A System Dynamics Model for Risk Assessment of Strategic Customer Performance Perspective in Power Plants

Abstract

The energy sector is a dynamic business environment, power plants have to deal with several complex risks, including both technical and non-technical risks. Thus, unexpected risks can disrupt the energy generation processes, with a negative long-term impact. Furthermore, these risks are not isolated, as their impact may affect a series of interrelated risks. To add to this complexity, the assessment of those risks may change with time in a dynamic business environment. This situation makes strategic decision making less effective regarding the successful design of a risk management system. Understanding the dynamic behaviour of a complex system of interrelated risks in the energy sector is very important to achieve a more sustainable overall performance of the power plants. This paper presents a System Dynamics (SD) approach to capture the interdependencies of strategic non-technical risks associated to the customer performance perspective in a risk management system for the energy sector. Several approaches for risk assessment focus on technical risks related to equipment but fail to consider the complex interactions with other risks and neither consider the dynamic nature of the business environment. A system dynamics model with 15 risk factors was built to assist decision makers in understanding the behaviour for such risks affecting the customer performance perspective. The model was validated in a power plant in the Middle East. The model allowed to highlight the impact of mitigating the risk of policy and regulations on the availability risk of the power plant and on the risk factor related to operational and maintenance cost.