Rising need for power plant services

Paul Boughton

Rapid expansion in the installed capacity of renewable power plants in Europe will be accompanied by the rising need for related power plant services.

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.

Frost & Sullivan finds that European renewable power plant servicing market earned 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 levelmainly through the European Commissionare expanding the renewable power plant industry notes Frost & Sullivan Research Analyst Rajat Kumar. This will create huge growth potential for the European renewable power plant servicing market."

At the same timerenewable power plant operators with limited experience in the actual running of their plants are increasingly outsourcing their servicing activitiesincluding day-to-day operation and maintenanceto third-party specialists.

While this trend of outsourcing non-core activities is allowing plant operators to focus on their core competenciesthird-party services providers also offer the additional advantage of minimised service risks through the provision of a fixed-price contract for an appreciable length of time.

Howeverscepticism 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 utilitieswith their vast experience in the operation of power plantssuffer from a traditional mindset and remain reluctant to outsource their servicing requirements explains Mr Kumar. They prefer to employ a 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. Howeverthis sector is increasing the amount of maintenance activities outsourced by it. Moreoverwith competition intensifyingindustrial plants will be under pressure to continue with the outsourcing approach.

Faced with growing price competitionservice 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 in order 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 concludes Mr Kumar. Howeverfor this to happenthe historic perspective of the utilitiesthat view operations and maintenance as their core competencyhas to change."

For more informationvisit www.frost.com

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