operators will also need fast and flexible support from their supply chain to ensure rapid response on issues involving turbine blades, valves, insulation, generator rewinds and coil set replacements.
The new dynamics of the energy market will require power producers, field services and supply chains to work together more closely than ever before to deliver reliable electricity in a fast-paced environment that is trying to balance decarbonisation and energy security at the same time.
ABOUT THE AUTHOR
Paul Wise is Managing Director of GE Steam Power for Europe, the Middle East, North Africa and Turkey
