Finding improved ways to evaluate and prioritise expenditure and investment is a must for the utility that strives for success. Niels Nielsen takes a closer look at the modernisation management system BC Hydro has developed to facilitate better decision-making when updating hydroelectric assets
LONG term strategic planning decisions are at the core of hydro plant management. They allow the generating company to identify and implement investments in existing assets that support corporate objectives. Making these strategic decisions requires technical and market information, a process to collect and store the information, and a method for using it to make sound investment choices.
When it comes to plant maintenance, hydroelectric utilities have developed sophisticated approaches for making strategic decisions. Taking into consideration manufacturer requirements, good practice, best judgement, sophisticated processes and on-line information, maintenance initiatives are triggered, work orders issued, activities implemented and jobs closed out as standard practice.
Complex and expensive software applications, often part of enterprise packages, complement the processes adopted, and in this way millions of dollars of annual maintenance activities are routinely managed. No utility would feel comfortable without a maintenance management system. Yet these same companies often do not manage their modernisation activities in a similarly systematic manner. Modernisation is the replacement of equipment that has reached the end of life or where there is an opportunity for improved output.
Modernisation often involves annual expenditures in excess of those spent on maintenance. However, the methodology used to make decisions on modernisation is generally not as sophisticated as that used for maintenance. This has become increasingly apparent in recent years. Mainly because of cost cutting and/or regulatory obstacles, investment in replacements of ageing equipment has lagged behind what is generally accepted as required. The result is that, as we move into the current energy-challenged era – as evidenced by recent California power cuts – many hydro plants have equipment urgently in need of renewal, and there are numerous opportunities for upgrading.
In order to make effective strategic decisions on modernisation, asset managers need approaches just as sophisticated as those used for maintenance management. They need ways to achieve improved reliability and operation performance, while reducing spending levels. They also need methods for making prudent investment decisions based on forecasted market prices. For this, sound, transparent information is required in the following areas:
• Prioritisation approaches – determining how important each activity is and the consequences of not doing it.
• Life-cycle assessments – understanding the long term health of the asset base and the value of the plant.
• Scenario planning – modelling change to the business and the market .
• Budget projections – knowing what is planned for the coming year(s).
• Project analysis – exploring the impacts on the business of any decision.
BC Hydro’s modernisation management system provides the necessary systematic procedures and training, software application and system alignment that allow optimum decision-making around renewals activities.
BC Hydro makes decisions on hydro plant modernisation in the context of a holistic approach to asset management planning. Assessments for the hydro plant are ‘water to wire’ and consider the quality of overall service, rather than dealing solely with issues relating to specific equipment. Similarly, costs cover the life cycle of the plant and equipment. Value takes into account all financial or economic parameters at the plant level and shows its current and future competitive position; this includes forecast pricing for products and services. The components of an effective renewals management system are: ·
• A process to collect and assess knowledge about existing assets and business drivers to optimise and select renewals activities, and to design and implement these works. This process is documented in the epri Hydro Plant Modernisation Guidelines (prepared by BC Hydro and associates).
• Software, a decision-support software application to evaluate and prioritise the knowledge, named TAPlogic (developed, sold and supported by BC Hydro).
• Alignment of modernisation decisions with existing systems, including annual budgeting, long term planning, maintenance management, commercial management, financial management, accounting, project management and value based management.
• Training in systems, technology applications and change management, to ensure that renewal activities are selected and implemented most effectively.
Knowledge management is a conscious strategy of getting the right information to the right people at the right time, so they can take action that will improve organisational performance.
In BC Hydro, as in most mature organisations, the knowledge in use is considerably outweighed by the knowledge that is archived, hoarded in individual work places or about to be lost through retirements.
Capturing knowledge through electronic data management systems (EDMS) has some success, but the sheer volume of information, its diversity and the enormous costs necessary to collect, compile and classify it mean that much will likely be eventually lost. Some kinds of information are deemed more important than others, including the information and processes around life extension and modernisation of hydro plants.
To retain best practice, EPRI conceived and designed a project around this subject. BC Hydro was awarded the contract in 1998. These guidelines, due for completion in 2003, contain the three primary components of knowledge management:
• Technology – the body of engineering knowledge.
• Know-how – the process of applying the technology to the application.
• Source – the repository of knowledge, as contained in references, procedures and collation of information.
EPRI manages a collaborative research and development programme on behalf of the electricity industry and its customers in North America. EPRI delivers the science and technology to make the generation, delivery and use of electricity affordable, efficient and environmentally sound. Created in 1973, the company now has more than 700 members worldwide and an annual budget of US$500M. EPRI’s hydro operations, relicensing and environmental issues target offers products and services to help plant owners and operators improve profitability and manage critical issues. Unique benefits for funders include the world-renowned expertise of EPRI scientists and engineers; forums for sharing information and capitalising on the lessons learned by others; and leveraged development of solutions to common problems which individual power production companies could not afford.
EPRI published an original, three-volume, set of guides in 1989, prepared under contract by black-veatch/Motor Columbus Associates. These guides, fundamentally technology based, were readily accepted and widely used by the North American hydro utility industry. In 1997, EPRI decided, through the contributing members of the Hydro Target Group, to update and expand them. BC Hydro International (BCHIL), in association with Powertech Labs (Powertech), Acres International Corporation (Acres) and Christensen Associates Inc (CAI), was selected as the contractor.
Based on the original terms of reference for this work, the new guidelines are based on an asset management process whereby all significant aspects of the hydro plant are considered before making decisions on life extension and modernisation. This is shown in the figure below.
The foundation of the process is the collation of contemporary practice, obtained from the collective knowledge of hydro plant specialists at EPRI, BC Hydro, Powertech, Acres and CAI, as well as from an extensive literature review. Members of the EPRI Target Group provided expert advice through the review process.
This collected knowledge was used to build the technical volumes of the guidelines.
• Volume 1 – overall process
• Volume 2 – hydromechanical
• Volume 3 – electromechanical
• Volumes 4 & 5 – auxiliary mechanical & auxiliary electrical
• Volume 6 – civil & other works
• Volume 7 – automation, protection and control
Volume 1 captures the overall process for developing a life extension and modernisation plan (also called an asset plan) for each plant. It is supported by more specific information, contained in Volumes 2 through 7.
Methods for gathering pertinent information and assessing plant condition, level of service and cost of service are outlined, as is the process for selecting spending activities (including associated timing and cashflow) for life extension. Technical data for equipment and components are extracted from Volumes 2 to 7
to support these assessments. Expenditures are then aligned with corporate strategies and business objectives to ensure that the life extension plan is feasible.
Opportunities for renewals are assessed and applied to the life extension plan as incremental improvements. The user is encouraged to align these opportunities with the utility’s modernisation strategies in the areas of operations, maintenance, workforce, risk and improved product portfolio.
The IT driver for the modernisation management system is a software application developed and used by BC Hydro, commercially known as TAPlogic. This is a decision-support application for short and long term business planning, which leads to cost-effective operations and optimised productivity. TAPlogic stores and integrates information about each hydroelectric asset, enabling users to screen, assess, manage and prioritise investment decisions. It is an ideal tool to evaluate and prioritise expenditures and investments.
TAPlogic has two main functional components: ·
• A database of all spending activities derived from condition surveys, performance assessments, risk evaluations, dam safety reviews, and business and other technical initiatives across the assets.
• An economic and financial model that assesses these activities based on user input and business evaluation criteria, and presents results in the form of reports and graphics that support decisions, justify business cases and drive project implementation.
• The input to this software application is the extensive technical and financial information collected using methods and processes such as those outlined in Volumes 2 to 7 of the EPRI guidelines. The model then aligns this engineering knowledge with economic and financial parameters to allow decision-makers to clearly understand the impacts of various life extension and renewals alternatives within the context of their business initiatives. TAPlogic does the following: Applies accepted economic and financial analytical frameworks to annual budgeting, long-term planning and short-term decision analysis.
• Incorporates non-financial decision criteria to ensure that projects are analysed and ranked based on all of the business’ overall goals and objectives.
• Values the short and long term cash flows and
profitability of individual (or groups of) production
• Allows the user to analyse the impacts of varying spending, operating condition and market assumptions on cash flows and profitability, and review the impacts of decisions and scenarios at various operational levels.
• Completes standard capital and operating project analyses on individual projects or groups of projects, to assist in business case preparation.
Since 1998, BC Hydro’s power generation group has been using an in-house version of the Asset Planning Tool (APT) to provide forecast financial information for individual production facilities and portfolios of facilities defined by rivers and/or geographic areas. It has provided decision-makers with prioritised, rationalised and ranked lists of renewals projects in a context consistent with divisional and corporate goals and objectives. As all projects are analysed and presented using the same assumptions and parameters – income, economic value added, cash flows (real and discounted), and benefit-cost ratios – APT has reduced subjectivity in the review, reporting and analysis of budget requests and has provided consistency to the budgeting process and other decision support functions.
Within BC Hydro, APT incorporates the business decision framework known as value based management to enable the valuation of projects that may provide non-financial benefits (ie environmental initiatives, protective coating projects, dam safety projects etc), in addition to measurable financial returns.
Alignment of business processes is extremely important in any organisation that is striving to improve its profitability and reduce workload and stress on its employees. In this regard, a review of existing processes and technological tools needs to focus on seamless integration. In order to both effectively utilise the knowledge within an organisation and have employees utilise and embrace the process and the tools, the linked activities and processes need to align in a mutually reinforcing manner.
• Effective alignment is based on simple but powerful concepts.
• Enter data only once.
• Enter data at the lowest level of detailed required.
• Ensure the tool is simple, intuitive and easy to use.
• Train only those who need to be trained.
• Be clear about your ‘business rules’.
‘Business rules’ both influence and dictate how systems are used and linked, how data and information is passed from one system to another, and how people work together. Successful implementation within an organisation is based on these ‘systems and processes’ making sense for both the business and for those using them.
TAPlogic currently sits on an Access platform and operates in a client-server type manner. The Oracle, n-tier, browser driven version of the software is capable of referencing data that resides in other data warehouses through an enterprise application interface (EAI) or middleware.
A crucial aspect of any change process is training to help the user apply new knowledge. To help utilities learn and benefit from the renewals management system, BC Hydro has two training initiatives. In the first, designed to be rolled out over a six to eight-week period, BC Hydro works on-site with a utility to provide a combination of training and guidance in how to use the guidelines and apply the renewals process to a specific hydro plant. This hands-on training enables managers to master the process for assessing the modernisation potential of the utility’s assets, in a real-life context.
The training is offered to EPRI target group members under the EPRI banner and to others under commercial agreements. By the end of the training, key staff will be knowledgeable in the process and one of the utility’s plants will be properly assessed. The training includes the transfer of the TAPlogic software to collect data and help in the decision-making process. The second training initiative is a two-day, classroom-based workshop designed for asset managers and business managers.
Owners and operators of ageing assets continually struggle with decisions on renewals to extend life and add value. This struggle will intensify as the assets age further, financial resources dwindle, knowledgeable staff retire and competitive challenges build. A fully functional and aligned modernisation management system, which provides better ways to evaluate expenditures and investments, leading to optimum decisions, is a must for the utility that strives for success.