risk based scoping secured by asset management control for aging coal fired power plants

Risk Based Scoping secured by Asset Management Control for Aging Coal Fired Power Plants

Thesis Master of Science in Asset Management ControlEdgar Wienen BSc.

E.ON Benelux, Rotterdam, the Netherlands

March 9th 2012

Problem initiation2. THEORETICAL &

PRACTICAL FOUNDATION

4. RISK BASED SCOPING METHOD

DESIGN

5. EMPIRICAL RESEARCH RESULTS

3. PROBLEM DEFINITION

1. INITIATIONEVALUATION

ABSTRACTION IMPLEMENTATION

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2. THEORETICAL & PRACTICAL

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Generating electrical energy using aging conventional production facilities with low efficiency do not compensate the marginal costs in comparison with newer more efficient generation. Deployment of these production facilities in the near future will become too expensive and the margins will become smaller.

(ECN, 2009)

EBX CEO (Van Dijk, dec. 2010) affirms the conclusion of ECN and stated that this will result in lower profitability of the production facilities of EBX.




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The most significant cause is a deteriorating market situation due to:

– Increase of CO2 tax to reduce CO2 gas emission by means of fiscal measures;

– Preference of renewable energy in stead of conventional energy;

– Increase of renewable energy;– Competition.




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The consequences for E.ON is a cost reduction announcement of 1,5 billion euro which will be realized by reducing personnel with 9.000 – 11.000 from 80.000 employees and a major cost reduction.

The consequences for EBX are not clear in detail for this moment but it is a fact that we in the very near future have to manage our assets with less budget in a lean organization.

Therefore the driver and essence behind this research subject is to be able to determine where to spend money and man-hours by means of continuously identifying "need to haves" and "nice to haves”

By means of a risk based approach and combined with AMC

This conclusion implies also a change in the scope of work

Variable assessment on contribution marginConsequences for aging coal fired power plants of EBX

Theoretical and Practical Foundation


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Justification of the research subject in order to decide if the intended research will proceed or change

Conclusion:Margin will decrease from 2013 but will stay positive

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enue

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tribu

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incl

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ad fa

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Revenues and Expenses

Revenues and Expenses Contribution for Maasvlakte unit 1&2situation 2010

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load

fact

or

Revenues and Expenses

Revenues and Expenses Contribution for Maasvlakte unit 1&2estimated situation 2013



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Maintenance work order growth analyses

Annual number of preventive and corrective maintenance work orders for Maasvlakte units 1, 2 and common systems

4000

4500

5000

5500

6000

6500

7000

7500

2007 2008 2009 2010 2011

Year

Num

ber o

f wor

kord

ers

Corrective maintenance

Preventive maintenance

Conclusion:Increase of preventive maintenance does not show a decrease of the amount of corrective maintenance.

Improvement potential by reducing the corrective maintenance (aging)



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Risk assessment preventive maintenance strategy (quick scan)

Risk effect category: Environment

3

Probability of occurence

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ct

Risk effect category: Reputation

3


Effe

ct

Risk effect category: Production loss, Material damage and Unplanned Unavailability

4

3

21

4

2

4

10

4

72

10

2

40

10

15

1


Effe

ct

Risk effect category: Safety

3

1

1

1

1

1

2

10

1


Effe

ct

A EC DB

A EC DB

A EC DB

A EC DB

1

5

3

4

2

6

1

5

3

4

2

6

1

5

3

4

2

6

1

5

3

4

2

6

Conclusion:A costs saving potential is present by means of canceling or postpone the “nice to have” activities and only keep the “need to have” activities in the scope.

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Core Definitions

• Risk Based Scoping

• Risk management within EBX environment

• Asset Management Control

• Aging Coal Fired Power plants

Practical Foundation

Theoretical Foundation

Perception of reality

Insights in existing RBS related methods, techniques and support systems

Forms the backbone of the RBS method design

AMC Related Literature:

•Cost Effective Management Control of Capital Assets, Stavenuiter•LOGISTIC ENGINEERING AND MANAGEMENT, Blanchard•Reliability–centred Maintenance, Moubray•ITEGRATED LOGISTIC SUPPORT HANDBOOK, Jones•Integrated Logistic Support, Defensie

Literature on Risk:

•Risk Management, Australian/New Zealand Standards•Risk Management section from PAS 55, British Standards•The Orange Book - management of Risk - Principles and Concepts, HM TREASURY•Leidraad RAMS, Rijkswaterstaat

Literature on Aging Coal Fired Power Plants:

•Oudere E-productie eenheden, KEMA•MERIT Brandstofmix 2020, ECN

Field survey:

•Asset Management with EBX•Risk Management within EBX

Opportunities and findings

"How to get better grip on Risk Based Scoping of the Aging Coal Fired Power Plants of E.ON Benelux?”

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Findings from the business environment

– Development of preventive maintenance strategies and project initiations is experienced and do not correlate with the actual performance;

– Improvement loops are not embedded;

– A substantial costs saving potential by means of cancel or postpone “nice to have” activities and focus on the “need to have” activities is demonstrated to be present;

– There is a robust risk evaluation software application available.

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Analyses of the literature study

– The literature of Cost Effective Management Control of Capital Assets is classified as the most comprehensive approach to use as backbone for RBS, mostly for identification of PKCD’s, transparency and communication;

– The literature of ILS and Leidraad RAMS guideline translate failure modes into risks by means of a risk matrix followed by and RCM method;

– The risk management literature provide deeper understanding of frameworks in relation to risk management;

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Opportunity to improveTo determine where to spend money and man-hours by means of

a structured, transparent and integrated risk based approach which continuously identifies "need to haves" and "nice to haves" and to make these quantifiable to get a better control regarding the decision making of which activities are essential and how to communicate this to stakeholders according to the AMC approach. By combining the theory of risk management, the risk

management strategy within EBX and the AMC related literature.

The risk management knowledge will contribute to increase the AMC related knowledge;

The AMC related knowledge will contribute to increase the risk management related knowledge;

Implementing the results within the EBX environment will contribute to increase the profitability.

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Problem Definition

Define realistic and relevant RBS objectives which should solve the problemBased on generally accepted, verifiable, and

justifiable professional knowledge

– Better identification of risks and threats;– A rigorous base of decision making;– Continues improvement;– More effective actor allocation;– Better transparency trough clear structure and better

documentation;– Better communication;

To tackle the problem and for implementation and integration purposes the 6 get’s approach is adopted.

1. get organized

1. get organized

2. get oriented

2. get oriented

3. get practiced

3. get practiced 4. get real4. get real 5. get

across5. get

across 6. get grip6. get grip

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Risk Based Scoping guideline design

Risk Based Scoping guideline design

1. get organized

1. get organized

2. get oriented

2. get oriented

3. get practiced

3. get practiced

4. get real4. get real

Set up an AMC structure from where RBS can start from (section 4.1)Functional breakdown of the system

The logistic process structureThe RBS team along with task and responsibilities

Applying system analyses related to RBSProgram AMICO as RBS modeling tool and RBS management

Information & communication system

Performance KillersCost Drivers

Lists sources of risk and events that (might) have an impact on the achievement of the organizational objectives

Step 1: Identification of risks (section 4.2.1)

Step 2: Determine risk level (section 4.2.2)

Determination of risk level creates a risk profile for the organization and provide insight in develloping and understanding of the risks

Step 3: Determine if the risks are tolerable (section 4.2.3)

Make decisions, based on the outcome of the risk analyses, which risks need treatment and treatment priorities (separate need to haves and nice to haves)

Step 4: Determine risk control measures (section 4.2.4)

Turn uncertainty to the organizations benefit by constraining threats by means of the most cost efficient control measure

Tolerate Treat


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Case Study (implementation)

Case Study Set up an AMC structure from where RBS can start from (section 4.1)

Functional breakdown of the systemThe logistic process structure

The RBS team along with task and responsibilitiesApplying system analyses related to RBS

Program AMICO as RBS modeling tool and RBS management Information & communication system

1. get organized

1. get organized

System as whole

Functional decomposition

Physical decomposition

Work breakdown structure

Structuring:– Functional decomposition– Logistic process structure– RBS team– Information and communication

system

Manager Operations (representing the owner/user)

Manager Asset Risk & Governance (representing the independent risk expert)

Manager Maintenance (representing the maintainer)

Daily Maintenance and Workshops

Inspection & Condition Monitoring

Risk Engineering

Shift Leaders and Operators

Maintenance Engineering

Operational Engineering

Outages

Information Services

Prime Actors

ReportingConsulting

4

3

21

4

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10

4

73

10

2

39

10

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1

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A B C D E

Performance Engineering

ResourceActor

ControlActor

Prime Actor

SupportActor

RBSProcess

ResourceActor

ControlActor

Prime Actor

SupportActor

RBSProcess

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Set up an AMC structure from where RBS can start from (section 4.1)Functional breakdown of the system

The logistic process structureThe RBS team along with task and responsibilities

Applying system analyses related to RBSProgram AMICO as RBS modeling tool and RBS management

Information & communication system

– System analyses– RBS knowledge– Program

2. get oriented

2. get oriented

3. get practiced

3. get practiced

System definition / characteristics

Installation definition / characteristics

Reliability, Availability, Capability

Logistic products, service and actors relations

Cost analyses

High level training road map


Function diagram

Installation diagram Activity diagram product/actor data

Installation data

Operational (sub) functions

Technical functions

Installations

Installation definition and characteristics

Actors and product type

e.g. costs impact factor

Function and installation relations and impact factor

Case Study


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Case Study 4. get real4. get real

– Identification PKCD’s – Determine which need risk

assessment– Information and communication

system









Tolerate Treat


Selection of PKCD’s for further analyses

– Multiple periods below baseline – Influence on the cost

effectiveness– Deviation on performance and

costs

Risk engineer: From system analyses indicated as PK in the years 2009, 2010, 2011. PT Risk entry MPP00058 for risk assessment and assumptions.Further analyses show prev. vs corr maint do not correlate. Direction of solution RCM study.ME mechanical check en confirm.

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Case Study 4. get real4. get real

– Determine risk level– Determine if risks are

tolerable– Information and

communication system









Tolerate Treat


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Case study

Case Study 5. get across

5. get across 6. get grip6. get grip

– How to communicate the message

– How to embed RBS in the organization

Regarding the RBS guideline 2 presentations were given to explain the principles of RBS in relation with AMC to E.ON executives and staff executives.

The goal of presenting the guideline was to examine the support of the management and to evaluate the guideline to obtain feedback.

These presentations resulted in positive reactions

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Empirical research results

Further implementation within EBX will lead to better control regarding the decision making process on which activities are essential and how to communicate these to the stake holders.

This will contribute to a lean and mean maintenance strategy and to a stronger competitive position of EBX.

Evaluation

From the case study it appeared that a considerable amount of information is available within the EBX environment but divided in

the organization.

This proves that applying RBS based on AMC can be implemented within the EBX organization with low effort

From evaluation of the research objectives, the main opportunity and the outcome of the case study it is concluded that the

guideline meets all objectives

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Empirical research results

Implement this guideline further within the EBX environment and in a later stadium further in the E.ON steam fleet

Procedures which meet the quality standards are to be set up. Also the training program must be developed further, based on

the theory as described in this thesis

The RBS meetings, as suggested, must be organized or integrated in the existing communication structure of EBX

In this case study a standalone version of AMICO is used and if decided to further implement the guideline an on line intranet

version, as suggested, is advisable

Further work needs to be performed in order to determine reliable baseline values in the matter of reliability, availability, capability

and cost figures on installation and actor level

Recommendations

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Public Defense

risk based scoping secured by asset management control for aging coal fired power plants

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