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Five Asset Management Challenges for Utilities and how to meet them

Electric utilities are highly asset-intensive. They have to balance delivering electricity to their customers with optimizing the management to their physical assets throughout their lifecycles.

This means procuring, operating, maintaining, and disposing of assets in a way that provides maximum benefit to customers and stakeholders while simultaneously generating reasonable return on investment (ROI). For an electric utility, this means significant capital investment is needed to sustain the asset base and live up to the customer’s and stakeholders expectations.

In decades past electric utilities were largely profitable even with relatively little focus on asset management initiatives. This was due to rising power demands associated with expanding service territories that guaranteed increasing ROI.

Electrical utilities now face a steadier increase in power demand due to the rising trends because customers are increasingly focused on energy optimization and demand management. Moreover, stricter regulatory requirements make it harder for utilities to access the capital required to manage their infrastructure. All this is driving a pressing need to implement Asset Performance Management (APM) to optimize the current portfolio and to use the shareholders’ money wisely. The article outlines a few challenges which electrical utilities are facing in implementing robust and effective asset management systems.

1. Quality of Data

The availability of quality data is the cornerstone of an effective asset management program. The presence of quality asset data enables utility planners to make informed and transparent decisions on renewal and replacements as well as on maintenance. Often the utilities face challenges to get the right information at the right time. This leads to decisions that are driven by experience and intuition rather than factual evidence. While such qualitative decisions may seem reasonable at the time, they cannot encompass all other factors that should be considered to make the optimum decision necessary to bring benefit in the longer run. The lack of digital data records is by far the most prevalent challenge faced by utilities in driving informed decision making. Due to a lack of electronic data, often planners have to juggle from paper records and spend significant time collecting the data from plain text and understanding the context of the asset. This lack of quality data also irritates regulatory professionals who have to undergo an unnecessary stress during the regulatory intervention to support their electricity rate-filing processes.

2. Lack of Efficient Decision Making

Developing a systematic approach to decision-making is a key enabler of asset management. Without a consistent approach, decisions will often be reactive and will result in overachieving of objectives for one asset class and underachieving in others. For example, continued investment solely in system reliability projects may compromise the utility commitment to execute other non-discretionary connections’ projects thus compromising customer satisfaction. The ideal strategy is to perform optimization of all objectives consistently through leveraging asset management decision-making software. Aplines’ Aptimize is a software tool that runs what-if scenarios and cost-benefit analysis for each intervention program and provides a comparison on a consistent basis. These help planners generate an optimal mix of capital projects and derive asset management objectives at the strategic as well as the asset level.

3. Rising Maintenance Costs

Any asset has a defined level of maintenance over its useful life that has to be executed to maintain its level of service. As the asset approaches its end of life, the requirement for maintenance increases proportionally, causing a burden on an already stretched budget. Without a formal maintenance management system, the utility will end up spending more money reactively catering for increasing maintenance requirements while delivering the minimum level of customer service.  For example, adopting a run-to-failure (RTF) – an asset replacement – approach may work for small inexpensive equipment as it yields benefits by simply replacing them when they fail. However, if a similar approach is used for expensive distribution station equipment such as power transformers, it will bring a significant financial cost to the utility in the form of loss of reliability, continuity of service, and inefficiencies in party supplies inventories.

4. Evolving Regulatory Environment

Achieving regulatory objectives while still meeting the replacement requirement of aging infrastructure is among the significant challenges for electrical utilities. The recent evolution of regulatory requirements has presented a unique challenge to asset managers as the regulatory environment transitions from the traditional Cost of Service (COS) models to more Performance-based Rate-setting (PBR) models. Under PBR models, the utilities are expected to demonstrate a high level of efficiency, while minimizing operational and financial loss, to secure desired electricity rates. This means the utilities are challenged on their  proposed rates by their regulators if they do not demonstrate a threshold level of efficiency which can only be obtained with a mature and sustained asset management program.

5. Evolving Customer Needs

The increasing influence of social media networks has massively transformed customer awareness about their rights and what they can expect from electric utilities. Now customer demands are evolving into increasing focus on energy efficiency, incorporating Distributed Energy Resources (DER), better power quality, and more importantly timely provision of customer service both in the form of new connections and providing smart metering data services. All these features come with the cost to the utility rate-payers. Therefore, one of the considerations of asset management is to incorporate customer feedback throughout the decision-making process. The purpose should be to capture evolving needs of the customers and understand their priorities so that customers are felt trusted and heard.

Conclusion

In short, electric utilities are working environments with constantly evolving challenges. While this article presented the five most common challenges any utility will face, there are numerous other challenges that utility asset managers face as they make vital decisions to enhance or sustain their asset infrastructures. These include shortage of resources, manpower, political influence, physical and cybersecurity, climate change, telecommunications 5G, and numerous others.

All of these are made easier to manage with a data-driven asset management program, underpinned by specialized and tuned software.

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