The Paradox of Host-Owned Cogeneration Facilities

Typically, large integrated production facilities with host-owned power utilities, like cogeneration units—power and steam generation owned and operated by the respective company—exist in a perpetual state of irony.

On one hand, cogens are viewed as the life force of the production facility. Therefore, reliability of these cogen units is so critical that the saying, “Perfection is just good enough!” might well be displayed as a banner at their battery limit gates. On the other hand, in an integrated plant site, cogeneration units are usually viewed as cost centers rather than profit centers. Quite often, these units receive far more scrutiny in terms of budgeting than production units, both in terms of capital re-investment and maintenance spending. The trap is easy to fall victim to; investments intended to improve reliability in site utilities translate to theoretical avoided costs, not visibly strengthening return on investment (i.e., the bottom line). If this is contrasted with a debottlenecking project in a petrochemical or refining facility, for instance, an increased capacity or throughput equates directly to incremental margin growth.

This described paradox frequently means the priority that the site utility units receive throughout the budgeting process is negatively impacted, and in extreme cases, these units must fight to ensure even minimum sustainable spending. Underprioritizing a cogen plant in this manner can lead to a remarkable increase in the operational risk of major production loss in the event of utility unit failure. Yet, as these failures are often viewed as “one and done,” even then, it is tough to shift away from under-prioritizing cogen utilities. Ask any long-time cogen operator or cogen maintenance representative if they have ever experienced the situation of where cogen utilities have lower budget priority than production units. The response would be not only in the affirmative, but more likely, “Many times!”

As an operator, have you taken a close look at the asset strategy of your site utility? Has your organization fallen victim to the trap of the “Host-Owned Cogen Facilities Paradox”? How much risk have you unknowingly taken by failing to recognize the true economic costs associated with even a single cogeneration utility reliability event?

Beyond benchmarking, Solomon offers services and products specific to your facility, to evaluate not only standalone performance of power and steam generation units, but also integrated operating, maintenance, and personnel metrics. Contact us to learn more and help ensure that your host-owned utilities are getting the respect they deserve. It is only ‘good enough’ when it is perfect.

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