ScottMadden Fossil Benchmarking Analysis
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ScottMadden's fossil generation benchmarking methodology allows power generation operations to assess and compare their performance against peers, utilizing relevant and updated industry data. The benchmarking process identifies performance improvement areas, supports decision-making, and helps clients prioritize initiatives for enhanced efficiency and reliability. With over a decade of experience, ScottMadden provides tailored insights and conducts comprehensive analyses of cost and reliability metrics using a four-step process.
ScottMadden Fossil Benchmarking Analysis
- 1. Copyright © 2020 by ScottMadden, Inc. All rights reserved. Fossil Fleet Performance Benchmarking ScottMadden’s Methodology for Achieving Results
- 2. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 1 Introduction to ScottMadden’s Fossil Generation Benchmarking We believe performance benchmarking is a must have management tool. – Assess performance – Establish targets – Obtain competitive intelligence ScottMadden’s fossil generation benchmarking allows generation operations to compare their generation units against peer units. – We work to build apples-to-apples comparisons. – We use relevant and up-to-date industry data. ScottMadden has been benchmarking fossil generation for more than 10 years. We know how to perform the analysis quickly and efficiently to allow you to focus on running your plants.
- 3. Copyright © 2020 by ScottMadden, Inc. All rights reserved. The Fossil Fleet 2 Why Is Fossil Generation Benchmarking Important? Renewable Portfolio Standards Regulatory Requirements and Increasing Oversight Aging Workforce Plant/Unit Decommissioning Benchmarking: • Specifically identifies areas for improvement and provides a basis for performance goals • Provides clear link between specific actions and performance objectives • Provides defensible analysis to support sound decision-making around budgets and staffing • Clearly defines common vision
- 4. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 3 Why ScottMadden Benchmarking? ScottMadden brings unique skillsets to fossil generation benchmarking. Proprietary Methodology We examine unit cost and reliability results at the unit level and staffing at the plant level. Our studies are designed to provide unique insights. Unbiased We ask our clients to agree on the peer plants before performing the analysis. We report the facts without manipulation. Expertise and Staffing Our benchmarking staff have performed hundreds of studies. Our expertise is experience based in energy, not theoretical. Energy Focused We have deep energy experience from our 35 plus years of consulting with energy companies. Report You are not signing up to provide your data every month. We prepare a report that shows how your units compare to peers and information on the gaps. Our clients obtain specific benefits from ScottMadden’s generation fleet benchmarking study: Identify areas of positive performance to be encouraged and reinforced Pinpoint areas of comparatively sub-par performance to set the stage for root cause analysis Discover top-performing plants at other utilities which could be studied for leading practices Prioritize improvement initiatives to focus efforts on achieving results
- 5. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 4 ScottMadden Provides Three Benchmarking Products Typical cost metrics include: Operations Focused View • Total production cost/MW • Operating cost • Maintenance cost • Fuel cost Market Focused View • Variable O&M cost • Fixed O&M cost Cost metrics are normalized depending on the type of unit and mission: Cost per installed MW Cost per MWh Cost Typical reliability metrics include: Net Capacity Factor Eq. Forced Outage (or EFORd) Eq. Availability Factor Planned Outage Factor Forced Outage Factor Maintenance Outage Factor Eq. Unplanned Outage Factor Unit Derate Factor Other metrics can include: Lost MWh by System/Component Unavailability by Outage Type Heat Rate (various) Ramp Rates Starting Reliability (CTs) Reliability and Performance Staffing metrics include: Total Staffing Operations Maintenance Plant Engineering General Management Admin and Support Metrics are normalized to enable appropriate comparison: Capacity # Blocks (Combined Cycle) # Units (Combustion Turbines) Staffing Note: ScottMadden’s benchmarking methodology goes beyond the quantitative metrics listed above. We evaluate numerous qualitative factors, including each operator’s approach to staffing (e.g., a regional approach to day-to-day maintenance and engineering may result in fewer dedicated plant staff), that are critical to understanding and interpretation of benchmarking results.
- 6. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 5 Overall Methodology We conduct benchmarking studies using an efficient four-step methodology: Form Peer Groups Benchmark and Validate Review and Discuss Results Prepare • Form project team • Obtain client data • Agree upon KPIs and scope • Prepare draft peer group criteria • Review and discuss peer group criteria • Finalize peer groups • Perform analysis • Validate data • Prepare report • Deliver report • Review and discuss results with client team and executives
- 7. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 6 Methodology: Prepare Finalize the metrics that will be benchmarked Obtain your data – Cost data at the unit level (as available) – Staffing data for in-scope plants sorted by ScottMadden’s provided functional buckets Identify your team participants and stakeholders who will review the peer group selection process Finalize project plan and set milestone reviews Form Peer Groups Benchmark and Validate Review and Discuss Results Prepare • Form project team • Obtain client data • Agree upon KPIs and scope • Prepare draft peer group criteria • Review and discuss peer group criteria • Finalize peer groups • Perform analysis • Validate data • Prepare report • Deliver report • Review and discuss results with client team and executives
- 8. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 7 Methodology: Form Peer Groups Develop peers based on like unit characteristics (e.g., vintage, equipment type, capacity, etc.) Multiple peer groups to match the fossil fleet makeup Key step in the benchmarking methodology because reliability and cost benchmarking can be correlated Peer groups must be signed off by the client prior to moving forward Form Peer Groups Benchmark and Validate Review and Discuss Results Prepare • Form project team • Obtain client data • Agree upon KPIs and scope • Prepare draft peer group criteria • Review and discuss peer group criteria • Finalize peer groups • Perform analysis • Validate data • Prepare report • Deliver report • Review and discuss results with client team and executives
- 9. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 8 Methodology: Benchmark and Validate Form Peer Groups Benchmark and Validate Review and Discuss Results Prepare • Form project team • Obtain client data • Agree upon KPIs and scope • Prepare draft peer group criteria • Review and discuss peer group criteria • Finalize peer groups • Perform analysis • Validate data • Prepare report • Deliver report • Review and discuss results with client team and executives Ensuring Data Credibility Source Analysis Results Investigate anomalies Database audits and control totals Sanity check of results versus expectations Deep dive analysis into issue areas before finalizing Identify drivers for variations Respected data partners Validated and scrubbed data Large samples Targeted peer group members
- 10. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 9 Methodology: Review and Discuss Results Identify cost and reliability improvement areas for discussion with owner-operators. Conduct progress reviews with you as the project sponsors. Conduct presentations with key leadership to present findings and gather input. Work collaboratively with your team to discuss implications and potential causes for certain topics of interest based on the results of the benchmarking. May even perform some hypothetical modeling; for example, if event X had not happened last year, your results would have improved, and you would be in the top quartile. These are important discussions to have as they help us to frame the results of the benchmarking. Please note that benchmarking tells you where you stand versus your competitors; it does not answer the question of “why.” – Our studies and interactive discussions with your team attempt to narrow down the possible answers to the “why.” Form Peer Groups Benchmark and Validate Review and Discuss Results Prepare • Form project team • Obtain client data • Agree upon KPIs and scope • Prepare draft peer group criteria • Review and discuss peer group criteria • Finalize peer groups • Perform analysis • Validate data • Prepare report • Deliver report • Review and discuss results with client team and executives
- 11. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 10 Deliverables Overview The primary deliverable is a comprehensive report comparing your unit’s results to peer group results. An executive summary is prepared to summarize results for senior leadership and/or boards. Cost Example Staffing Example Reliability Example
- 12. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 11 Typical Timing Is 8 to 9 Weeks for 4 to 6 Peer Groups Activity Week 1 2 3 4 5 6 7 8 9 1. Preparation • Confirm metrics • Confirm team • Obtain data • Set up analysis tools 2. Peer Group Formation • Cost • Reliability • Staffing • Contact other plants/orgs 3. Benchmarking and Validation • Cost • Reliability • Staffing 4. Review and Discuss Results • Cost • Reliability • Staffing
- 13. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 12 Recent Examples of ScottMadden’s Work ScottMadden performs comprehensive analyses of cost and reliability for fossil fleets in North America. Utility in the Midwest/Cost and Efficiency ScottMadden helped a large investor-owned utility (IOU) in the Midwest identify plants which were higher cost and lower reliability compared to similar peer plants. – Significant new and incremental variable renewable generation in the region was forcing base load coal plants to be cycled in new and unprecedented ways, which was causing unplanned and unexpected outages. – Subsequent collaboration between the plant operators and the trading and marketing group resulted in a more holistic and constructive process for dispatching units as “a portfolio.” – Plants more suited to cycling were identified and targeted for accommodating curtailment required by the market, and those which were more prone to failures were allowed to run unabated. Investor-Owned Utility in the Southwest/Reliability ScottMadden conducted a study to help a large fossil fleet operator in the Southwest identify specific components that were failing at disproportionally higher rates than peers, resulting in disproportionately higher lost MWhs. – Because transparent peer groups were developed collaboratively, plant managers had faith in the results. – This set the stage for the plant managers to conduct root cause analyses, develop improvement initiatives, and set reasonable goals for future improvement. – A task force comprised of cross-functional subject matter experts was chartered to address a handful of high-priority issues, which were identified as themes across multiple plants. – Benchmarking was embraced and institutionalized, and a procedure was developed to update ScottMadden’s analysis once a year in the process of business planning and budgeting.
- 14. Copyright © 2020 by ScottMadden, Inc. All rights reserved. 13 Recent Examples of ScottMadden’s Work (Cont’d) Public Power Generator in the Southeast – Cost and Staffing ScottMadden benchmarked the cost and staffing levels of a fossil generation fleet at the request of the company’s board of directors. Large Fossil Generator in the Southeast – Fossil Operations Restructuring ScottMadden assisted a client in developing a business case for implementation of performance improvement opportunities in fossil operations through use of a playbook structure. – Preliminary work to support the business case was a cost benchmarking study for the fossil operations coal fleet and a dialogue on workforce management. Large Utility Environmental Department – Organization and Process Performance Assessment ScottMadden conducted an assessment of the Air Quality Group of an IOU environmental department. – The objective was to assess organizational structure, staffing levels, process quality, and quality of work in the areas of air policy development, compliance planning, and compliance reporting. – The project was implemented through a detailed benchmarking and best practices assessment and resulted in an organizational design and succession planning process development. – An ISO 14001 based methodology was employed. Large Fossil Utilities and Unregulated Generators – Fossil Organization Development ScottMadden assisted clients in developing organizational structures and reporting relationship changes for multiple fossil organizations, applying benchmarking to inform the analysis. – These included multi-phased projects requiring organizational assessment, functional mapping, organizational design, staffing and selection method, and implementation.
- 15. Copyright © 2020 by ScottMadden, Inc. All rights reserved. ScottMadden, Inc. O: M: ScottMadden, Inc. O: M: CONTACT US 14 Todd Williams Partner toddwilliams@scottmadden.com 678-644-9665 404-814-0020 Preston Fowler Director pfowler@scottmadden.com 404-558-1609 919-781-4191 2626 Glenwood Avenue Suite 480 Raleigh, NC 27608 3565 Piedmont Road, NE Building Four, Suite 500 Atlanta, GA 30305