GAS TURBINE OPERATORS MISSING VALUABLE OPPORTUNITIES

CERA's research, in collaboration with analysts from Poweradvocate, has found that the common ways that traders, dispatchers, and investors treat gas turbine operating and maintenance (O&M) costs can lead to suboptimal operating and investment decisions. As a result, there may be hidden value for more sophisticated operators and investors to unearth. Oversupplied markets and thin spark spreads have made it crucial to understand and carefully manage costs. The cost advantages and superior returns top-tier players enjoy can help them gain market share and position them for future growth.

- A combined-cycle gas turbine plant investor could achieve a 30 to 80 percent increase in levered return on equity by optimizing dispatch around O&M costs. For the two regions studied, CERA identified a 10 to 25 percent difference in unleveraged plant valuation between the typical operating practice and what could be achieved with more sophisticated understanding.
- Simple O&M cost treatments used in dispatch decisions typically do not reflect true marginal costs, even though they may closely approximate average O&M costs. This is the source of the hidden value.
- Today's advantage will become tomorrow's necessity. Understanding O&M costs can create a temporary advantage, but over the long term competitors will follow suit. Continual improvement in operational efficiency is the only way to avoid losing ground.

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CERA Reports Online, a wholly owned subsidiary of IHS Energy, is a leading advisor to international energy companies, governments, financial institutions, and technology providers. CERA delivers critical knowledge and independent analysis on energy markets, geopolitics, industry trends, and strategy. CERA's expertise covers all major energy sectors--oil and refined products, natural gas, and electric power--on a global and regional basis.