Lifetime Extension Is Key in the Next Decade
How can we ensure profitable business in the next decade with our aging assets? Because of the current financial and economical climate replacement of capitalintensive assets is no longer an option to continue operations. Lifetime Extension is the answer to this challenge!
Within the next decade around 50 % of the technical assets in The Netherlands will have reached the end of their design lives. This includes railroads, chemical plants, public transport fleets and distribution networks. In a situation where all those assets reaching their end of life will be replaced by new assets, a total investment of EUR 200 billion is needed. On the other hand, do aging assets have an impact on reliability and safety? In 2010 Mainnovation together with TNS Consult conducted market research amongst Dutch asset managers and maintenance managers to identify the trends in reliability of the Dutch technical assets during the next decade. The results were astonishing, 8 % of the interviewed answered that they expect serious safety incidents within the next 5 years.
One of the main causes lies in the aging of the Dutch assets. We all know that aging assets need more maintenance and will need more funds. This fact, together with the current economic climate results in severe maintenance backlogs and will eventually cause problems on reliability and safety. On the other hand, assets reaching their end of life need to be replaced, but again the economic climate does not allow our industries to make huge investments. So the only solution besides closing our assets is Life Time Extension (LTE).
Initiated by Mainnovation and the Dutch institute World Class Maintenance and sponsored by the Dutch government, a group of asset owners started the VITALE project. The aim with VITALE (Value & Innovation Through Asset Lifetime Extension) is to professionalize LTE in companies to enable them to improve the competitiveness of the Dutch industry and to enable growth of the maintenance market.
VITALE Reference Model
Based on available knowledge and experience with LTE, a brand new reference model consisting of two frameworks has been developed. The first framework helps you to get a grip of the initiation of lifetime extension, the so-called TECC-driver model. The second part is a process framework covering all processes that are needed to manage and execute lifetime extension.
In practice, end of life is most of the time linked to reaching the end of an asset’s technical design life. In that case LTE-actions focus on asset performance improvements. Besides the technical aging of assets the project identified three other major causes for LTE. The TECC-driver model is illustrated in Figure 1 showing the other three major causes: economical aging, compliance aging and commercial aging of assets. How are those major LTE-causes defined?
Figure 1. TECC-driver model.
Figure 2. VITALE process model.
Once the operating costs have reached a level where the company’s products are no longer profitable enough, we have reached a financial end of life – Economical aging. The third LTE-initiator has to do with integrity. Once asset integrity issues are encountered, this may have a direct impact on the company’s license to operate, meaning that assets due to the new strict legislation may no longer comply increasing the risk of losing the license to operate – Compliance aging.
Finally, the fourth LTE-driver focuses on the overall function of an asset. Once the market demands change, it is possible that an asset is no longer able to produce products that satisfy the market needs. We defined this as Commercial aging and in this case LTE should focus on functional adjustments of the asset.
The essence of the TECCdriver model is that companies become aware of the possible relevant causes for the end of life of their assets. Once this awareness is translated into monitoring those initiators, a company can manage assets’ remaining lifetimes giving the opportunity of pro-actively arranging solutions.
Monitoring an asset’s remaining lifetime is one of the activities that is needed to professionalize the LTE approach of a company. In fact it is only the start of a total process flow that ends with a revitalized asset capable of creating value. The involved processes have been assembled and structured as shown in Figure 2.
The first step in managing LTE is to know your assets in terms of risk profile and current expected age, that is the focus of managing the asset portfolio. One of the conclusions of VITALE is that this crucial initial step is missing in most companies, which leaves the question of how you can monitor your assets vitality in process 2 without knowing your asset base. One of the best practices used to develop those VITALE-processes came from ProRail.
ProRail, the Dutch rail infrastructure asset manager, records the theoretical end of life date of every single asset using its enterprise asset management system (SAP). Once a year, SAP generates a list containing all assets with a remaining lifetime of seven years. Over the course of the year, every asset on the list gets a physical inspection so its actual condition can be assessed and recorded. ProRail’s asset managers then verify or revise the theoretical end of life dates of all the inspected assets in SAP.
In this way, the closer Pro- Rail’s assets get to the end of life, the more closely they’re monitored. And when an asset reaches the end of its life, the company has all the data it needs to calculate the relative merits of replacement and lifetime extension.
Once the end of life has been reached, it is time to determine which assets need lifetime extension process 3 (figure 2). It is crucial for this process that scenarios need to be worked out to figure out which scenario fits the best regarding to the company’s business values. It may well be that replacing assets is also a relevant scenario. During the decision making in process 4 (figure 2) based on clear business case criteria it becomes clear which scenario prevails. The following case study shows an interesting best practice on this topic.
TenneT is the Dutch electrical grid asset manager and is responsible for over 50,000 assets. To select LTE-critical assets they use their Asset Health-index. The input for this health index is asset condition information, criticality of the assets and the expected end of life date. Based on this information the tool determines the urgency of counter measures. They use four categories and assets that reach category 4 will be subject to LTE-measurements.
The LTE-measurements are grouped and several scenarios will be developed to eliminate the consequences of aging. Forecasted results per scenario are compared with the company’s business risks and the scenario with most added value becomes a project. By introducing this way of working, TenneT managed to change their decision making from technical risk-based decision making into an overall balanced decision-making strategy taking into account all business values.
Once a decision is made, the LTE-project needs to be started up. Processes 5 and 6 of the VITALE process model describe how to manage LTE-projects by focusing on the differences with new built projects. It is crucial for the revitalized assets that the initial business case is used during project execution as the guideline for future performances. Each LTE-project manager in close cooperation with the responsible asset manager guards the realization of the business case targets.
The total VITALE-reference model has been published and besides the explanation of the VITALE-reference model, also an extensive overview and description of useful practices have been written down. This enables asset managers to pick suitable practices and gives them the opportunity to professionalize their LTE-approach.
Added Value of VITALE
Based on the broad experience and knowledge of all involved companies the VITALE reference model became a practical framework. Feedback from the participants was that VITALE ‘opened their eyes’ regarding the scope of lifetime extension. Not a single participant used all aspects of the reference model although we invited local and global companies that do have a track record in LTE. The positive news is that for all processes best practices are available!
Recently several companies have used VITALE to improve their internal LTE-approach resulting in new, sustainable asset strategies enabling them to continue business in the future. Mainnovation’s advice to you is to follow those examples and make sure that your asset management organization will be ready for the next decade!