Offshore Renewable Assets Mitigating Risk While Driving Costs Down

Transcription

1 Offshore Renewable Assets Mitigating Risk While Driving Costs Down

2 PPA energy Overview PPA energy International advisors on technical regulation Undertaking technical & economic studies Developing & implementing technical innovations International consultancy advice on network business management (asset management, pricing, technical performance) Electricity industry worldwide Established 1997 London Guildford - Johannesburg 2

3 BPP-TECH Overview BPP-TECH Design analysis & review of subsea equipment Subsea power cables & umbilicals Riser management systems for drilling vessels Project management & QA/QC Insured risk & failure analysis Product development Hydrocarbon, renewable, marine, insurance industries Established in 1981 London - Houston - Aberdeen 3

4 Petrofac - TNEI Leading many of the offshore initiatives TNEI Overview Supporting several R2 & R3 projects Leading Asset Delivery for OTCG HVDC experience onshore and offshore Extensive engagement on the issues of developing and delivering offshore transmission Transmission, Distribution, Generation, Offshore wind, Oil & Gas Established in 1997, part of Petrofac since 2010 Manchester - Newcastle 4

5 OFTO Ownership Transmission Cable Source: RBC capital markets

6 Assessing overall project and operational risk and mitigation strategies Will they last the 20-year design life? 6

7 Technical Design Issues Offshore power cable network redundancy Down time reduction and repair planning Cable performance and sea bed scour monitoring Rapid deployment of repair capability Long term cable life assessment Planning for replacement costs 7

8 Design & Risk Mitigation Cable & configuration design Installation, dynamic & fatigue analysis Cable array & power conditioning system engineering Cable protection, J-tube, I-tube & bend restrictor engineering Mechanical & thermal service life assessment Reviews of sea bed scour potential & monitoring philosophy Cable & material qualification testing Environmental impact assessment Subsea cable supply & quality assurance/quality control Failure scenario & repair planning

9 Sources of Failure Risks Design flaws Manufacturing defects Damage during installation Mechanical fatigue and thermal degradation Sea bed scour effects (spanning, fatigue, impact damage) Damage from marine life Many of the risks are interrelated 9

10 Asset Management Asset lives not well understood Asset ageing and failure modes in UK/deep water situations Costs of maintenance intervention much higher than on land Access issues - seasonal challenges Regulatory mechanisms not fully defined 10

11 How do OFGEM s availability payments drive design options, level of redundancy, interconnection, specifications of plant & cable assets? 11

12 Energy revenue + ROCs + Carbon credits Cash flows Xxxxxxxx Xxxxxxx xxxxxxxx Xxxxxxxxxx Xxxxxxxxxx xxxxxxxxxx

13 Financial Overview 230 MW of generation = million of capital investment (at approx 2840 per kw Cable link to shore cost approx. 120 million The generator earns 93.2 million in total per year Generator exposure to outages is 255k per day on an average day 13

14 The OFTO This OFTO earning 18.2m per annum. Average penalty per day of outage is 82.7k (82.7k x 22 = 1820k) OFTO s worst case risk is losing 50% of revenue equivalent to 9.1 million or 110 days, but this risk spread over 5 years. This would equate to a loss of earnings of approx 28 million for generator Both Planned and unplanned outages are taken into account as Outage. 14

15 OFTO Risk If OFTO can increase availability by 2% over the 25 year life of the project this is worth: NPV of 1.87 million OFTO (at 9% discount rate) Cost of maintenance intervention to OFTO +/- NPV 1.5 million. Total NPV of increase in OFTO availability, assuming it leads to maintenance reduction is: 3.36 million For the Generator, NPV of reduction in loss of earnings is 18 million (at 10% discount rate) 15

16 Scaling up to Round 3 Is an NPV the right way to look at these types of risk? A 9.2 million loss of revenue in year 10 is still a serious threat to business continuity Do you mitigate risks by building network functionality/redundancy, or by making financial provisions? Who is rewarded to building extra functionality? And How? 16

17 93m per year 230 MW Energy revenue + ROCs + Carbon credits Cash flows 23m per year 18m per year Xxxxxxxx Xxxxxxx xxxxxxxx Xxxxxxxxxx Xxxxxxxxxx xxxxxxxxxx

18 How can you drive down costs at the same time as you drive up availability as well as managing risk? 18

19 Key Network Design Issues How should operational experience and financial model influence network design? NPV analysis on designs changes the weighting between near-term and far-term events This is significant for low probability high consequence events such as 3rd party damage Good design and planning upfront can create robust networks that are safe investments 19

20 What does good design mean? Single circuit security Loss of circuit is total loss of power export capability from offshore site Loss of power to offshore so emergency power conditions, i.e. diesel bunkering for 3 month repair time 75.6M in lost production plus repair bill Multiple circuit security Loss of circuit results in reduction of export capability to 50% Power retained offshore so no emergency power requirements Offshore site constrained to 50% but with 35% capacity factor, constraint is lower Lost production ~1/4 of single circuit loss 1GW 100% 1GW 50% 20

21 Location C 500 MW Future Offshore Networks Location J 300 MW Argyll HUB Coolkeeragh HUB Location K 300 MW Argyll Array 500 MW Islay 500 MW Coleraine HUB Tidal 200 MW Hunterston Coleraine Coolkeeragh 21

22 Actual Network Configuration Multiple HVDC links Flexible sizing to match project build-out Phased construction No DC circuit breakers 3-end multi-terminal Multiple paths for power export not redundancy in the conventional sense Offline reconfiguration allows for outages but maintain majority export 22

23 Future Networks 23

24 Future Networks What if: The output and performance of every asset in an array cluster was known and understood? Where and when the next cable, transformer or switchgear failure was known BEFORE if occurred? Generators with dynamic voltage control rode though faults, with zero fault current and recovered instantly? Circuit were longer, lower voltage, lower loss and higher capacity? Secure meshed networks had no offshore circuit breakers? Offshore platforms and hubs were smaller and lighter?

25 Asset Management Policy Asset Management Strategy Information, risk management and planning Implementation and operation Working Together Design analysis & review of subsea equipment Riser Management Systems Project Management & QA/QC Insured risk & failure analysis, Product development Direct experience dealing with lenders, due diligence etc. Operational and financial experience with network businesses Excellent networks with universities and innovators in supply chain Extensive regulatory experience, including with Ofgem. Leading edge thinking around offshore regulation Provision of high quality specialist professional engineering Concept engineering and feasibility investigations Power system planning and analysis Technical due diligence & failure investigation 25