By Susan Peterson Sturm
A recent survey by IT consultants Capgemini found that 200 senior utility executives worldwide expect their companies to achieve a 5 percent productivity gain using digital solutions over the next five years. What is striking about this expectation is that the same group indicates they have achieved a total productivity gain of only 0.8 percent since 1990.
Digital is expected to be a gamechanger, so the industry’s broad adoption of digital solutions is no coincidence. Many basic business assumptions about how the industry operates have been turned upside down in recent years through the effects of power market deregulation, increasingly stringent environmental constraints, the creation of wholesale power markets and the addition of renewable generation resources, and others. Traditional business value streams and asset utilization models are being called into question, and new players and business models are emerging. This article examines how digital can help power generators not only to survive this challenging period but use digital technology to enable new business models and thrive.
There is much hype around digital, so industry veterans are right to be cautious. They are focused on producing safe and affordable power. Rarefied discussions about the best industrial IoT platform or the benefits of the cloud often result in an eye roll from those with 20 years or more in the industry. To keep it real and engage skeptics, digital is best looked at in the context of key challenges for a specific vertical. For example, an OEM or EPC for power generation has vastly different challenges than a utility power generator, independent power producer or an inside-the-fence industrial cogeneration site. To illustrate this approach, let’s look at the key challenges facing utility generators today.
A key challenge for companies operating in mature power markets worldwide is the retirement of experienced operations personnel; in the United States, 40 percent of the workforce at electric and gas utilities will be eligible for retirement in the next five years, according to the American Public Power Association. As people retire, how does the industry retain operator and process engineering expertise? Digital can be a significant enabler when staring down the barrel of the “great generational shift.” Secure remote connectivity, like ABB’s Collaborative Operations Centers, provides increasingly scarce internal resources with expert support for operations and maintenance. Simulation and benchmarking can also help ensure that best practices are applied at every site.
As an example, ABB worked with a supercritical power plant in a remote part of Africa that was struggling with a lack of local expertise, operator variation and performance degradation of the boiler. Together with the plant owners we focused on soot blowing practices. We worked with local teams to create simulators that showed not only key performance indicators, focused on recoverable degradation, but also found ways to create operator tools to make consistently optimized decisions on when to perform soot blowing. Ultimately, we applied model predictive control (MPC) to close the loop and consistently execute soot blowing sequences. The solution achieved $175,000 per year in fuel savings and more consistent operation, enabling better execution in dispatch, supply chain and maintenance functions. Digital allows customers to scale these same solutions across a fleet of similar plants, thereby accelerating time to value.
Mastering competitive markets
For conventional base load plants built more than 10 years ago, ABB has looked at parts of the generation process that can impact both cost and revenue. For example, at a large coal-fired plant in Europe, ABB analyzed the combustion process, use of abatement materials and at opportunities to increase top line revenues through focused activity in ancillary services markets. Through optimization and closed loop control changes, we were able to reduce variable costs by $500,000 annually by reducing fuel consumption at start-up, improving combustion efficiency and reducing abatement costs. By helping the customer understand costs associated with engaging in primary frequency markets, we were able to grow top line revenue opportunities for the plant.
Developing a strong digital foundation
Any successful transformation requires strong alignment of people, process and technology. There is at least one supercool, disruptive technology that was never adopted because it did not have stakeholder engagement or did not take into account the business process changes needed to implement it. As a result, there is a need to be hyperaware of maturity. Here are a few considerations to help organizations address the ever-important people and process facets of digital adoption.
It starts at the top
Utilities are undergoing a cultural shift towards an information-based digital economy – where primary processes are digitalized – and moving away from the traditional business model that requires heavy investment in physical assets. In the face of this change, chief executives feel there is a real danger of getting left behind if they fail to rally their organization to the new digital order. The drive from leadership is key to the implementation of successful digital projects. It is vital that there is a clear link between any digital project and a company’s strategic priorities.
Pick partners with expertise and experience
Customers have rich networks of multiple digital partners – this view contrasts with some digital vendors that push for a single platform. The partners selected should be able to demonstrate industry expertise, proof-points of challenges solved and maturity in software development and cyber security. If digital partners have worked with companies experiencing similar market and operational challenges, the chances are the customer will benefit from the solutions applied and lessons learned.
Select open technologies
Power generators have complex technology stacks of varying age, often spanning several decades. The industry has plenty of technology debt to address over the next 20 years. Focusing on platforms and solutions that integrate well with others is key. Some platforms, for instance, use industry-standard, open-source and proprietary software. They combine technology leadership and domain expertise with strategic partnerships. This approach makes it easier for customers to integrate solutions with other platforms they have already deployed. It also enables system integrators to create new applications that interoperate with specific solutions. Such a broad, open and inclusive ecosystem delivers massive benefits to customers, compared to narrow, closed and exclusive proprietary systems.
The power generation industry has a track record of resilience and innovation in times of disruption. But it also demands solutions that help it deliver its higher purpose of safe, reliable and affordable power. If digital continues to deliver solutions to these challenges, and enable new business models to evolve and flourish, the digitalization of power generation will expand and escalate, faster than many expect.
Susan Peterson Sturm is the Digital Lead for ABB Power Generation & Water.