Assets (power plants, electricity cables, substations) are the backbone of the power utility sector. They need management throughout their lifecycle. But that’s not all that needs management and coordination. There is also data, people, equipment, real estate, and other assets.
Beyond that, you have to deal with revenue shifts induced by a more complex economy.
One way to help manage these challenges is through sophisticated asset allocation. Many firms track their asset performance by comparing it with the returns of index funds, especially if their portfolio includes fixed-income securities.
It is also essential to keep operations smooth and expenses under control. Increased input costs, stretched supply lines, etc., add to the value chain’s costs. Yet, there is a limited cost that the management is likely to pass on to the end-user. The need for strategic asset management, taking care of all known internal and external challenges, is pressing.
What is CapEx and OpEx Optimisation for utilities?
For S&P 500 companies, optimizing expenditure is a priority. Due to the size of their organization, they have to make capital expenditures (CapEx) to build new systems of assets that will create added value for them and other external stakeholders, like their clients. A utility company’s CapEx includes heavy equipment or storage reservoirs. In the case of an electric supply company, it might be transmission lines.
For CapEx optimization, companies also use asset allocation and management techniques. They help make easy and timely asset acquisitions and save money on a long-term perspective. Since CapEx needs a larger sum of money, the stakeholders also prefer having an optimized system.
Once the assets arrive, the organization incurs a series of operational expenses in operationalizing them. These include from departments, such as maintenance, HR, and finance. The expenses incurred by these departments to generate value are also OpEx for the organization.
These departments are also resources for the organization as they generate value. A good asset management strategy guides internal stakeholders in allocating resources and other assets to important locations. The right asset at the right location will generate economic activity. Maintenance costs for assets are also a part of OpEx, and these resources are allocated here or there for a reason As all assets are a source of profit/value creation for the organization.
How can organizations use Asset Management for Utilities
Organizations use Asset Management to increase value and mitigate risks associated with assets. Asset Management is important for organizations that provide utilities such as electricity. They may also need to track their non-renewable assets to generate good ROI.
Utility providers use Asset Management to create a strategic plan for effective management. Here’s how they do it:
Completing their asset inventory
First, utilities companies should conduct a survey of their non-renewable reserves. Although this is a time-consuming process, it will help them in completing their inventory to maintain reserves. Management can also make timely decisions to import necessary raw materials.
Computing life-cycle costs
Utilities companies will also have capital tied up in heavy machinery and equipment. They can use Asset Management to understand their life-cycle. AM can also determine the maintenance schedule that will help in maintaining lifespan.
Setting levels of service
Apart from the non-renewable assets, management can define the service needs of equipment. This step will help in determining the predicted operating and maintenance cost.
Exercising long-term financial planning
For companies listed on stock markets, all stakeholders have access to the organization’s Asset Management process. Thus, they can design a good financial plan that will help them increase their profits.
What is Risk-based Asset Management for utility networks
Utility companies have many risk-based assets in their inventory. These assets are not only a financial risk but a risk to the staff and environment as well. They are volatile in nature and can cause harm in case of miscalculations or mishandling.
A risk-based asset management strategy is essential in providing transparency to the risks. Here are 4 phases that every utility company needs to put in place:
The organization should classify its assets after understanding the logical flow and value. After the classification process is complete, the AM team will create a Value Stream Map. The map will capture each step of the process.
Now the team will focus on creating a method to conduct a critical analysis of the assets. The team will also include stakeholders so that they can understand the value stream. Now, the organization will realize every benefit of the VSM.
Now, the team will design control strategies. This includes preventive tasks and remote monitoring. The team will document everything. To ensure standard working procedures are being followed. As they define the mitigated risks and failures of the assets. After the identification of underlying causes, the management can create a control strategy.
After configuring the MIS, the team will design the appropriate queries and reports. These will help in identifying opportunities and risks associated with managing these assets. Monitoring the performance will also become easier with the strategic plan. As success metrics can be better understood and maintained. Stakeholders will also be capable of making better financial decisions and calculate dividend yield. They will base their decisions on the generated queries and reports.
How to conduct Critical asset management for electric networks?
Asset management must align the long-term vision and short-term strategy. Asset managers are bound to concentrate on quick solutions for people and problems. Beyond firefighting, the team should think of a preventive solution that must relate to utility stocks.
A coordinated strategy addresses external stakeholder concerns, demand evolution, and everyday operations. It is crucial to keep in mind that asset management is a process, and building a long-term network will take time.
The following steps can help any electric business to conduct critical asset management.
Measure the asset health
To apply analytics to form an asset-management strategy, a health index can be helpful. It should be for each transmission or distribution company’s assets. A health index is a single number that describes an asset’s status. It also shows whether it needs maintenance or replacement.
Compute the asset with a critical eye
There are many ways of finding an asset’s criticality i. One way is through Failure Mode and Effects Analysis (FMEA).
A utility network may examine all possible ways for an asset to fail and the potential effects. With sophisticated analytics, this will allow it to compute its criticality with greater efficiency and precision.
Build asset-management decision models
Developing asset-management decision models involves determining how executives will prioritize costs and outcomes. One method asks CEOs to choose which outcomes they desire in certain circumstances. After that, an algorithm can link individual preferences with various asset management approaches. It will focus on those options.
What Digital transformation solutions for utilities in asset management can help us?
The urgency of asset life management methodologies grows as utility infrastructure ages. Utilities are implementing intelligent asset management techniques rapidly to get insight into the health of their assets. These include online condition monitoring, predictive asset maintenance, and data analytics.
Some of the following solutions can bring a positive change:
The use of drones and artificial intelligence (AI)l. It assists in recording field activity progress. It will check inventory control to track items received and checked out.
Another solution is the use of virtual reality (VR) for training new technicians or assisting workers. It can assist speed up equipment assembly while also lowering the risk of error.
Furthermore, the use of unmanned aerial vehicles (UAVs) can help in aerial line and substation inspections. UAVs are for visual condition evaluation. Using thermal and infrared scans and physical condition checks is a good solution. During these checks, one can find broken insulators, missing bolts, rusty parts on a tower, etc.
Energy and utility firms rely on key assets to keep their operations running. Utility asset life cycles are increasingly complex, partly due to the increase of renewables and infrastructure requirements. As a result, businesses need a new approach. Aptimize is an asset management solution by Aplines. The solution will help you calculate risks and costs that will help the asset managers and the stakeholders to make timely, well-informed decisions.