The distinction between asset management and managing assets

Power utilities in Africa are characterised by infrastructures that were installed some decades ago, leading to sub-par performance with an ever-increasing risk of service failure. Critical assets including power generation plants, substations and networks are the key items of focus. A response is to view the Asset Management discipline as the path to maximising stakeholder benefits from investing in such critical assets.

According to a 2011 World Bank report, Africa Power Infrastructure: Investment, Integration, Efficiency, investment in generation in Africa had been stagnating over the preceding three decades, and average consumption per capita was posted at 457kWh (124kWh when excluding South Africa). Furthermore, the report states that this is corroborated by electrification levels on average <30% of the population having access compared to >90% in East Asia. Where the service coverage has been attained, many utilities remain saddled with poor service reliability and system availability.

Long-term asset management vs managing plant assets

On a positive note, African governments have in the last decade woken up to shoring forth large investments in power generation, and transmission and distribution infrastructure reinforcement and capacity expansion. Many of such investments come with lots of socio-economic and political optimism.

All stakeholders – government officials, utility managers, multilateral financiers, banks, developers, and the public – are often present on grand commissioning of these new and shiny installations. However, many do not live to deliver the expected benefits for a significant part of their lifecycle before new financing campaigns commence for their replacement or refurbishment.

The foregoing arises from a lack of appreciation that such installations needed to be made having due regard to their fit in the entire utility ecosystem; and having considered how they contribute to the overall service delivery and commercial and social impact over the long haul. Utilities tend to be excited about commissioning new capex projects and immediately relapse into business as usual only to wake up years down the road when service firefighting has begun due to neglect and or poor maintenance.

There is often lack of a systematic approach that seeks to secure the implicit benefits in the asset over the 25 to 50-year lifecycle. The installation, its performance and risks are not linked to the overall utility objectives and thus midterm failures are not uncommon.

Many utilities operate assets from a place of “data-blindness” with respect to asset condition and performance on an ongoing basis.

Since most of these installations are publicly funded or are at least a public and private mixture, the focus tends to be on the capex required to get the assets. Limited attention is given to ongoing performance and maintaining their productivity and the overall value streams to the whole system. Assets are looked at individually or collectively as a group, a holistic industry-wide approach and objective optimisation is rarely done.

Many utilities operate assets from a place of “data-blindness” with respect to asset condition and performance on an ongoing basis; and this makes contemplating Asset Management (AM) at operational and strategic level a challenge. The situation is worsened by the fact that the workforce is ageing, and knowledge and skill transfer is needed to create talent and diversity in the work force that will drive the future.

Strategy vs managing

The closest you get to AM is that the more attuned utilities focus on managing assets—a focus on individual maintenance and reliability—but when political pressures rise regarding reducing tariffs and government allocations, even these maintenance plans are abandoned. Consequently, the quality of these assets deteriorates as their average age increases while the service levels and other overall industry performance parameters suffer.

The plight of many such utilities could have been different and their performance could have been unassailable if they had adopted AM strategies and principles as opposed to merely managing assets.

Asset Management is an approach that transcends an individual or group of assets to look at all the assets in the utility, as well as the business practices, people deployment and management, risks, information systems and how data is collected and analysed, and how all these fit within the overall objectives and the strategic direction of the utility. This is the distinction between Asset Management and Managing Assets.

Utility systems are critically dependent on their assets for the overall value and service they deliver to the ratepayers (consumers) and other relevant stakeholders. Therefore, in an environment where AM is practised, asset planning, financing, construction, and maintenance over asset lifecycle should include an assessment of the value gained over that period or the risk sustained on the whole system and industry scale if such an asset was never constructed or installed.

Setting standards and sticking to objectives

Even though Asset Management has existed before, many utilities still grope in the dark, especially in Africa. Research in this area has advanced and industry standards have also been established, especially ISO 55000 Asset Management; globally assessments leading to certifications are being done and academies have been set up for training. These enable practitioners to have a structured and practical approach to asset management.

While this discussion is not about standards, it is clear that these standards do help to establish a clear link between objectives, targets, performance, risks and decisions at all levels in the organisation and help unpack decisions on relationships between investments and the expected results in terms of value and benefits to stakeholders.

Asset management, therefore, is a new world in approach to infrastructure planning including not just renewal or expansion of infrastructure but also the financial, organisational arrangements, and information management aspects needed to ensure the sustainability of the infrastructure and meet the stakeholders’ needs and expectations.

Unfortunately, many utility practitioners in Africa exhibit a reactive and not proactive approach to asset management. They often bind themselves to how work was previously done and only enforce the bare minimum manufacturer’s recommendations.

There is a lack of shared vision or strategic direction regarding assets. Assets are run into the ground and are only replaced when they no longer work the way they are supposed to. This sadly is unlikely to yield any customer satisfaction. Initially, it may seem a cost-saving way of getting service but eventually it proves very costly to replace them let alone the customer inconvenience and lost productivity.

With unhappy customers, overstretched employees due to unstructured and unplanned days as they react to each failure and service outage—with safety incidents on one hand, performance and service level pressure from regulators and political pressure on the other—dismal results and dire consequences to managers are an invariable outcome.

Over time, this translates into budgets that can’t cope with the demands, and liabilities, especially where you have onerous take-or-pay PPAs for off-takers/distributors, leading to a dismally performing utility. Such utilities will struggle to raise capital for the badly needed investment.

Linking of operational and performance parameters to strategic objectives is a game changer in AM.

Linking operation and performance parameters

A recent empirical study in one of the utilities in the region on network availability and outages revealed that by aggregating data on outages, into hours of supply outage in a month weighed against expected optimal feeder energy demand, substantial losses in utility revenue were being sustained in Energy Not Served (ENS).

Such cost coupled with the opportunity cost on the consumers who were not served revealed a huge economic cost of poor network performance. Subsequently network managers had their KPIs expanded to include reduction of network outages in their territories.

This substantially changed the attitude towards asset management and performance in the utility and progressively improved the performance of the utility.

The take-away from such a scenario is that linking of operational and performance parameters to strategic objectives is a game changer. Therefore, the practice of effective asset management in any utility will depend increasingly on intelligence and insight from data.

The latter calls for an intentional institution of the requisite policies, procedures and systems aimed at AM.

Cover photo:  everythingpossible©123rf