Power generators are now facing significant cost pressures that are changing the traditional roles of power plants. Jim Wininger, a partner with Bain's Utilities & Renewables practice, explains how companies can reconsider the missions of their plants to meet these challenges.
Read the transcript below.
JIM WININGER: Today, utilities are facing significant disruption. Load growth is flat. Renewables are generating a higher share of electricity. And the relationship between coal and gas has changed. And this puts tremendous cost pressure on traditional generators, while they still have to meet the requirements of low-cost power that is safe and reliable.
It means that the traditional roles plants play are changing—that base load, intermediate, and peaking does not mean the same thing that it used to. We think it also creates an opportunity to think about the individual missions of each plant in the fleet and optimizing staffing, maintenance, investment, and central services to meet those new missions.
Examples of these new missions include seasonal intermediate or deep reserve, which are different from traditional intermediate and peaking roles. Companies that are thinking about a mission-driven change need to take three actions. First, is to take a forward-looking view of the missions for each plant in their fleet. This may mean that some plants need to be closed.
Second, they need to set the expectations for each mission. What's the cost envelope for each? What's the staffing template? And how do we adjust work to make sure that both of those things can be met?
And then third, what's the right support structure to meet those missions—management structure, central services, and relationships with third-party vendors? Although these changes aren't quick or easy, we've seen clients achieve 5% to 10% O&M savings inside of a 6- to 12-month period. And therefore, we believe that, with no end to the cost pressures in sight, every utility generation executive should be considering a mission-driven change to their generation portfolio.