Ineffective Maintenance Can Have a Significant Impact

When things go well, maintenance is an activity that is often invisible to
senior management. Smooth running plants allow the Operations Department to
manage the generating system to maximize efficiency and effectiveness, while
the firm’s traders can rely on the cost and availability of energy to sell into
wholesale markets.

On the other hand, ineffective maintenance can have drastic consequences. Inefficient
plants can slowly reduce profits through higher fuel costs. Outages at critical
times can leave Operations scrambling to make up lost production. Non-compliance
with strict environmental regulations can result in fines and even tighter restrictions.

Although maintenance outages have always impacted firms, competition and the
expansion of wholesale power markets has brought with them new challenges for
the power plant maintenance manager. Two of these challenges are greater impacts
of lost production and the increased difficulty to schedule maintenance “around
the market.”

Greater Impacts of Lost Production

The financial impact of maintenance outages has increased as firms’ excess
capacity has decreased or, for many firms, as they have placed a greater reliance
on electricity trade to meet their load requirements. In these cases, increasing
output from another facility is no longer an option to make up lost production.
Instead, replacement power must be purchased from the market, be it the spot
market for short outages or through longer contracts for extended interruptions.

The impact is most significant for unplanned outages. Firms have a better
chance to obtain reasonable contracts for replacement power when maintenance
outages are anticipated and scheduled in advance. However, an outage that is
unplanned forces everyone into fire-fighting mode, and the result may be unfavorable
contracts that come at considerable cost. In competitive markets, firms are
more inclined to maximize trade revenues rather than to be supportive of a neighboring
utility in a time of need.

Increased opportunities to sell power into lucrative wholesale markets also
mean that it is no longer sufficient to consider “own-costs” as the only costs
of removing plants from service. Firms must include the cost of lost sales opportunities
into their analysis. Moreover, it doesn’t take a complete loss of a generator
to cause significant financial impacts. Even relatively small unit de-ratings
can have noticeable consequences if problems are not dealt with promptly. Furthermore,
energy is not the only product that can be sold into a market: the potential
to sell ancillary products, such as operating reserves, has also increased.
Every minute of unit availability counts in a competitive market.

Increased Difficulty to Schedule Maintenance “Around the Market”

The increase in volatility of market prices has made it more difficult to select
optimal times for maintenance. The ever-changing balance of supply and demand
has always resulted in fluctuating prices, but the daily and seasonal variations
seem to be more pronounced given the immaturity of the markets and pressures
of tight supply. With market conditions constantly changing, it is an understatement
to say that scheduling “around the market” is a challenge.

Volatile market prices affect both the ability to schedule outages in advance
and the level of confidence that the original outage schedule will actually
be followed. Maintenance staff are often frustrated by last-minute changes to
outages that were previously “negotiated” with Operations. Although these changes
may be the correct economic decisions based on market conditions at the time,
they do not lessen the annoying need to continually redevelop work schedules,
nor the perception that the Maintenance Department has little control over its
own work. Furthermore, changing roles and responsibilities magnify the challenge,
as the creation of traders, ISOs, etc. has increased the number of stakeholders
and changed the traditional relationships and protocols between Operations and
Maintenance.

Addressing the Challenges of Generator Maintenance in Competitive Markets

Although the evolving wholesale electricity market has provided a significant
challenge to power plant maintenance managers, many of these challenges can
be overcome by controlling your maintenance instead of allowing maintenance
to control you. In particular, a successful maintenance program for competitive
markets is one that takes a strategic view and that undertakes appropriate and
planned maintenance that is scheduled at the best possible time. Supporting
these activities must be an effective computerized maintenance management system
and a responsive workforce (Figure 1).

Figure 1 – Controlling Generation Maintenance

Take a Strategic Approach to Maintenance Management

Maintenance is an important activity, with significant consequences if done
poorly and in isolation from the firm’s other activities. Generating firms should
have clearly-defined maintenance strategies that support the firm’s overall
approach to business and that enhance the firm’s competitive advantage in its
market. This isn’t to say that the primary objective of maintenance is no longer
to keep a high level of reliability at a reasonable cost. However, the way in
which this is achieved may be different depending on the firm’s objectives and
culture.

It is also necessary to develop specific maintenance strategies for each facility,
as different plants play different roles within the firm’s generation portfolio.
For example, the approach to maintenance for a base-load thermal plant is likely
to be different than that for a peaking hydroelectric plant. This exercise must
start by establishing the value provided by each plant within the generation
portfolio to identify specific areas for emphasis. The best way to maximize
its own value can be determined by each plant, provided that the strategies
of all plants are then integrated to ensure that the combination of approaches
provides an optimized solution for the firm as a whole.

Performance measures and indicators must also be developed to clearly identify
areas of importance for the firm, for each facility, and, ideally, for each
department within a facility. This is necessary because high-level measures
such as Economic Value Added (EVA) and $/MWh are not tangible to workers on
the shop floor. Instead, plant-specific and department-specific measures, such
as preventative maintenance compliance or lost sales opportunities caused by
outages, may be more meaningful and controllable if the behaviors encouraged
by such measures are consistent with higher-level measures and objectives.

Do the Right Work

Doing the “right work” is a balance between two competing directives: target
the work that avoids unplanned outages, but don’t do too much — maintenance
is a significant cost to generating companies, and at a point additional maintenance
has diminishing returns.
Doing the right work has several components. First, the right work is that which
uses the appropriate set of tactics to target the root-cause of potential failures.
This is a failing of many existing preventive maintenance programs, as maintenance
activities often target the symptoms, rather than the cause. Furthermore, a
long history of performing some tasks can often make us forget why they were
specified in the first place. Constantly review your maintenance program; understand
why tasks are necessary and discontinue those that aren’t.

Second, the right work must be focused on the equipment that is key to the facility’s
availability. This requires a critical assessment of equipment and, as importantly,
the discipline to undertake work according to priority. Recognizing that priorities
are constantly changing, don’t get caught with a fire-fighting mentality in
which, for example, PM tasks are dropped to address failures to non-critical
equipment. Your PM program is an important element in controlling your maintenance
— don’t relinquish your control by unduly deferring or cancelling work.

Finally, the right work means doing the work correctly and completely. Maintenance
tasks are specified for a reason; the maintenance program will not achieve its
full value if they are not completed. Reinforce the need for 100 percent compliance
for necessary maintenance activities. Use the maintenance program review process
to evaluate suggested changes to tactics and procedures; maintenance staff can
provide valuable input into the process but the consequences are too high to
allow non- compliance as the mechanism for their input.

Using RCM to Determine the Right Work¹

Reliability-centered maintenance (RCM) is a proven process that can be used
to determine the appropriate maintenance for your facility, by identifying the
tactics required to address failure modes and their consequences. RCM was developed
in the 1960s to maximize reliability for military and aeronautical applications.
Since that time, its uses have broadened to industrial applications as well,
as a method of optimizing equipment design and maintenance. (SAE standard JA-1011
defines the criteria for acceptable RCM analysis.)

The RCM process first requires the functions and performance expectations of
equipment to be defined. This allows a clear understanding of what constitutes
normal operation and what constitutes “failure.” Although a high degree of reliability
is expected for all equipment, the performance requirements will be higher for
those components with significant commercial or safety implications. As a result,
it is appropriate to establish different performance expectations for different
equipment, or even for similar components in different operating roles.

The root-causes of failure and the subsequent effects are then analyzed. In
addition to the financial losses caused by production impacts, effects analyzed
include safety hazards, environmental damage, and non-compliance with permits.

Finally, the set of maintenance tactics for each piece of equipment is determined
based on its performance expectations and the technical nature of the failure
modes it suffers. Maintenance tactics that are considered include:
• Scheduled inspection, discard, or restoration
• On-condition tasks
• Run-to-failure
• Redesign

The key benefit of the RCM process is that it identifies the equipment-specific
set of tactics required to address modes of failure, while explicitly considering
the consequences of failure to determine what tactics are economically feasible.
The output of the analysis will also provide a detailed understanding of the
materials required to sustain the maintenance program.

Build Effective Planning and Scheduling Processes

Even if outages cannot be avoided, effective planning and scheduling processes
can mitigate the financial impacts of lost production in highly volatile markets.
This is accomplished through a maintenance staff that, for each job, knows exactly
what is required, finds the best time to do it, and carries it out efficiently
and safely.

Direct costs of labor, materials, and contractors can be reduced through effective
planning, as can the indirect costs associated with lost production. Planning
involves identifying the required work steps, safety needs, labor, materials,
and tools before dispatching maintenance crews to start the job. Direct costs
are lower because a well-defined list of tasks allows maintenance staff to focus
on getting the job done, rather than scrambling to find materials and tools
or being surprised with unexpected safety concerns. This can also translate
into a reduction in outage time.

Combined with effective planning, scheduling further enhances the value of maintenance
work by ensuring that tasks are undertaken in order of priority (within constraints
such as labor and material avail ability), and in such a way as to minimize
the financial consequences of lost production. Scheduling “around the market”
means that firms must have a view to “run when the market is hot, and maintain
when it is not.” This places greater importance on the need to coordinate day-to-day
work activities between crews to minimize the number of outages and, when outages
are essential, to minimize their duration. Integrated schedules should be developed
for at least a one-week period (and ideally longer) with a focus on activities
that involve equipment outages or multiple crews. Scheduling according to priority
also ensures that the preventative maintenance program is not pushed to the
side in favor of other less-important tasks.

Changing market dynamics also challenge the way that some firms have scheduled
extended outages. For example, is it possible to squeeze maintenance that traditionally
required an outage of six weeks into a three-week window? Can new approaches
to staffing be used to put more workers on the job? Major outages have often
been used as a convenient way to defer minor outages — is it more effective
to shorten the length of the major outage and perform some of the work when
the opportunity arises? These may not be the best approaches to minimizing staffing
costs or maximizing crew efficiency, but they may be attractive options when
the cost of lost production exceeds the cost of additional labor. Risk analysis
and “what-if” scenarios should be considered while planning and scheduling tasks,
as it will be easier to respond to changing maintenance requirements of market
conditions if mitigating strategies have already been developed.

Finally, scheduling maintenance in a competitive electricity market requires
maintenance activities to be fully integrated with the plans of Operations and
Trading. Processes should be in place to provide maintenance staff with the
traders’ view of potential outage times over the coming weeks and months. This
will allow Maintenance to consider opportunities for outages as they build their
schedules, and also to be prepared to perform other work if outage opportunities
do not materialize.

Integrate Maintenance Management and Materials Management

Maintenance and materials management processes must be highly integrated and
managed with the common goal of assuring plant capacity and reliability at an
acceptable cost. It does little good to minimize stores goods if maintenance
staff cannot obtain the correct components when they are required. Conversely,
the firm would be required to make a very large investment to stock every conceivable
part just in case they were required. Somewhere in the middle is the optimized
blend of stock materials, supplier agreements, and ad hoc purchases that will
provide optimum value to the firm overall.

Derive your need for maintenance materials from your maintenance strategy. Your
preventative maintenance program is a good place to start identifying materials,
as tasks are routine and on a set frequency. An effective maintenance scheduling
process will then allow Stores and Purchasing to optimize the procurement of
each material based on expected usage. This will only work if job plans are
complete and adequate notice of material requirements is provided. In far too
many cases, perceived problems with Stores or Purchasing arise as a result of
inadequate maintenance management processes.

Of course, no proactive maintenance strategy can ensure that each and every
task can be undertaken with sufficient notice to allow materials to be procured
in the optimal means. All firms must hold a level of emergency spares to ensure
that the operational impacts of unexpected breakdowns are minimized. This again
should be an outcome of a refined approach to maintenance that recognizes equipment
criticality, operational risks, and the financial consequences of lost production.

This coordinated approach to Maintenance and Materials Management processes
will help to maximize plant availability while also controlling inventory and
purchasing costs. Upfront identification of maintenance needs will also help
to identify opportunities for alternative procurement strategies by providing
a more complete view of required maintenance materials.

Maximize Workforce Flexibility

Minor maintenance requiring short outages should be attacked whenever the market
provides a window. That means being prepared for the job, including the job
planning and the materials staging. Maintenance crews must also be responsive
to start the job on short notice, or to interrupt the job if market conditions
change and the generating unit can be safely and profitably returned to service.
And if the best window is overnight on a weekend, then so be it.

The flexibility and responsiveness of your workforce is directly related to
its understanding of your maintenance strategy and the impacts of maintenance
on profitability. Without a doubt, it can be very annoying to have scheduled
outages cancelled or changed as a result of changes in market conditions. However,
acceptance of changing schedules is more likely to be accepted if the financial
impacts are understood. Moreover, it may not be as annoying if the employees
stand to gain through properly structured performance-based bonuses that provide
the incentive to perform maintenance around the market.

Also required are communication processes that provide all employees with market
information that can empower them to make their own market-based decisions.
Although Operations often has the final approval for outage requests, providing
Maintenance with current market information can allow them to anticipate potential
opportunities and structure their activities with the market in mind. Even simple
activities like staging tools and materials based on market information can
dramatically increase response time to opportunities for short outages. The
market may not give you many opportunities, so do your best to take advantage
of them when you can.

Use your CMMS Effectively

At the core of these activities is the Computerized Maintenance Management
System. Used properly, the CMMS can be much more than just an electronic calendar
for time-based maintenance and a cost-collector for maintenance activities (which
are roles the CMMS plays in far too many firms). Instead, the CMMS must be seen
as a critical information management tool for the purpose of increasing the
effectiveness of maintenance management processes and making better business
decisions in the future.

An effective CMMS provides integrated maintenance and materials management functionality,
and is configured to reflect the firm’s processes. All maintenance activities
are identified, planned, and scheduled in the CMMS, thereby providing a detailed
work description to maintenance staff and complete notification of materials
requirements to Stores. Wherever possible, existing job plans are utilized when
planning new work, which progressively increases the efficiency of job planning
while also creating more precise records of work details and requirements. Work
is not complete until the details of the work performed are documented (including
labor, materials, and tools) and the cause of failure is identified. Furthermore,
processes must exist to review the effectiveness of maintenance activities (Figure
2).

Figure 2 – Typical Benefits of an Effective CMMS

Conclusion

While the need to provide highly reliable generation has not changed, the evolving
competitive marketplace has created some additional challenges for the power
plant maintenance manager. Choosing appropriate tactics, increasing focus on
planning, integrating maintenance management with materials management, and
using your CMMS effectively will allow you to control your maintenance instead
of it controlling you. Aligning your maintenance strategies, increasing your
focus on scheduling, and increasing the flexibility of your workforce will provide
further benefits by ensuring that your plant will maximize its value within
your firm’s generating portfolio.

Footnote

1 See also Campbell, John D., and Andrew K. S. Jardine (2001).
“Maintenance Excellence: Optimizing Equipment Life-Cycle Decisions,” Marcel
Dekker, New York.