Benchmarking Variable Cost Performance in an Industrial Power Plant

Abstract

One of the most perplexing problems for industrial power plants committed to improving competitiveness is measuring variable cost performance over time. Because variable costs like fuel and electricity represent the overwhelming majority of power plant expenses, it is imperative to develop and deploy a tool that can help plants benchmark operating performance. This paper introduces a benchmarking methodology designed to meet this need. The "Energy Conversion Index" (ECI) ratios the "value" of utilities exported from the power plant to the actual cost of the fuel and electricity required to produce them, generating a single number or "index." Variable cost performance is benchmarked by comparing the index from one period of time to the index of another comparable period of time. Savings (or costs) attributable to excellent (or poor) performance can easily be calculated by using the former period's index to project the current period's cost.