The radical transformation of the Indian power sector, currently underway, opens up a plethora of opportunities to power plant MRO (maintenance, repair and overhaul) service providers around the world. However, any business strategy aimed at making inroads into this market, projected to grow to $4800 million/y by 2025 from the current $750 million/y, must, from the outset, factor in unique features of the Indian power sector.
The Indian power sector has grown significantly from the measly 1700 MW of installed capacity in 1950 to over 147 000 MW by the end of 2008 (see Tables 1 and 2). At the same time there has been strong growth in indigenous capabilities in plant
design, engineering, equipment manufacturing, construction, MRO services, along with parallel evolution of a robust regulatory/policy framework. In particular, shifts since 1990 culminating in the Electricity Act of 2003 have created a new business landscape. This means that previous paradigms, eg, traditional cost plus regimes, seller’s market, relaxed construction timelines and low operational efficiencies, are no longer tenable, while generating companies have been prompted to tweak their business models, with MRO (maintenance, repair, and overhaul) being one key area which is seeing renewed focus.
Accordingly, NTPC Ltd, the Indian power major, teamed up with the consultancy Frost & Sullivan to survey the MRO industry. The insights drawn from a survey of a wide spectrum of power stations and vendors reveal that, despite better operational performance, Indian power stations face service and quality issues related to plant MRO. Inadequacies in the technology base and resources of MRO service providers, which have in the past been compensated by the close supervision of the power plant personnel themselves, have contributed to high man power intensities, efficiency deviations from design levels, and higher incidence of equipment breakdowns in comparison with best practice power stations.
The road map charted by the MRO study flags up the importance of introducing best practice into Indian power plant MRO. This, coupled with the expected future expansion of the Indian power generation sector, offers significant business opportunities for global power plant MRO service providers.
Profile of Indian fossil plants
Contemporary India has over 140 fossil fired power plants (450 units) adding up to about 93 000 MW of installed capacity, fired with domestic coal (with a small component of lignite and imported hard coal) as well as domestic natural gas. The plants are typically in the 500 MW to 3000 MW range. Unit sizes of 210 MW and 500 MW are popular, while 660 MW units are now being constructed and 800 MW units are in the pipeline. The majority of coal plants are sited at the mine mouth, in remote locations. Gas based power stations are primarily located on the HBJ gas pipeline.
Boilers in Indian fossil plants are of conventional subcritical, dry bottom, two pass design with customisation to handle high ash contents (over 35%). Table 3 shows key features and main equipment suppliers for the Indian coal fired plants. The equipment has generally been sourced from the domestic suppliers, under technical collaboration agreements with foreign OEMs. Equipment for FGD and deNOx is generally not used. The gas turbines are typically of the D and E class.
Traditionally, the Indian fossil plants have had large workforces, but over the last decade the trend has been downwards. The man per MW ratio varies from 0.6 to 3 (full time employees (FTE)). Manpower at Indian fossil plants is typically organised into traditional equipment-centric maintenance execution groups in addition to shift operation staff. The manpower involved in maintenance is roughly 30% of total FTE but varies depending on the degree of outsourcing, which has been on the increase since 1980s. Maintenance outsourcing in Indian power stations is mostly limited to execution. At present complete outsourcing of maintenance execution and planning or of full O&M is negligible in India.
Load factor centred MRO
High demand and deficits in peak installed capacity have meant that power generation is pursued with a quasi religious fervour that is palpable at Indian fossil power stations. The plant load factors (= ratio of what is actually generated at the generator terminals in a year to what would be generated at rated capacity) of Indian fossil plants are better than global benchmarks: Indian national average over 78% and NTPC average over 92%. Business processes and a certain regimentation peculiar to the Indian power sector appear to be working in the background to allow such results to be achieved. Dynamism in circumventing constraints seems internalised. Deployment of extra qualified personnel is common. Follow-up appears professionalised be it for major resources like fuel/spares or internal preparedness for overhauls. Close supervision of maintenance activities and hair splitting outage analysis plays a key role. The sense of ownership of the personnel is high and reflected in the extra work hours contributed voluntarily.
India’s generation centric approach pushes other performance measures, eg fuel efficiency and operating costs, to a lower pedestal. Consequently the same level of extreme focus that is found in ‘activity completion’ is not found in the area of ‘work quality’ – especially for activities requiring longer term planning or cross industry initiatives. Table 4 attempts to benchmark typical Indian power stations against global best practice for a range of different operating parameters. The numbers are indicative only, and any conclusions drawn need to take note of domestic conditions. For instance, high levels of erosive ash impact boiler air preheaters, resulting in a rapid downward spiral in efficiency. Similarly manpower intensities need to be seen in the context of traditionally low outsourcing levels.
Maintenance interventions are generally done as per OEM recommendations and aimed at avoiding unplanned outages. Accordingly a high level of preventive maintenance (PM) is generally observed. To put this in perspective, there are about 34 PM interventions per day at a typical Indian 210 or 500 MW unit. This is higher than at best practice plants, which generally have optimised such interventions over the past couple of decades in a bid to cut maintenance costs.
High demand for electricity severely restricts the time window for carrying out maintenance in India. Boilers have a statutory annual inspection requirement and generally get overhauled every 1.5 to 2 years due to high grid demand. When the overhaul is done it is done very quickly, about 15-20 days for an annual boiler overhaul, while a major overhaul of a steam turbine is typically done in about 40 days.
The duration of overhauls may be impressive, but the frequency of intervention in India is generally high compared to best practice stations. The overhaul frequency for steam turbines is generally once every 4-6 years, while turbine bearing inspections are normally carried out every 1-2 years. Most stations get forced to open up turbines within the stipulated time as going beyond would generally translate into an unplanned outage.
The preoccupation of maintenance personnel with follow up activities relating to procurement and timely maintenance execution have repercussions for maintenance optimisation efforts – eg, establishing predictive maintenance, creating maintenance history, root cause failure analysis, spares planning, vendor assessments, specification improvements etc.
The incidence of minor breakdowns (leakages, abnormal sounds, improper component functions, etc) is relatively high in India, typically about 200 notices per month per unit, and attending to these jobs contributes to higher manpower requirements. These breakdowns can be attributed to inferior maintenance workmanship, among other things, which is influenced by service quality and restricted maintenance opportunities.
While the cost plus business environment, which presumably brought about the paradigm of PLF centric work processes, is now gradually disappearing, the structure of the Indian MRO service industry poses a serious impediment to improvements in power station processes.
Fragmented service sector
Maintenance outsourcing in the Indian power plants essentially started in the early 1980s, leading to the emergence of service providers. The Indian MRO industry comprises a large number of small vendors. The estimated population of about 1000 vendors consists mainly of maintenance vendors (70%) and support services vendors (25%) with a limited presence of OEMs (5%). Table 5 gives a breakdown based on the services offered. The maintenance vendors can be placed in three tiers: Class A, with overhaul of main plant as their focus area; Class B, which is concerned with equipment specific maintenance (electrical, mechanical etc); and Class C, very small vendors who mushroom around the power stations. Support services vendors offer services in the field of testing, repair, expert/supervision support etc required to buttress the maintenance activities.
A typical Indian maintenance vendor is generally characterised by weak resources (weak manpower, sub quality tooling) and missing quality systems, leading to low maintenance work quality. The low revenues of these vendors compel them to make use of temporary workers, with a skeleton team of FTEs. A typical Class A maintenance vendor has about 40 FTE. The majority of the power plant MRO service workforce pool comprises workers who start off as helpers and with experience gradually progress up the skills ladder. The T&P (tools & plant) owned and mobilised is generally insufficient to perform the job to the best quality level. The deployment of mechanised and advanced equipment, as visible in best practice stations, is virtually non-existent in India.
To achieve the required work execution quality Indian vendors are therefore typically totally dependent on the personnel of the generating companies.
Table 6 summarises characteristics of Indian MRO vendors.
The OEMs primarily restrict themselves to the bigger maintenance jobs such as boiler, steam turbine and generator overhaul and jobs requiring technical inputs and repair facilities, such as major outage troubleshooting. However, the OEMs in turn also depend on the above-mentioned smaller vendors for resources such as personnel and tooling for job execution and restrict their efforts to supervision and technical assistance.
A key outcome of the interaction between the vendors and the power plants over recent decades has been creation of a quasi-skilled workforce, consisting typically of welders (HPW), millwrights (MWF), riggers, grinders, etc, who have picked up skills ‘on the job’ responding to the needs of the generating stations.
Qualified skilled workers – a product of India’s (otherwise) large vocational training system – find that jobs in the power stations pay too little or are too temporary or remotely located, exacerbated by India’s recent urban-centric tendencies. The remuneration for skilled workers in the power sector is low, in the range 10 000-20 000 INR per month, with limited fringe benefits. This leads to craftsmen preferring other industry sectors as well as other countries (notably most places in the Middle East). Table 7 shows typical craft remuneration in the power MRO sector for various skill levels.
Roadmap to better quality services
The root cause of the insufficiencies that have crept into the vendor–station interface appears to be the “weak specification” by the power plants of work quality determinants – such as craft skills required, tooling and work procedures. This affects the way the power stations qualify/select vendors, so that any serious vendor offering quality doesn’t get acknowledged in the open bidding scheme.
This ‘quality penalty’ prompts the vendors to reduce their company overheads, compromising on longer term issues such as creating internal infrastructure, providing craft training, tooling etc. Consequent low craft wages exacerbate the problem as does the absence of a vendor/craft certification system.
Any roadmap for increased MRO quality must be based on retrofitting fundamentals such as certification systems, standardisation of cost estimates and specifications, and work procedure documentation. This will take time and resources and will require a cross-industry initiative.
Appreciation of best practice in maintenance work procedures, tooling and skill sets and its impact on efficiencies, outages and, in turn, costs, is the first step. This anchors the whole approach and propels the process of putting things right.
Major Indian generating companies are sensitive to the need. To accelerate the improvement process the best way appears to be through partnerships with reputed and high quality international MRO service providers. Practicable options for such partnerships need to be worked out, with a focus on costs as these will tend to be higher than prevailing prices.
Some upfront development work needs to be done jointly by stations and vendors to demonstrate the benefits that will be derived from the additional costs.
It is also important to note that demonstrable improvements in plant efficiencies can be reported under the CDM scheme, further offsetting the additional costs.
The MRO business opportunity: what’s it worth?
The Indian government’s integrated energy policy projects that Indian installed fossil power generation capacity could be about 333 GW by 2025 assuming 7% CAGR, or 500 GW assuming 8% CAGR.
The graph shows projected MRO business volume growth over time until 2025. The market projections consider two scenarios: “business as usual” (BAU) scenario; and “improved” scenario. In the BAU scenario, no MRO improvement initiatives are considered and capacity growth is assumed to be 7% CAGR. The improved scenario assumes a gradually improving MRO industry and capacity growth of 8% CAGR.
Presently the Indian power plant MRO services & spares market stands at about 750 million US$/y and could be as much as 4800 million US$/y by 2025. This market size makes it attractive to international businesses and it could be bigger when one considers the possibilities for fossil plant renovation and additional consulting services. Power sectors other than fossil (hydro, renewable, nuclear etc) while not included in this assessment are also significant and potentially open to similar initiatives.
The growth in the Indian MRO market can mainly be attributed to two factors:
Quantitative – large thermal power capacity addition plans.
Qualitative – changing business dynamics brought about by increased competition and the emergence of ancillary businesses like maintenance schools, certification agencies, craft training channels etc.
Table 8 shows market shares for the various MRO vendor types, current and projected.
In the future we could see industry consolidation, with a trend to fewer but bigger service providers offering services throughout the MRO chain. A notable change will be the emergence of new quality & support services, as the entire Indian MRO industry is upgraded.
Pitching into the market
While no international player in the power plant MRO business can afford to ignore the potential in the Indian marketplace, patient and informed pitching will be required to drill down into the Indian market and unearth the opportunities. Even with new MRO service providers in the market, local vendors are likely to continue to be crucial but it is important that best practice systems are brought in and customised for the Indian market to increase cost effectiveness and create an acceptable business model. Initial involvement of international vendors can be encouraged either through formation of joint ventures with an individual or group of Indian generating companies, while business tie-ups between international vendors and their Indian domestic counterparts could be another possible route.
The opinions presented are those of the authors and do not necessarily reflect the views of their employer NTPC