Proceedings - ICOMS-2001, International Conference of Maintenance Societies : Melbourne, Australia, 30 - 31 May 2001
MAINTENANCE IMPROVEMENT OF VICTORIA'S POWER STATIONS AND THE EFFECTS OF PRIVATISATION MEASURES. or THE MAINTENANCE MIRACLE OF MORWELL John Price, Mechanical Engineering Department, Monash University 9903 2868, Fax 9903 2766
[email protected] ABSTRACT This paper examines the generating situation in Victoria today and the effects that electricity privatisation has had on it. The publicly available measures of the performance of the privately owned power stations are considered. The three kinds of privatisation which occurred in Victoria are discussed and how each has influenced station performance. Keywords. Availability, maintenance, electricity prices, maintenance, forced outages.
1. INTRODUCTION This paper considers the capacity to supply energy as measured by the capacity factor (CF) which is being achieved in various power stations in Australia. As will be seen this measure has dramatically improved for some generators in recent years in particular in the State of Victoria. The reasons for this improvement is apparently connected with various privatisation moves in the industry and this matter is of great interest for all industry. 1.1
Privatisation of power generation in Victoria.
Privatisation in Victoria has not been a single simple activity but has taken 10 years, and in some ways it still continues. There were three major approaches to privatisation in Victoria. •
•
•
The sale of 49% of Loy Yang B to Edison Mission in 1991 was the first major step. The sale was conducted by the Labor Government of the time in a sep that was significantly out of character with its typical policies. The sale was essentially forced on the State because of very high debt levels which had been incurred at the time. This sale was accompanied by a guarantee concerning the price of coal and the sale of electricity at a predetermined price to the SECV of $62 MW/hr1. This sale must be regarded as an indirect way of borrowing money and was carried out a time of very high interest rates. The remainder of the station was sold by the Liberal Government in 1997 and apparently electricity purchases will at some point no longer be guaranteed, the station will eventually compete on the same basis as the other stations. Apart from any financial effect this sale has had, the original sale introduced a new private element into the LaTrobe Valley and new industrial relations structures with the compliance of the then Labor Government. Outsourcing of non-core SECV businesses began in 1989 with fringe activities such as catering and car maintenance. After the election of the Liberal Government in October 1992, major outsourcing started to occur. Of great significance to the theme of this paper was the fact that major maintenance and service outsourcing occurred in the period 1993- 95 before the period of sales of the assets of power stations and mines. Sale of assets. By 1996 most of the power stations had already been significantly reduced in staffing and were already performing much more efficiently. At this point the ownership of the assets of the power sations plus cola mine were offered for sale. This occurred on the basis of the time table shown in Table 1 from 1996 to 1999.
Aiding these developments have been other activities which have changed the mode of operation in the Victorian electricity system from a government service to a commercial operation. These included, with approximate dates • Business accounting 1989 (Prior to this date the SECV had run more like a government department, without individual profits for each activity, but budgets were based on allocated funds.) • Corporatisation 1993 • Competition among suppliers 1993 - 2000 (Some suppliers held long term contracts dating from the pre-privatised period but these are presumed to be disappearing.) • Competitive national market 1993 - ? (The market currently involves government owned power stations and thus cannot be claimed to be fully competitive.) 1.2 Victorian power stations The main fossil fuel power generation capacity in the State of Victoria is given in Table 1. This table also gives the date of sale and the current name of the operating company. Most of the owners are consortia of various investors, usually including Australian investment houses. There have been modifications to the equity structures of some of the stations since the original sales, so the "significant owners" are basically the owners dominant in the operation of the station.
Source of energy
Plant/Owner
Significant Owners
Sale
Capacity MW
Brown coal Brown coal
Edison Mission Loy Yang Power
1991,1997 1997
1000 2000
Brown coal Brown coal Gas Brown coal Gas/Waste gas Brown coal
Hazelwood/Hazelwood Power Corporation Yallourn/Yallourn Energy Newport and Jerralang/Ecogen Co-generation, Energybrix Various, Co-generation Anglesea/Alcoa
E-M,US CMS & NRG, US Horizon National Power, UK PowerGen, UK AES, US HRL, Australia Various Alcoa
1996 1996 1999 1997 Private Private
1600 1450 965 110 240 150
TOTAL
7990
Interconnection capacity
1000 MW to NSW
500 MW to South Australia
Victorian owner GPU, US
Table 1 Power generating capacity in Victoria and interconnection capability. (Various sources including ESAA, newspapers, Internet sites and personal communication.)
2.
THE ELECTRICITY MARKET AND MAINTENANCE
Electricity in South-East Australia is nowadays an extremely vibrant market involving plants with different ownership arrangements, different technical capabilities and different fuel and capital cost structures. The output of all generating plant in the national market is controlled by National Electricity Market Management Company, NEMMCO. Trading decisions are based on offers being continuously submitted by the various generators and how this matches with the requirements of the various electricity buyers in the market. The generators have two basic types of contract, one is a relatively long term contract with large customers and distributors known as a vested contract and a second contract which is obtained on the spot market through NEMMCO. The vested contracts are said to vary from mid $20s to high $30s per MWhr (Myer2). Table 2 charts some spot prices in the market.
2
Average daily prices for two months $/MWhr 1200 1000 800 Sep-00
600
Feb-01
400 200 0 01
08
15
22
Day Table 2 Some examples of the movement in average daily spot prices:
The effect of this market on maintenance is very critical. During the days of government ownership and no electricity market, the operators of power stations did not know exactly what their electricity was worth. Electricity was dispatched on the basis of a "merit order" where the stations which were thought to have the lowest marginal cost of operation were dispatched into the market before stations with higher marginal costs. This meant that if a power station was not available due to a maintenance outage, the cost to the monopoly utility would be the difference between that station's marginal generating cost and the power station that would be dispatched to make up the short fall. This calculation can result in very low cost figures for the cost of maintenance outages. There is no clear accounting for the capital cost of the power station or of its fixed overheads. In this system there grew up all sorts of traditions of lengthy planned outages where only day labour was used to make repairs, regular annual shutdowns at holiday periods and a very poor understanding of the cost of forced outages. Capacity was king, and the only real pressure on the system was when the number of power stations in planned or forced outages threatened the State's power supplies. One inevitable result was the building of extra power stations to give a large reserve. It is quite difficult to remember this old mind set. I often used to go to power stations (in all states of Australia) and ask them how much a days forced outage would cost because this is a crucial issue when determining maintenance decisions. The staff rarely knew. Nowadays there are screens with the spot price of electricity placed in prominent positions in all the power stations so that staff know the price on a minute to minute basis. Because of the varying market, the economic impact on the generator of a planned or forced outage will vary from hour to hour and day to day. Maintenance planning must now take this into account.
3.
SOME BACKGROUND ABOUT MAINTENANCE OUTAGES
Causes of loss of availability. Information concerning the causes of outages is not available in the public domain in Australia. For this kind of information NERC data is the best available. Some of the detailed data from NERC is shown on Table 3. Classification of Outages. Table 4 considers a classification of outages based on ESAA concepts. This classification permits some evaluation of the different economic impact and character of the different types of outage. The ESAA approach has some problems and comments are made on these issues on the right column. A typical outage program. Table 5 gives a typical outage program for major power stations in Victoria and typical values of LOA associated with the various kinds of outage.
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All Fossil Equiv. hours per unit
GADS category
BOILER BALANCE OF PLANT STEAM TURBINE GENERATOR POLLUTION CONTROL EQUIPMENT EXTERNAL REGULATIORY, SAFETY, ENVIRON PERSONNEL ERRORS PERFORMANCE TOTAL Boiler tube leaks Boiler overhaul and inspections % TOTAL Pressure Equip (include turbine)
Coal only Eqiv. hrs
% LOA
% LOA
827.76 193.26 333.41 91.76 43.46 17.22 28.88 4.94 3.39
9.4 2.2 3.8 1.0 0.5 0.2 0.3 0.1 0.0 17.5
926.13 152.24 316.77 79.5 36.02 21.02 21.66 6.22 3.31
10.6 1.7 3.6 0.9 0.4 0.2 0.2 0.1 0.0 17.7
194.46 388.33
2.2 4.4 41.8
245.78 451.39
2.8 5.1 48.1
Table 3 NERC Data for Fossil-Steam Units 400-599 MWe 1992 - 1996 Losses due to outages and deratings by cause code categories (Ref. 4).
Planned outages
Unplanned, delayable.
Unplanned, immediate.
ESAA description "Planned Outages" Determined by advance planning. Of firm duration. Planned normally a year or more, but no less than 4 weeks, in advance. "Maintenance outage" Outage can be deferred beyond next week end but must be carried out before next planned outage.
Economic issues High economic impact. Planning and length of these outages crucial to station performance.
Comments Extensions of planned outages should be registered as forced outages.
Moderate economic impact if short.
The phrase "maintenance outage" is unsatisfactory, since it gives the impression that the outage is planned and "unplanned delayable outage" is a better terminology. Some boiler cleans in Victoria may fit into this category.
"Forced outages". Immediate forced outages (The rate is called "EFOR")
Very high economic impact. The fault is so large that the Unit is affected immediately.
Table 4 A classification of full and partial outages from ESAA (Ref 1) Description Major outages Minor outages Boiler clean (This type of outage is required only by brown coal boilers) Forced outage
Typical frequency Every 4 years
Typical duration 4-8 weeks
Typical LOA
Content of outage
2-4 %
Yearly or six monthly Determined by fouling in boiler- 3-6 months Random event
3-5 days
1%
Planned major repairs Full inspection Critical planned inspections and repairs
2 days
1% (Brown coal only)
2-3 days
2-8%
TOTAL
Heat transfer surfaces cleaned. Inspections may be possible in some areas. Always happens at beginning of minor and major outages. Repair the failure and inspect other equipment at immediate risk
6-14% Table 5 A typical plant outage program in Victoria (J Price, previously unpublished)
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4. POWER STATION AVAILABILITY Australian power stations have achieved significant improvement in their availability in recent years. The best publicly available data is the summary provided in the ESAA annual report3. The most dramatic improvement in AF had occurred in Victoria where most of the generating capacity during this period had passed from public ownership to private ownership. Almost all states improved FOF as is shown on Table 3. State
NSW Vic Qld SA WA Tas NT (97/98) Australia Average
Availability factor 95/96 92.0 83.0 90.2 89.2 90.8 93.5 N/A 89.1
%
Forced outage factor
98/99 90.6 88.3 90.4 84.2 90.3 91.0 95.3 89.6
95/96 3.0 4.0 3.2 3.4 2.3 0.7 N/A 3.0
%
98/99 2.7 2.3 4.6 2.7 2.2 0.8 0.2 2.8
Planned outage factor 95/96 5.0 12.7 6.6 7.4 6.9 5.8 N/A 7.9
%
98/99 6.0 9.4 5.1 13.2 7.5 8.2 4.5 6.9
Table 6 Generation Availability from Electricity Australia 1998 (Ref 3) The magnitude of these changes has to be considered. Total installed capacity in Australia in 1999 was 40.7 GW, so an improvement of 0.5% in AF is equivalent to having another 203 MW available in the system. Another means of considering the importance of availability figures is to consider their value to the generator. Outages of power stations represent a major economic factor in their operation. Even at $20 per MWhr, a typical figure achieved in the current electricity spot market, a 500 MW power station can earn $240,000 per day. A loss of availability (LOA) of 1% of a 500 MW unit at these rates costs that company $876,600 per year. International comparisons. The performance of the Australian Power Stations is now extremely good and can be compared internationally. One source of comparative data is the North American Electricity Reliability Council (NERC). Some recent data for large fossil fired units are shown on Figure 1. The average of the 262 stations is 80.9% AF. This is well below the Australian average of 90.9% in 96/7. The Australian average AF would appear to be exceeded by about 3% of the stations in the US. Cumulative % of stations
100.0 80.0 60.0 40.0 20.0 0.0 0
20
40
60
80
100 AF %
Figure 1 North American Electricity Reliability Council data for 262 fossil-steam power stations 400-599 MW, 199219964. Average AF 80.9% compares to Australian average of 90.9%
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5. VICTORIAN POWER STATIONS Privatisation of power generation in Victoria. Privatisation in Victoria has not been a single simple activity but has taken 10 years, and in some ways it still continues. There were three major approaches to privatisation in Victoria. •
•
•
The sale of 49% of Loy Yang B to Edison Mission in 1991 was the first major step. The sale was conducted by the Labor Government. This sale was accompanied by a guarantee concerning the price of coal and the sale of electricity at a pre-determined price to the SECV of $62 MW/hr5. This sale must be regarded as an indirect way of borrowing money and was carried out a time of very high interest rates. The remainder of the station was sold by the Liberal Government in 1997 and apparently electricity purchases are no longer guaranteed, the station competing on the same basis as the other stations. Apart from any financial effect this sale has had, the original sale introduced a new private element into the LaTrobe Valley and new industrial relations structures with the compliance of the then Labor Government. Outsourcing of non-core SECV businesses began in 1989 with fringe activities such as catering and car maintenance. After the election of the Liberal Government in October 1992, major outsourcing started to occur. Major maintenance and service outsourcing occurred in the period 1993- 95. Sale of assets. By 1996 most of the power stations had already been significantly reduced in staffing and were already performing much more efficiently. At this point the ownership of the assets of the power sations plus cola mine were offered for sale. This occurred on the basis of the time table shown in Table 1 from 1996 to 1999.
Aiding these developments have been other activities which have changed the mode of operation in the Victorian electricity system from a government service to a commercial operation. These included, with approximate dates • Business accounting 1989 (Prior to this date the SECV had run more like a government department, without individual budgets for each activity, but based on allocated establishments.) • Corporatisation 1993 • Competition among suppliers 1993 - 2000 (Some suppliers still hold long term contracts dating from the pre-privatised period) • Competitive national market 1993 - ? (The market currently involves government owned power stations and thus cannot be claimed to be fully competitive as discussed above.)
6.
IMPROVEMENT IN AVAILABILITY IN VICTORIA
In this review I will concentrate on two stations Hazelwood and Loy Yang A. These are large stations and there is publicly available data for both before and after privatisation. Prior to privatisation, the capacity factor (CF) for Loy Yang and Hazelwood are very close to the AF because of the way the system was run. These two stations were considered to be high on the order of merit and were generally loaded as soon as they were available. The historical figures for Victorian power stations from the period of government ownership prior to any privatisation are given in the SECV 1990/1 Annual report6. Hazelwood, between 1989 and 1991 averaged AF of 55%. This is clearly a very poor figure but in fact Hazelwood had suffered persistent long term problems with reliability and these years were actually better than previous years. Loy Yang A. between 1989 and 1991 averaged an AF of 85%. To understand the current situation the publicly available information comes form employee magazines which are issued by some of the stations. Most stations now have an employee incentive scheme which is dependant of the station achieving a range of safety, environmental and production targets. They publish these targets and the current measures so that employees can see how their prospective bonus is faring during the year. Hazelwood. For Hazelwood 1998 (to November) an AF of 82.7% was achieved7. This is an extremely dramatic change form the SECV days. It is, on its own, is like having a new power station of over 400 MW on the grid or about 50% more. Unfortunately Hazelwood is not so clear about reporting this data in more recent publications. In December 2000 they list the "commercial loss" as 2.26% in the Year to Date. Using the data in Table 6 as a basis, this implies an AF approaching 90%. This is becoming sa truly remarkable figure. When I described these figures to an international power station maintenance expert he described them as truly miraculous. Thus the sub title of this paper -" the maintenance miracle of Morwell". The Hazelwood case is particularly dramatic. For most of its life the station struggled with AFs between 48% and 60%8. Immediately prior to privatisation in 1996 only 6 of the 8 boilers were in service. Unit 7 had been severely damaged by a severe thermal transient in 1993 and Unit 8, which shares some common equipment with Unit 7, was in mothballs. Moreover Generation Victoria at this time considered Hazelwood to be low on its order of generation merit order so generally only 3 or 4 of the remaining 6 units were regularly in service. In fact between the time of its construction in the 1960s and privatisation in
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1996 there had been only two occasions, lasting only a few weeks on each occasion when all 8 boilers had been simultaneously in operation. Nowadays all eight units appear to be in service simultaneously for most of the time. While it belonged to the SECV, Hazelwood received enormous attention and expenditure but achieved very little in terms of improved output. Nowadays Hazelwood is a successful station for its age. Loy Yang A. In 2000 Loy Yang A achieved an AF of 97.9%9 This is actually close to the absolute possible value of the station (see Table 6) but was probably aided by a there being no large planned outage. The long term average which Loy Yang can achieve is about 95%. Even so this change is significant and it is like adding another 200 MW to the station, that is increasing its output by 10%.
7.
THE CAUSES OF IMPROVEMENT
The cause of this change of fortune for Hazelwood and the solid improvement in the other stations is one of the most interesting issues in electricity generation in Australia. The fundamental reasons seem to be better management of maintenance and operations since this has changed dramatically in the past few years. This at first sight is an unfortunate conclusion for a person who has been involved in the engineering and technical side of maintenance. There are two basic mathematical reasons how AF improves. • Reduced forced outages. The forced outages due to sudden equipment failures are being reduced. • Reduced planned outages. Overhauls and inspections are done faster and less frequently. The basic ways these improvements can be made are • better work planing, • better knowledge of the equipment and better records of its condition, • more resources being available when required and • better quality work. At a recent conference a forum was held by the author with maintenance managers to question as to how these changes were achieved. The most frequently used response was "change of culture". This term was also used by representatives of nonVictorian power stations where performance improvements have also occurred. One of the key ways these changes may have occurred is that the relationship between the power station managers and the maintenance service providers has changed. In the government organisation the relationship took the form of "boss" to "workers". Nowadays there are likely to be contractual relationship between companies involved. The workers now instead of being permanent employees of a government organisation are part of private contractors or even working for themselves or in small companies. This, it is suggested, has changed the focus of the workers activities. Though it may be heretical to say so, it seems that in the old situation the maintenance staff were rewarded for bad performance. As the availability of the power station deteriorated, the need for maintenance staff increased. Catastrophic failures resulted in lots of exciting activity and lots of overtime payments. The station embarked on expensive capital improvement programs which were a new source of interest and income for the maintenance staff. In this context it is clear that another key issue in the improvement of reliability is the contractual relationship between the power stations and their service providers. The key word in discussions of this relationship is "partnering"10. This amounts to a formula for sharing benefits obtained from improved performance in the station between the station and the contractors. The obverse of this is that penalties also apply if targets are not met. This system places valuable incentives in the contract, something which never existed before privatisation of the maintenance services. An example of this is the current approach to the area of sootblower servicing used in the power stations. The sootblowers are an automatic form of furnace cleaning used in brown coal power stations. They have an effect on the efficiency of the boilers and allow the power station to run longer between outages for cleaning. Errors in the operation of a single sootblower has no catastrophic effect and may not be observed in a power station for weeks. Errors in positioning of the sootblowers can lead to forced outages and damage but are difficult to detect. Prior to privatisation it would be fair to say that sootblower maintenance was very low on the list of priorities. This was because of the slow effects of errors and the fact that the systems were complicated and full of little details. Nowadays the sootblower maintenance package has been given out as a separate contract. This contract has been won at least in some cases by the original equipment supplier (to the author's knowledge).
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In this situation the company which is the winner of this contract has soot blower maintenance as their number one priority. Because of the incentives they will work to ensure high reliability as a key target and indeed may make capital improvements to the system at their own expense. One issue, which has been pointed out to the author by a number of people, is that many of the largest improvements in performance were made during the period of corporatisation and outsourcing and before the asset sales. Thus it is not clear that the actual equity arrangements of a plant are critical for performance issues
8. CONCLUSIONS There have been major improvements in reliability of Australian electricity generating plant in recent years. Australian reliability now appears very good in relation to US figures. The Australian average availability factor would appear to be exceeded by only about 3-5 % of the power stations in the US. The improvement in reliability of the power stations is so significant in Victoria that it has had an impact on spot prices in the South Eastern Australian electricity market. The extra reliability means there is much more capacity selling to the system at a very low extra cost to the stations. The need for additional base load capacity has been put off for many years because of this situation. This has perhaps an unfortunate effect that the Victorian power system has difficulty in identifying economical ways of achieving sufficient capacity to deal with peak demands on a few hot days in summer11. The key reasons for the improvement in reliability appears to be that maintenance is now significantly better managed and the service providers are much more highly focussed and motivated than in the past. The improvements achieved are associated with the contractual relationship between the station and its service providers who are now in the private sector. Rewards are built into these contracts relating to the reliability of the stations. This form of relationship was impossible prior to the outsourcing of maintenance services. In fact in the previous situation, where maintenance was provided internally, the providers were effectively rewarded when bad reliability occurred. The improvement in maintenance is thus associated with the privatisation of the maintenance services rather than the privatisation of the power station assets which occurred at a later date in the chain of privatisation activities in Victoria.
9. 1 2 3 4 5 6 7 8 9 10 11
REFERENCES Walker, D, Edison Mission get Loy Yang B, The Age, 2 April, 1997. Myer R, Power struggle is now a capital matter, The Age, 28 May 1999. Electricity Australia, Electricity Supply Association of Australia (ESAA), Sydney. Two years used 1998 and 2000. North American Reliability Council, Generating availability reports 1992 – 1997, NERC, New Jersey, 1998. Walker, D, Edison Mission get Loy Yang B, The Age, 2 April, 1997. SECV, State Electricity Commission, Annual Report, 1990-1991, p126. Jumbunna, Hazelwood Power's official employee newspaper, 4(12), 2 November 1998, p3, 6(11) December 2000 p6. SECV ibid. Loy Yang Power Report, 3(14), 23 July 1997, p2, 6(22),20 December 2000, p3. A Tompkins, paper to ESAA Mechanical Power Generation workshop, Adelaide, Feb, 2000. NEMMCO, Update on project Victorian and South East Australian electricity supply situation for the 2000/2001 summer period, published by National Electricity Market Management Company Limited, 23 November, 2000.
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