For decades, asset decommissioning has been relegated to afterthought status in many industries, including utilities. Instead, businesses have focused their attention on bringing new projects online as rapidly and cost-effectively as possible to optimize opportunity, service delivery, and revenue. With decades-long lifecycles for critical assets, there was little compelling desire or incentive to plan early for their decommissioning. But, times are changing. And utilities are rapidly realizing the need to plan for and manage the final mile of their assets - the process of asset retirement, or decommissioning - as carefully as they do their initial construction.

What has changed?
First, assets and the people that manage them are aging. For example, the 2015 State of the Electric Utility Report revealed that old infrastructure and an aging workforce are the top two challenges facing the industry today. Much of the nation's utility infrastructure is decades old, with many critical assets nearing the end of their practical lifecycle. In addition, the skilled professionals who constructed these facilities and managed them for decades are retiring. Utilities are having difficulty replacing them, and more importantly, are not effectively capturing, archiving, and sharing their institutional knowledge for future use. At the same time, regulatory requirements and safety and environmental concerns continue to escalate, making older units, in many cases, unprofitable.

Driving further urgency to decommissioning is the overarching need to continually do more with less while accelerating transformation. Organizations are looking to realize maximum value from their assets while minimizing costs and risk. Increasingly, a comprehensive decommissioning strategy is essential to achieving these objectives.

Danger Ahead: Kicking the Can down the Road

Only 23 percent of utilities organizations have a plan in place for the retirement phase of their assets, according to Aberdeen Group. Several factors are driving this surprising statistic:

• New Assets are the First Priority. New assets and infrastructure are vital to ensuring the scale and reliability needed to meet rising demand in the utility industry. As such, enterprises are first focused on completing these new projects on time and on budget.
   
• Asset Lifecycle Pushed to Its Limits. Utilities are looking to squeeze every last drop of productivity out of their assets. This often involves extending lifecycles well beyond the original targets.
   
• Increasingly Limited Resources. Enterprises today must frequently choose between applying skilled resources on new projects as opposed to using them to plan for or proceed with decommissioning.
   

Focused on these shorter-term considerations, many utilities overlook the considerable opportunity costs associated with a mismanaged decommissioning project and therefore fail to devote sufficient attention to this important process early in the asset lifecycle. Simply stated, a decommissioning project that is late or over budget consumes precious resources that could be leveraged elsewhere in the enterprise to drive innovation and return on investment.

Beyond opportunity costs, failure to plan effectively for decommissioning can bring additional risks, including insufficient funds set aside to complete the project and greater regulatory scrutiny and intervention all of which shift an enterprise's focus away from its core mission.

Proof in the Numbers
Decommissioning projects can carry just as much risk as new projects, and sometimes more. For example, enterprises typically decommission assets much less frequently than they bring new ones online. As such, organizations have fewer best practices on which they can rely and have to "reinvent" each time they launch a decommissioning initiative. In addition, documentation about the facility being decommissioned is likely to be paper-based and institutional knowledge is dispersed informally throughout the organization - which makes the collaboration and information sharing required for a successful project extremely difficult.

In its research, Aberdeen found that decommissioning projects can derail at several points.1 For example 52 percent of utilities companies in the study said that they experienced poorly defined project requirements, 32 percent cited changes introduced after the start of a project, and 25 percent cited time spent waiting for decisions and communication due to manual processes as sticking points. Aberdeen's research made one important point very clear: companies who plan for decommissioning in the beginning of the lifecycle have an 88 percent advantage over peers who do not implement a plan.

Roadmap for Success
Decommissioning is an essential part of the asset lifecycle and should be approached with the same deliberation as the design, build, and operate phases. Here are seven best practices that when implemented can go a long way to ensure a successful decommissioning:

1. Collaborate early and often. It is important to involve all key stakeholders consistently throughout the life-cycle planning process to define and validate project scope and approach. This includes internal stakeholders (facility managers, line of business leaders, risk officers, as well as executive management) as well as multiple external stakeholders (contractors, partners, as well as local, state, and Federal regulators who have jurisdiction over the project). It is also important to seek input early and often from individuals who will manage and ultimately decommission the asset. Their perspective can provide important insight into design features that can facilitate and reduce the cost and risk of decommissioning decades later.
    
2. Create a centralized plan repository with the ability to embed risk assessment into the plan. These repositories, often the core of enterprise project portfolio management (EPPM) solutions, capture and store information needed to manage the entire asset lifecycle, including decommissioning. They enable enterprises to effectively communicate and manage tasks internally and externally by creating a one-stop shop for all project information. By embedding risk information into these repositories and resulting plan, leaders can prepare and react to unforeseen issues and apply lessons learned to future projects, perform what if' scenarios, and monitor the status of in-process progress to approve, continue, and optimize decommissioning projects. This information is vital to capturing and standardizing institutional knowledge that is essential in decommissioning when an asset has reached end of life.
    
3. Optimize resources. As resources become increasingly scarce, key stakeholders must have complete and real-time visibility into the skill sets at their disposal, as well as where and how resources are deployed throughout the organization. It is also critical to standardize procedures for selecting resources and predefine exception processes. Working within this framework, leaders can accurately identify required skills and resources and effectively map them to project requirements - enabling them to fully leverage increasingly precious resources to avoid delays, mistakes, and cost overruns.
    
4. Ensure real-time visibility into project as well as asset performance. Asset-intensive enterprises have long understood the need for effective project management. It is just as important to include during the decommissioning phase. Leaders require real-time visibility into project performance - in terms of progress and budget adherence - and must be able to share this information with internal and external stakeholders, as appropriate and necessary. Clear insight via analytics into milestones achieved and missed, status updates, budget versus actual spend, and work breakdown structure (WBS) updates are essential. Today, utilities are eager to extend visibility beyond individual projects to encompass the complete lifecycle of an asset. This approach enables enterprises to better determine and plan effectively for end of life, ultimately, optimizing return on investment.
    
5. Equip managers with tools needed to plan and execute. Automating the asset lifecycle management process is increasingly essential. The days of disparate spreadsheets and paper based processes are no longer tenable in the modern utility enterprise. Instead, they require modern, often cloud-based capabilities that not only enable complete visibility but can automate processes such as scheduling, costing, project management, reporting, and collaboration. Solutions, such as EPPM systems, can help leaders improve strategy execution, operational excellence, and financial performance across the entire enterprise to ensure that projects are not only completed within budget and on time, but also support the execution of business outcomes that drive strategic value.
    
6. Institute formal processes for managing change. Change is inevitable during any larger project. The key is to learn to manage it by setting up processes that guide change management; standardizing processes to require a change; creating formal process to report and approve changes; establishing protocols to communicate change effectively; and instituting a closed loop process for change related tasks.
    
7. Focus on continuous improvement. Always take time to assess progress and capture knowledge for future initiatives. Leading enterprises bake continuous improvement into their standard operating procedures for project management and benefit greatly from continued evolution of best practices.
    

By embracing a holistic and aligned approach to asset lifecycle management and project management best practices, utilities set a solid foundation for improving performance, reducing risk, optimizing return on their strategic investments, and most importantly, scaling effectively to support current and future customer demands. With careful planning and proven methodologies, utilities can finally put an end to decommissioning distress.
 

About the Author

As the director of industry strategy for Oracle's Primavera global business unit, Guy Barlow leads the global go-to market strategy across the energy, engineering & construction and public sector industries.

He has more than 20 years of industry experience working with and marketing to global enterprises. At Oracle, Guy works with business leaders to help them realize a vision for enterprise project and portfolio management through portfolio and project management, business analytics, process improvement, and risk solutions.

Prior to joining Oracle, Guy worked at BearingPoint (KPMG Consulting), IBM Software, IBM Management Consulting, and PwC.
 

Reference

¹ Paquin, R., "The Importance of Decommissioning in Asset Intensive Industries," Aberdeen Group, September 2014