Tom Roche from FM Global discusses the world’s growing demand for electricity and presents a case study with Turkey’s ENKA Power to illustrate the importance of protecting supply.

Tom Roche, FM Global, UK

As global demand for electricity escalates, natural resources dwindle and environmental issues become ever more topical, the focus on protecting the world’s energy supply is becoming increasingly critical. This increased demand will see existing sources of energy come under ongoing pressure, and sustainable alternatives are likely to become more important. According to the Energy Information Administration (EIA), renewable energy will experience the fastest growth of world electricity generation, but there are limits to this, and other than hydroelectric power, most renewable technologies may not be able to compete economically with fossil fuels.

By addressing loss prevention at the design and construction phase ENKA Power was able to reduce property and business interruption losses in a more cost effective way at its 1520 MW Izmir plant
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Given these limitations the EIA predicts coal and gas consumption will rise and remain the most important sources of power generation. Nuclear power is also expected to become a more important source of energy, with existing plants expected to work beyond their expected operating lives, though safety and political concerns could well hamper the development of new plants.

Even with the current economic slowdown, the EIA estimates that total worldwide consumption of marketed energy will increase by 44 per cent by 2030. The largest projected increase in energy demand will come from non-developed economies, where the rapidly growing economies of China and India have led the EIA to predict these two countries combined will account for 28 per cent of the world’s energy consumption by 2030, up from 19 per cent in 2006. Demand is also expected to grow in developed countries over the same period, albeit at a much slower rate.

The situation in the UK is typical of the challenges facing the power generation sector and governments across Europe. Three quarters of the nation’s electricity comes from coal and gas, but the government has said that by 2050 virtually all of the country’s electricity will need to come from renewable sources, nuclear, or fossil fuels where carbon dioxide emissions are captured and safely stored for the long-term.

High severity, low frequency losses

As the demand for energy escalates power suppliers can ill afford even short-term unplanned outages, and in addition to lost energy production any downtime will have a potentially disastrous financial and reputational impact for the power company.

What is more, power generation facilities exhibit the properties of high hazard risk, and whilst relatively infrequent, unplanned outages can be significant. The most common types of disruption associated with power generation stations are those resulting from damage to key equipment such as turbines, generators, transformers and boilers, with damage typically resulting from electrical or mechanical failure, followed by fire. In the worst case scenario, such an event can leave a plant vulnerable to several years of lost power generation due to the potentially lengthy lead time for replacement equipment.

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The increasing number of new power generation facilities to help meet the global energy demand has seen delivery time for key equipment escalate. Five years ago a replacement turbine would take 12 months to deliver – now it can take up to two years. Not only are lead times affected by the increased demand, it is also putting pressure on costs with the price of key equipment rising dramatically in recent years.

Power generation outages can also result from natural catastrophes such as flooding, windstorms and earthquakes. The flooding in the summer of 2007 in the UK affected substations and transformers across the country, and at one point threatened to cut power to some 500 000 homes when the flood protection measures at the National Grid switching station in Gloucester were almost breached.

More recently in August this year disaster struck Russia’s largest power plant, the Sayano-Shushenskaya hydroelectric power station. Following a catastrophic accident which caused flooding in the engine and turbine rooms and a transformer explosion, 75 people died and power generation promptly ceased. The damage, which is expected to cost $1.25 billion to repair, was significant for the plant’s owner RusHydro and its customers.

Immediately after the incident electricity prices in the region reportedly jumped five fold on the spot market and shares in RusHydro were temporarily suspended after it lost seven per cent of its market capitalization immediately after the accident. While the plant accounted for just two per cent of Russia’s overall power, some 70 per cent of the plant’s output was consumed by one company, Rusal, the world’s largest aluminium producer. The substantial increase in local electricity prices could have an adverse impact on Rusal’s bottom line. In its recently published official report Russia’s industrial and technical standards safety watchdog cited management failures and technical shortcomings for the disaster.

Loss prevention and reducing risk

The good news is that through the application of effective risk management and property loss prevention measures the potential for unplanned outage time can be significantly reduced. By working in partnership with loss prevention experts, power generating companies can focus their efforts on the most effective measures to minimize potentially devastating downtime.

As new facilities are constructed to meet growing demand, planning for loss prevention at an early stage will yield benefits in the long-term. Power generation companies which adopt good risk management and loss prevention in the design and construction stages can achieve higher standards of protection than would otherwise be practical if implemented retrospectively.

At FM Global we work on several fronts to help boost the reliability and efficiency of new plants in the pipeline. We work closely with our power industry clients who are developing new facilities by making recommendations, which we help them to understand and encourage them to incorporate into their project specifications.

By way of example, we have a series of property loss prevention data sheets which are geared towards specific types of generating facilities. These data sheets contain engineering guidelines designed to ensure that existing and future power plants are built to the highest levels of property protection. To help our clients and the power industry overall, FM Global has made its entire library of data sheets available online – reams of information which represents vast technical knowledge and years of scientific testing. Expertise is gained from inspecting power facilities worldwide and through comprehensive research we have conducted at our world-class testing facility, the FM Global Research Campus.

For new power generating facilities, adherence to rigorous building specifications during the design and construction phase are fundamental for ensuring that a plant has superior protection. Following local regulatory codes and guidelines alone may not be enough – local codes may permit the use of certain materials in construction because they have good insulating properties, but they may also be combustible and more suitable materials could be used instead.

We have specialist teams who design custom training programmes and materials to address complex risk management scenarios. For example, highlighting the need for the strict adherence to following manufacturers’ recommendations for equipment and maintenance procedures will improve reliability and efficiency, and reduce the likelihood of physical loss or damage. The failure of a turbine blade, a not uncommon cause of breakdown, can be prevented by regular, non-destructive examination of equipment to look for evidence of fatigue and cracks. A damaged turbine can cost millions to repair and up to $50 million to replace. Potentially even more damaging is the time which it takes to get a plant back up and running following the loss of a key piece of equipment. This can result in as much as two years of lost generation from the affected units.

It is also important to mention it is much easier to prevent an accident than it is to recover from a devastating loss such as a fire or machinery breakdown. This is crucial from a financial perspective. While property insurance will cover physical loss or damage to buildings, machinery and equipment, it is common for power companies to have significant uninsured self-retentions or deductibles, which can run into many millions of dollars. These amounts are unrecoverable and have to be absorbed by the power company. Prevention of such outages is key when operating a financially effective power generating station.

World-class property protection

In 2003, ENKA Power, one of Turkey’s leading construction and energy companies, completed the development of three new power plants. Combined, the three plants provide approximately 18 per cent of the country’s energy requirements.

Working in partnership with us from the beginning of the development has ensured the highest level of property protection at ENKA Power’s three plants, located at Izmir, Adapazari and Gebze. By addressing loss prevention at the design and construction phase ENKA Power was able to reduce property and business interruption losses in a more cost effective way than would have been the case had it had to retrofit at a later stage.

Arial shot of the Adapazari (770 MW) and Gebze (1540 MW) combined-cycle power plants
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During the construction process we provided expert advice to ensure the stations were of world-class risk quality at inception of operations. These standards included adhering to first-rate equipment maintenance programmes; the implementation of special technologies designed to reduce the risk of fire, such as infrared thermography in cooling towers; and the installation of metal shields around potential oil leak points to prevent oil spray fire.

Since the ENKA Power plants have been operational FM Global engineers make twice yearly visits to the three facilities. Loss prevention improvements are ongoing and further recommendations continue to be made, including the addition of gas detectors in the turbine halls and additional sprinkler systems. Installing automatic sprinkler systems plays a crucial role in mitigating loss, as they help to contain a fire to one area, which otherwise may spread throughout an entire station.

As further risks are identified, ENKA Power has been able to continue to benefit from our experience and research whilst operating the three power plants, adopting the latest property loss prevention technology. An example of this is where FM Global demonstrated through previous loss experience that losses can occur from corrosives in the soil around transformers. As a result, we recommended that ENKA Power test for corrosive chemicals within the transformer, helping to prevent future physical loss or damage.

In recognition of ENKA Power’s outstanding commitment to its property protection programme, in 2009 all three of its power stations were awarded the status of Highly Protected Risk by FM Global. The award recognizes the ongoing dedication of ENKA Power to the reduction of potential loss through its stringent programme of risk mitigation and prevention. It also confirms that ENKA Power has taken all necessary steps to ensure that the safety equipment and features at it facilities across Turkey have in place the best risk protection practices currently available.

ENKA Power is now well positioned to ensure that its facilities remain online, and if or when a disruption should occur at any of its three plants to protect itself effectively against any potential financial loss.

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