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By John Van Leeuwen, Jason Palmenberg and Andrew Steinhubl, Booz & Co.
Despite significant operational improvement programs at most power producers, we still find “gold mines” in coal handling and by-products operations. The opportunity size typically ranges from $300,000 to $1 million per plant and most improvements are achievable in months with minimal capital investment. Why are plants missing this opportunity?
Today, plant leadership is primarily focused on achieving higher availability, maintaining boiler performance and meeting environmental regulations. Material handling is lower on the priority list and positions are often staffed with new employees who have little or no plant experience. Plant managers rarely, if ever, visit the coal yard and leadership’s primary request to material-handling supervisors is to avoid a forced outage. Capital requests to upgrade facilities, replace aging mobile equipment or add backup capacity remain unapproved year after year. Coal unloading, bunkering, ash handling and other material practices are little changed from those in place 10 or 20 years ago.
As a result, costs remain far from best-practice levels (see Figure 1) as material-handling supervisors respond to inconsistent deliveries and maintain aging equipment with little time for innovation.
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Six Opportunities
Existing operating practices should be challenged. Increased efficiency can be achieved with minimal capital expenditure. Where capital is needed, high paybacks can be achieved.
Opportunities can be pursued across six areas: supply variability, system constraints, energy efficiency, automation, work practices and inventory management.
Supply Variability: Supply variability is a key cost-driver and a constant headache at most plants where managers assume they have no influence over rail, barge and mine operators. Frequently, plants hold staff and incur overtime for barges or trains that don’t arrive on time. The first steps to improve performance include tackling the supply chain into the plant and adapting the workforce schedule to accommodate supply uncertainty.
System Constraints: System bottlenecks are prevalent across the U.S. generating fleet and can include undersized chutes, malfunctioning metal separators, ineffective crushing, dozer capacities or incompatible belt speeds. Value-stream mapping of the material flows should identify these bottlenecks.
Energy Efficiency: Plants are conscious of running conveyors only when needed, but additional saving opportunities may be found in running de-watering, crushers and bunkering processes during off-peak hours.
Automation: Many plants have added automation but have yet to capture the productivity savings, while others have not yet automated areas such as bunkering processes, train controls or dumping.
Work Practices: The diverse nature of material-handling activities and urgency to turn around trains create peak work-force requirements. Flexibility in work practices such as multiple mobile equipment operators or flexible start times to fit labor requirements across the day can greatly increase work force utilization.
Inventory Management: Unlike manufacturers who have embraced just-in-time inventory or chemical companies that use analytical inventory targeting, coal plants regularly use rules of thumb to set coal stock levels. While the carrying cost of coal affects corporate performance, the hidden costs of maintaining this stock level—fuel and maintenance for dozers, unloading delays due to excessive stacking and reclaiming time or compacting time—may be overlooked.
Four Plants—Consistent Findings
As plant budgets receive increased scrutiny, leadership can find significant cost and margin opportunities by implementing material handling excellence. We have found opportunities in multiple types of plant settings.
Plant 1: Modern, Large Plant This plant had a well-maintained coal handling system, but automated controls were not being used to improve labor productivity nor had the material flow been studied to identify bottlenecks. By implementing material handling excellence, bunkering times were reduced by 20 percent while coal unloading productivity was improved.
The larger opportunity was found in the by-products area. An incomplete installation of the limestone crusher control system was causing a 20 percent increase in limestone usage. Improved crushing controls such as cutting sludge de-water and reducing land-fill operations improved efforts across the process. In addition, by bringing a driver in early to warm up equipment, the hauling and land-fill operation was able to eliminate one truck. The resulting benefits were 3 percent to 4 percent of compressible operating and maintenance (O&M) spend.
Plant 2: Modern, Low-Inventory Plant This new coal plant had some of the latest material-handling technologies in place, which allowed it to operate with less than 10 days of inventory. However, more than $3 million in savings across O&M costs, fuel costs and margin improvements were identified with a savings of 8 percent of compressible O&M expenditure.
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The study revealed that as the plant began commissioning and final fuel selection, several material-handling processes were modified to meet new fuel specifications. These changes created material over-processing with excessive crushing and conveyor transportation as well as significant quantities of material reject since additional trucking was needed to handle the rejected material. Moreover, the plant had not extended its predictive maintenance program to the material-handling area, causing a high level of downtime.
Plant 3: Older, Mid-sized Coal Plant In this study, a coal plant that was more than 30 years old had undergone several changes in its material-handling processes and fuel selection in an attempt to remain competitive on the merit curve. As with many older plants, staffing decisions and technology had not changed over the years. System bottlenecks were driving 30 percent overtime.
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By applying material handling optimization, this plant reduced its material handling staff from 10 to seven without resorting to a financially unattractive automation project. In addition, a rail management process was established to minimize overtime due to late rail arrivals. Finally, the study revealed an optimum pile management process that combined conveyor speed modifications, stacker utilization and dozer operations. Including fuel optimization and ash handling, the work delivered 12 percent savings versus total O&M expenditures.
Plant 4: Mid-sized Plant, Unique Fuel Situation This 30-plus-year-old plant had unique fuel properties that increased fuel processing and by-products complexity. An optimum fuel drying process was developed to lower moisture content by as much as 2 percent with a significant heat rate improvement. In addition, a modified bunkering process eliminated the need for a full material handling day shift and lowered auxiliary power consumption.
As part of the by-products study, the supply routes were analyzed to identify inefficiencies. New supply routes and processes minimized transportation costs and streamlined operations. Overall material-handling improvements were equivalent to 10 percent of O&M spend.
Seize the Opportunities
Our work highlights the need for cross-functional capabilities in identifying and delivering opportunities. A combination of process engineering, lean manufacturing, supply chain and financial analysis expertise is needed to identify attractive opportunities across the entire system.
Once opportunities are identified, the material handling team is often eager to improve its performance. To supplement the team’s efforts a few key, site-specific metrics become important, such as costs of SO2 removal, inventory levels, coal-handing productivity and the like.
As coal prices remain at historically high levels and power markets become more competitive, utilities and merchant operators alike will continue to need new sources of improvement. Material handling is fertile ground. With most of the value driven by attention to operations effectiveness and efficiency, plants can begin to generate improvements now rather than wait for the next planned outage. With a few weeks of focused analysis and review, your material handling groups can become the showcase of operations excellence.
Authors: John Van Leeuwen is a principal with Booz & Co. in Houston, with 20 years of experience. He leads the North American plant performance team and specializes in operations improvement and transformation for process intensive industries. Jason Palmenberg is a senior associate, also with Booz & Co. He specializes in operational improvement programs with a focus on O&M optimization for the utility industry. Andrew Steinhubl is a partner with Booz & Co., specializing in organizational design, technology and operations readiness for the energy industry.
