How do utility asset managers deal with risks and failures of assets in the long-term? How much should electric utilities be budgeting for maintenance, asset renewal, and investments?
The answers are not always obvious for asset managers that are faced with increasingly severe weather and the need for strengthened electrical grids. Another layer of unpredictability is added to the mix with policy in flux and changing public opinion on how we develop and consume energy. Although President Biden’s climate agenda may be shrinking and there isn’t a Green New Deal yet, utilities need to be prepared to shift to greener energy. Federal infrastructure negotiations also include electric grid improvements and a gradual shift to a carbon-free electric sector.
Because of these factors and more, asset managers no longer have the role of making decisions based solely on the perspective of one single aspect of the problem. Decision-making is complex and asset management is not linear, but a sum of practices with evolving contexts require even those most experienced asset managers to make adjustments.
Although the electric utility landscape is evolving rapidly, the basics of utility asset management are the same. The best place to start any asset management journey is by understanding long-term risks of failure and required budgets to manage these risks more effectively. Then, asset managers can create a vision for strategic asset management moving forward and ultimately achieve a sustainable network. Achieving a sustainable network means ensuring utilities continue to provide optimal service while facing multiple challenges and accommodating evolving regulatory requirements. Asset managers need to be able to make informed, data-driven investment decisions and determine the right operations maintenance practices for assets in different scenarios.
Three Basics of Utility Asset Management
It’s important to first understand the complexities of the industry and the solutions for successful utility asset management. Among the basics are:
- Asset Management Requires Alignment Between Long-Term Vision and Near-Term Strategy. Oftentimes, asset managers have to focus on manpower and problems they can fix in the near term. In addition to putting out fires, thinking preventatively needs to be objectively linked to the day-to-day. Strategies to address the challenges faced by external stakeholders, the evolution of demand, and daily operations should be working together. Remember that asset management is a journey, and a sustainable network will not be achieved overnight.
- There Are Three Key Factors of Asset Management—Risk, Cost, and Performance. Often referred to as a three-pronged scale, risk, cost, and performance all influence one another. Assessing the effect each has is essential to maintain the well-balanced scale. Risk monetization allows asset managers to estimate a necessary level of cost for risk mitigation plans.
- The Asset Management System Is Not Just Maintenance, Operations, or Any Individual. The asset management system involves the whole utility and its consumers. This complexity is what makes asset management systems difficult to implement, and asset managers need to take a leadership role of all involved entities to make it work. The asset manager creates the system that allows specialized departments to collaborate to achieve cost, risk, and performance objectives.
Implementing an asset management system is important not only for streamlining day-to-day operations and meeting regulatory standards, but for avoiding disaster and being prepared when issues do arise. For example, if oil from a transformer spills into a body of water, the utility takes responsibility for necessary cleanup. Similarly, if a transformer catches fire, explodes, or has a gas leak, the utility will have to unexpectedly cover the cost of replacement. Lastly, if an outage is caused for any reason, the utility may be penalized based on the length of the interruption. Failures of all kinds are costly and create reputational risks, but risk-based asset management can help avoid these expensive occurrences by calculating the risks of aging assets, vegetation, and other contributing factors.
Although there will never be a direct line of sight into the future, data can be used to predict outcomes for assets including risk of failure. When done right, asset management can be a smooth process where spending money tactically on assets and asset maintenance saves money for the utility in the long run.
Five Steps Every Utility Asset Manager Should Follow
This is achieved with risk-based asset management, which can be broken down into the following five steps.
1. Define the Asset Failure Risk Assessment Methodology Adapted to the Organizational Context.
The asset failure modes are numerous, and so are their consequences on every challenge. An exhaustive study of all the risks would require an enormous amount of effort and time to carry out. Therefore, managers should choose a simplified and proven method, taking into account the major risks of failure and the major issues of all stakeholders.
Asset management is a journey, and utilities usually start by adopting a platform and methodology that will start generating value in a few weeks or a few months. As data becomes available the risk modeling can be improved.
2. Create an Asset Registry—Develop a List of Assets with Relevant Information.
Without an asset data register, there can be no failure risk study. The analysis of failure risk due to aging of the asset is calculated with data including the age of the asset, the aggressiveness of its direct environment, its duty rate, the history of failures, and associated costs. For the estimation of failure risk due to vegetation, data can come from various sources such as satellite or LiDAR (light detection and ranging). Post processing and computer vision techniques will allow a quantification of the risk caused by vegetation for easy decision-making. To be useable on a large scale, this data must be computerized and stored carefully in an accessible database.
3. Assess the Condition of Each Asset Using Specific Criteria for Each Asset Category and Determine the Probability of Failure (PoF) Based on Real Conditions.
An estimated probability of failure can be calculated with historic asset failure and predictive asset failure models combined with inspection data. In the framework of the asset failure risk assessment due to aging, utilities can work with aging models for each asset category. When using this method, it is necessary to assess the asset health using asset information as input of the method (Step 2) and deriving the annual probability of failure from the aging model of the asset category.
4. Determine the Consequence of Failure (CoF) for Each Asset Regarding Performance Targets in Relation to Service Reliability, Safety, Environment, and Direct Costs.
Does failure of that asset create a power outage? Could it start a fire or damage other assets and create explosion? Each asset failure creates several consequences. Some of them may be insignificant, while others are disastrous depending on what is impacted. Being able to monetize consequences of failure allows not only asset managers, but all stakeholders, to see asset failure in a new light.
5. Develop a Risk-Based Investment and Maintenance Strategy to Extract Greater Value from Infrastructure Assets.
At this point, it all comes down to the numbers. Once this strategy is in place, asset managers can analyze data to make well-informed decisions that result in optimal outcomes for the utility. Some use cases are more focused on the long term, such as planning for energy regulators or optimizing maintenance strategy for a given asset class. Others pay out more quickly, like clearing vegetation before fire season.
Implementing a System
There are solutions available to simplify the data so asset managers can save time and money with this process. Aplines, a Schneider Electric venture, has developed a solution, called Aptimize, that calculates risks and associated costs, and identifies the assets that have the most significant needs for maintenance or replacement, to help asset managers make their decisions more easily and justifiably. Workshops and training sessions are also available to help onboard asset managers to implement these steps using the ISO 55000 as the standard.
Taking responsibility for asset management means putting in the work to create a system that spreads out spending by analyzing risk and cost. Taking safety, environmental, and monetary factors into consideration provides asset managers the opportunity to create value for the utility and its customers in the long term, while streamlining their own work from day to day. Asset management is a complex role but doesn’t have to be a daunting one with the right data, partners, and systems in place.
Author: Xavier Loin, Asset Management Consultant – published in Power Magazine Online, 23rd July 2021