O&M strategies for superior performance by Tata Strategic Management Group

Tata Strategic Management Group published a report for the 3rd Annual Conference & Exhibition on Thermal Power O&M Summit 2014.The report is a source of insights and information on the O&M sector for thermal power plants. The report acts as a guide to power producers in their efforts to obtain superior returns through effective O&M. The report shares insights about the various O&M regimes being followed. Publishing of the report is highly relevant as the trends in the power sector point to a growing need for adoption of superior O&M measures.

Power plant developers, combating the issue of deteriorating performance measures, have shifted their focus from capacity addition to operational excellence. As O&M activities account for ~65% of total life cycle cost of power plants, any positive impact on this could lead to significant benefits to power producers. Extensive interviews were conducted with various stakeholders to obtain their views on changing O&M practices. These discussions revealed some of the key external and internal challenges plaguing power plant operators.

Other key insights include:

• There is significant deterioration in Plant Availability Factor in India from 85% in FY08 to 80% in FY13, highlighting significant idle capacity. Poor maintenance and ageing fleet are significant contributors to this deterioration
• Indian power plants have moved beyond traditional 100% in-house O&M to adoption of advanced O&M practises like outsourcing (each of the O&M models have their own pros and cons)
• Most IPPs currently adopt a reactive or preventive maintenance approach, but there is a need to evolve practices to predictive or reliability centred maintenance
• Some of the measures that could help power plants improve their performance include improving Station Heat Rate (SHR), reducing Auxiliary Power Consumption (APC), reducing manpower cost and optimising on spares inventory

Development of superior O&M strategy by the IPP requires a structured approach that encompasses root cause analysis, identification of improvement areas, measurement and benchmarking of performance parameters, setting improvement targets, aligning organization structure and critically monitoring for continuous improvement. These efforts can yield positive benefits in the form of increased returns and enhanced plant life.

Mr. Manish Panchal, Practice Head - Chemical & Energy, Tata Strategic Management Group, said, “The report provides key insights on the various models and regimes being followed for O&M of thermal power plants. It highlights the fact that poor O&M can potentially erode ~25%-27% of expected project returns. Thus, there is a need for companies to strategically decide on the appropriate O&M model.”

Mr. Shardul Kulkarni, Principal - Energy, Tata Strategic Management Group, said, “The report highlights the fact that power producers have moved from “cost plus” mind-set to “cost conscious” mind-set. The focus on improving O&M practices can help improve plant performance. The combined impact of superior O&M, for a 1300 MW plant is estimated to be in the range of INR 75 Cr to INR 100 Cr per annum.”