RCP2 Portfolio Overview Document

Transcription

1 RCP2 Portfolio Overview Document Portfolio: Expenditure Class: Base Capex Expenditure Category: Grid Replacement & Refurbishment As at date: 15 November 2013 Expenditure Forecast Real 2012/13 NZ$ (m) Total CAPEX Description Deliverables Our High Voltage (HV) 1 and Medium Voltage (MV) 2 power cable fleet provides a mix of functions from providing short runs of connections within substations, to transmission over longer distance, generally in areas where the use of overhead lines is impractical or undesirable. In addition to the cables themselves, the fleet includes cable terminations, joints, link boxes, oil tanks and Distributed Temperature Sensing (DTS) systems 3. The main focus of the Power Cables Replacement and Refurbishment (R&R) programme in RCP2 is on replacing the aged, deteriorated, 220 kv oil filled cables at the Bream Bay substation. Other capital expenditure under this programme includes DTS system replacements and procuring a cable oil treatment unit. 4 In planning the programme of works for RCP2 we have increased our focus on minimising whole-of-life costs of cable assets and their impact on other assets, consideration of asset criticality when prioritising replacements of power cables, and an improved approach to cost estimation using tailored building blocks based on actual cost out-turns from completed equivalent works. During RCP2, the portfolio expenditure will involve: replacing the 220 kv oil filled cables at the Bream Bay substation (including establishment of a temporary bypass) replacing the DTS interface equipment on four DTS units; and procuring a cable oil treatment unit to enable regular treatment of oil in 220 kv oil filled cables kv (IEEE definition); SM-EI safety manual definitions remain separate. 2 1 kv 72.5 kv inclusive (IEEE definition); SM-EI safety manual definitions remain separate. 3 DTS systems allow us to monitor the temperature of the cables and provide us with an ability to understand their operation, validate the cable design and identify potential hot spots. 4 Most of our old technology age-deteriorated paper- insulated lead sheath (PILC) cables will be replaced as part of the outdoor to indoor switchboard conversion, power transformer replacement and indoor switchgear replacement projects. This expenditure is therefore outside the scope of this Portfolio Overview Document. 1

2 Objectives Expenditure Drivers Key objectives for the portfolio are set out below. Safety no injuries or fatalities resulting from installation or maintenance of cables no fatalities caused by cable failures; and no injuries caused by earth potential rise or transfer of potential on cable screens. Service performance zero cable faults on HV cables. Cost performance cables are designed, constructed, and maintained to minimise lifecycle costs, while meeting required levels of performance. The Bream Bay 220 kv cables are an essential part of the supply to the New Zealand Refinery at Marsden Point. The key driver for the replacement of the 220 kv cables is the risk of failure due to deteriorating condition, and the potentially severe consequences of extended loss of supply to the refinery. The condition of the cables was assessed in 2012 and a number of issues identified and repaired. However, as they are nearing the end of their expected physical life, it is forecast that by the time of the next condition assessment, (during RCP2), and their condition will have deteriorated further 5. The Marsden Point refinery is a nationally significant load and refinery operations are critically dependent on a continuous supply of electricity - even small interruptions of supply can cause major disruption and significant losses to the refinery. Extended loss of supply could have severe consequences 6. Further, the type and configuration of equipment in the Bream Bay substation means that bypass options to maintain security of supply are not readily available 7, exposing the refinery load to N security during lengthy repair 8 periods, with a significantly increased likelihood of total loss of supply. To manage the risk, cable replacement must be undertaken proactively, and with appropriate contingency plans in place. The key driver for DTS replacement is failure risk, on the basis of age 9. The functions provided by the DTS systems provide us with confidence in being able to operate the cables safely at high loads, particularly in contingency conditions, without causing significant risk to the cables or the network. The driver for investment in a cable oil treatment unit is the need to be able to maintain critical 220 kv oil filled cables immediately in the case of an 5 A 2012 condition assessment found that the T2 and T3 cables had cracks in the oversheaths and a minor leak in the oil tank. Insulation resistance in some of the cable is too low and residual gas pressure readings have been outside the acceptable range. These and other issues have been addressed in part through repairs, but, if retained, the rate of deterioration of these cables is expected to continue to increase during RCP2 as they are nearing the end of their expected life. 6 Information obtained from the refinery indicates that a loss of supply lasting more than a few days could lead to fuel supplies becoming depleted in the Auckland region (there is no bulk storage of fuel in Auckland and it is dependent on piped supply from Marsden Point). 7 The cables provide the only connection between the gas-insulated switchgear in the substation and the power transformers that supply the customer load. Conventional aerial connections cannot be used as a direct replacement in the event of cable failure. 8 Repair times can be up to eight weeks. 9 We do not yet have a good understanding of the life expectancy of these DTS systems, but in line with manufacturer advice we anticipate they will require replacement during RCP2. 2

3 oil leak or cable fault. Currently we are reliant on third party equipment that may or may not be available when required. Benefits Forecasting Approach (Quantity) Cost Estimation (unit cost) The main benefit to be obtained from the programme is improved reliability performance. The cable replacement at Bream Bay will significantly reduce the likelihood of failure and the potentially severe consequences of extended loss of supply to the refinery at Marsden Point. Continued confidence in the integrity of the DTS systems will itself enable continued confidence in the ability to operate cables safely in high load and contingent conditions. The cost of cable failure is high, particularly for HV cables where repair costs can range from $100k to $1.0m per event. Removal of the aged Bream Bay oil-filled cable will remove the risk of environmental damage from oil leaks. Risk management Our approach to managing risk comprises a combination of asset health and criticality assessments. These provide proxies of the likelihood and consequences (respectively) of failure. While other legacy 220 kv cable circuits will undergo repairs during RCP2, the condition and higher criticality of the Bream Bay cable circuits warrant prioritised replacement as outlined above. Options analysis Three generic options are possible for dealing with the deteriorating condition of the Bream Bay cables. Running to failure is not acceptable because of the criticality of the site, which serves a nationally significant load. In addition, fast tracking the replacement cable in the event of failure would be very costly. Nor is refurbishment acceptable to us: the existing cables are of an obsolete technology and the process would take a very long time and be very costly, with limited confidence in the outcome. Full replacement provides the reliability required, and is a more cost effective approach for the Bream Bay cables. The cost of replacement of the two Bream Bay cable circuits has been estimated at $5.8m. The customised cost estimation approach is used due to the bespoke nature of the HV cable circuits which reduces the extent to which historical costs can be relied on to forecast future projects 10. Therefore the project cost has been estimated individually, taking into account the specific context, and requirements of the cable assets and the installation site. A key requirement for an accurate customised estimate is to establish a site-specific scope of work. From this, estimates of the quantities of materials and work are estimated. This process utilises desktop analysis of the site, recent cabling works and estimates from potential suppliers. For this one-off type project we sourced a manufacturer quote for the 220 kv cable and terminations, while all other parts of the cost estimate are from our TEES cost estimation library. Further detail regarding the cost forecast for the replacement is provided in the Bream Bay 220 kv Oil Filled Cable Replacement BC1+ document. The cost of the DTS system replacements was also estimated on an individual basis. The estimated cost of $1.0 m for replacing the four units is based on the purchase cost for DTS systems for the North Auckland and Northland transmission upgrade project. The estimated cost of the oil treatment unit has been obtained from a supplier. No contingency amounts are included in the cost estimates. 10 The relative proportions of materials and installation cost can vary significantly depending on the project. For example, for projects that require large conductors (such as NIGUP and NAaN) the cost split is about 50:50 materials: installation. For smaller projects, installation is a much larger proportion of cost. 3

4 Assumptions In developing a cost estimate for the 220 kv cable replacement, it is assumed that: the existing cables will be replaced with modern equivalent assets (XPLE insulated cables with new GIS and transformer terminations for each cable circuit, and new cable troughs); and due to the site criticality and outage constraints, a temporary bypass for the 220 kv cable and 220/33 kv power transformer will be established during the installation of the new 220 kv cable, using a strategic spare power transformer and temporary switchgear, control and protection, in order to ensure full N-1 security during replacement. Total capital expenditure for the power cables portfolio during RCP2 is forecast to be $7.5m, comprising $5.8m for the Bream Bay cable replacements during period, $1.0m for DTS system replacements in 2019/20, and $0.67m for purchase of oil treatment equipment in 2015/16. - Forecast Expenditure $6m $5m $4m $3m RCP1 RCP2 Forecast Expenditure $2m $1m 0 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 All figures are real 2012/13 Expenditure trend Capital expenditure is substantially higher than in RCP1 due to the planned replacement of the Bream Bay cable circuits and replacement of the four DTS systems that are forecast to reach replacement criteria during RCP2. Note that most MV power cables works are encompassed in other projects, such as transformers, outdoor to indoor conversions and indoor switchgear replacements, so the chart is not illustrative of the true magnitude of works. 4

5 Governance Interdependencies Procurement Deliverability One of our business planning processes is a dedicated challenge and approvals process which is applied to large capex portfolios 11. The objective is to ensure that the rationale for a proposed programme and the forecast cost for the work is robust and has been effectively challenged at appropriate management levels. For the purpose of preparing our proposal additional steps were introduced into the governance process. For the Power Cables portfolio, this included cost estimation review, and challenge and approval by the portfolio owner prior to challenge and approval by the RCP2 Advisory Team. This crossfunctional group challenged the overall programme, particularly looking at prioritization of expenditure across portfolios. The Capital Governance Team (including General Managers and the Chief Executive) performed a further challenge round before proposed RCP2 expenditure forecasts were submitted to the Board. The Board has reviewed the R&R expenditure in aggregate. Deliverability of the proposed work has been challenged in the context of other planned works, the expected level of field resources and available outage windows. Our asset management approach for power cables seeks to achieve least overall lifecycle cost and integrate power cable and related works. A number of MV cables that are nearing end of life during RCP2 will be replaced or retired as an integral part of major substation works scheduled to be undertaken during RCP2, including outdoor to indoor conversions, indoor switchboard replacements and power transformer replacements. Power cables are required for some large enhancement and development projects, as well as other projects funded by third parties, particularly property developers seeking to underground sections of transmission lines. In these cases, the expenditure is not included under the power cables portfolio as it is included in the major project plan. Replacement of cables will also require consultation with customers in some cases. For example, the high criticality Bream Bay cables requires strong collaboration with the oil refinery in order to plan for outages around refinery shutdowns. The Integrated Works Planning (IWP) process allows for coordination across asset works to minimise disruption and reduce costs. High voltage cable, given its bespoke nature and relatively high cost, is generally procured via an open tender at a project level. Depending on the size of the job, components such as cable joints will be sought from the cable supplier. We may also use the supplier to complete installation and jointing. Suppliers need to be pre-qualified prior to purchase. Prequalification of new suppliers is usually completed following the tender process. The level of resource and expenditure allocated to the pre-qualification is dependent on the level of risk the equipment/supplier poses. Medium voltage cables are generally short runs and will generally be procured from NZ based suppliers. The lead time for procuring high voltage cable can more than a year, depending on the vendor and size of the project. Similarly, cable commissioning and testing can take an extended period. Both of these are taken into consideration in the detailed design phase of a project. Of greater concern is the need for competent and specialist cable jointers to join and terminate cables. The importance of this is illustrated by several recent cable failures attributable to poor workmanship. As the demand for cable jointers in New Zealand is relatively small, careful consideration needs to be given to ensure sufficient competent resource is available to meet our demand, and to contract for and schedule work in a manner which encourages retention of the resource. We do not consider this will constrain the HV cable replacement work during RCP2. 11 Projects are approved as part of a programme of work at this stage, not as individual projects. 5

6 Supporting Documents and Models Documents This POD is a high level overview of the portfolio. Further information and details on the programmes can be found in the following documents: FS10 - Fleet Strategy Bream Bay 220 kv Oil Filled Cable Replacement BC1+ Departure from policies and standards This programme does not involve any departures from policies, planning standards, or consultant recommendations. Models No models were developed in relation to this programme. 6