Product category:
Engineering Industry Reports and Surveys
News Release from: Frost and Sullivan
Edited by the Engineeringtalk Editorial
Team on 27 April 2006
Plants reluctant to cede control over
maintenance
As renewable power plant operators look to outsource their service needs, servicing companies will need to offer cost-effective, value-added services to their clients to promote uptake levels.
Rapid expansion in the installed capacity of renewable power plants in Europe will be accompanied by the rising need for related power plant services, according to a report from market watcher Frost and Sullivan Even as renewable power plant operators look to outsource their service needs, servicing companies will need to offer cost-effective, value-added services to their clients to promote uptake levels
In the report, the "European Renewable Power Plant Servicing Market", the analyst saw revenues of $417.9 million in 2005 and estimates this to reach $1.2 billion in 2012.
"Country-specific policies and incentives to foster renewable energy supply complemented by activities at the European level, mainly through the European Commission, are expanding the renewable power plant industry", said Frost and Sullivan Research Analyst Rajat Kumar.
"This will create huge growth potential for the European renewable power plant servicing market".
At the same time, renewable power plant operators with limited experience in the actual running of their plants are increasingly outsourcing their servicing activities, including day-to-day operation and maintenance, to third-party specialists.
While this trend of outsourcing non-core activities is allowing plant operators to focus on their core competencies, third-party services providers also offer the additional advantage of reduced service risks through the provision of a fixed-price contract for an appreciable length of time.
However, scepticism regarding outsourcing these servicing activities continues to persist with many operators preferring to carry out the operation and regular maintenance themselves rather than relying on specialised servicing companies.
"The utilities, with their vast experience in the operation of power plants, suffer from a traditional mindset and remain reluctant to outsource their servicing requirements", said Kumar.
"They prefer to employ full-time staff to carry out these services and view power generation as a core activity instead of looking at the power plant as an asset whose job is to earn a return just like any other asset".
This situation is similar for industrial power plants with most generally reluctant to cede control over plant maintenance and operation.
However, this sector is increasing the amount of maintenance activities outsourced by it.
Moreover, with competition intensifying, industrial plants will be under pressure to continue with the outsourcing approach.
Faced with growing price competition, service providers will need to offer clients improved service offerings with maximum value.
Potential strategies in this regard could include the bundling of several services to make the final offer more attractive as well as catering to niche markets to differentiate their offerings from that of other service providers.
"Moving towards a complete asset management of the power plant is a strategy that promises to give a big boost to the market in the medium and long term", said Kumar.
"However, for this to happen, the historic perspective of the utilities, that view operations and maintenance as their core competency, has to change".
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