The transformation of the energy industry is forcing companies to re-evaluate the way they manage their assets. Technology is evolving at a rapid pace, business models are changing that increase the likelihood of stranded assets, asset expenditure is decreasing and regulatory conditions are changing the way investment models are being scrutinized and approved.
In this article we explore the concept of value-based asset management which enables energy organisations to increase their maturity and improve their asset management strategies, freeing up cash returns to the business to reinvest—provided they get the basics right.
Value-based asset management
In the most basic sense, as conditions change and assets age, energy companies invest in both CAPEX and OPEX to improve asset management strategies, though today’s approaches need to change for investment to be efficient in an industry-facing significant disruption. Expensive ERP and EAM systems, maintenance program delivery improvements, investment in mobility and seeking registration including TQM and ISO all help organisations become better asset managers.
None however have been able to consistently deliver the performance and value needed in today’s energy industry where technology change and customer adoption of alternative energy solutions is occurring at a pace faster than organisations can prepare and deploy new asset strategies and ICT systems.
With organisations failing to keep up with the pace of change, executives are losing faith in investments that promise, but seem to have failed, to deliver the benefits outlined in business cases. This is exacerbated by the range of vendors and consultants encouraging energy companies to deploy mature asset management strategies by leveraging IOT, big data and analytics, even though these organisations often don’t yet have the foundation elements such as data, processes, organisation and standards right.
So the question utilities ask is: when should I start investing in mature strategies and how much longer do I need to continue investing in getting the basics right?
Our response is “now and forever”. In other words, we believe that improving the foundation elements of asset management is an essential and on-going continuous improvement effort, and that organisations must also explore new technologies and approaches, such as moving beyond Condition Monitoring and/or Risk-based Asset Maintenance, to avoid falling behind peers and competitors.
We recommend changing the question to: does this investment of time, effort or money optimise the value of the asset in the production or service delivery of the organisation?
Answering this question means considering all possible hypotheses of asset management and concentrating on the positive revenue loss of downtime or lesser performance, as well as the costs of refurbishing or retiring the asset across the whole of asset life. Performed effectively, this approach optimises customer service, maximises reliability and availability, minimises maintenance operating expenses, and ensures the full and true value of the asset investment is realised for the business.
The goal of value-based asset management is making value the single objective driver of asset management so tied-up capital is returned to the business. This restores executive’s confidence that their investments in developing the assets and the capability of asset management provide real benefit returns. Importantly, this approach is scalable for different sized organisations and applies across investments in foundational and enhanced and evolving asset management practices and technologies, resolving the tensions discussed earlier.