Monday, 17 September 2018


Guest Post by PlanetNL 
PlanetNL14: Hydro Reliability This Winter - At the Mercy of the Weather
The Liberty Consulting Group is a specialist frequently utilized by regulators to provide critical analysis of how utility businesses are performing, especially in the wake of major failure.  The NL PUB hired Liberty in 2014 to assess the causes of the January 2014 outage event known popularly as Dark NL and to subsequently monitor NL Hydro’s plans to upgrade the system.  Liberty has evaluated Hydro’s winter readiness every year since and is monitoring the Transition To Operations (TTO) efforts to integrate Muskrat Falls, the Labrador Island Link and the Maritime Link.
The latest Liberty report, Winter 2018-19 Supply Adequacy, was filed by the PUB on September 5, 2018.  The report indicates considerable wariness and frustration with Hydro and Nalcor and tremendous concern that neither the Labrador Island Link will be a reliable source of generation this winter, and nor should Holyrood or other existing generating assets be considered as reliable as Hydro is expecting. 

Liberty’s own words tell the story quite clearly.  No further editorial is offered in this posting, however, additional analysis and interpretation will be delivered in a future related posting. 
From the Executive Summary:

Power supply vulnerability has become a problem for the Island Interconnected System (IIS) in recent years as winter approaches.  The nature of the threat may change each year, but the exposure to supply-related outages persists.  This year, delays in the reliable in-service date of the LIL and their impacts on anticipated supply from Labrador (known as recall power), and poor performance at the Holyrood Thermal Generating Station (TGS) increases the risk of supply related outages considerably.

Hydro and Nalcor representatives were unwilling to provide information about LIL schedule details sufficient to permit us to identify a realistic LIL in-service date.  Nevertheless, what we have learned supports a conclusion that the LIL is unlikely to be reliably in commercial operation at the start of the winter.  We have further concluded that, once accepted into commercial operation, the LIL is likely to prove somewhat unreliable, due to: (1) its planned operation as a monopole in its first year, (2) continuing problems with one of its primary vendors, general Electric (GE), (3) the limited duration of the minimum successful run required for acceptance (20 days versus 60 on many other such projects), and (4) the typical problems associated with any new facility in its early operation, especially one whose technology is new to the owner.

A rapid change of circumstances has brought Hydro, in just several months, from more-than-adequate supply to violations of its reliability criteria and heightened risk.  Management had consistently reported that the LIL would indeed be available for the winter, but there is now a strong possibility that will not be the case.  Liberty therefore recommends that the Board require Hydro to aggressively demand and monitor action by Nalcor to ensure that Nalcor undertakes all possible actions to minimize further delays in placing the LIL into reliable operation for this coming winter, while at the same time preparing contingency plans for the unavailability or limited reliability of the LIL.  Given the unacceptable trends in Holyrood performance, we are also recommending more aggressive action by Hydro to improve its asset management program and capabilities.
On the Significance of, and Tolerance for, Violations:

Our interim April 24, 2014 Report, our first on Hydro’s operations, observed (at page 19) that Hydro operated “near the edge,” and it appears to still do so.  Perhaps this concern of operating near the edge will go away with the completion of MF.  This question should get a definitive answer in a major supply report from Hydro in November 2018. For now, we recommend treatment of all violations as important, with multiple years of continuing violations being particularly problematic.

On the Status of the LIL:
… In our opinion more attention and pressure from management was necessary to apply to GE, the apparent cause of the primary schedule threats.  The serious problems facing GE at the corporate level are well known, and its capability to meet Nalcor requirements, even with the best of intentions, remains far from clear. We did not see in this quarter signs of significant improvement in the pace of critical work.  At an August 17, 2018 meeting with TTO management, the Company representatives did not express confidence in GE’s ability to meet an in-service date of mid-November.

We were not able to secure from management information necessary (such as critical path schedule information) for determining the likely impacts of many of these issues.  Nalcor’s representatives, for example, declared critical path schedule details for GE work on the LIL beyond the scope of legitimate inquiries from us.  The limited information we were provided is not sufficient to address the length of likely delays in reliable LIL operation, but we do think they may well prove considerable.  That management’s lacked confidence in the dates it offered to us on August 17 was demonstrated by Hydro’s letter to the Board on August 27 advising of an extension in LIL’s completion date to January 2019.

There is no sound basis at present and with the information we do and do not have for considering the, later date likely.  With no basis for identifying a likely date for reliable commercial operation of the first pole, we can nevertheless offer the following interim conclusions:

·         We find it unlikely that the LIL (single pole) will be in commercial operation for the start of the winter 2018-19.

·         Acceptance of the facility for operation will not necessarily demonstrate a capability to perform reliably: “Paper” declarations in the industry that critical facilities have been accepted for operation (particularly in other high-pressure situations) are often followed by the emergence of issues that make them undependable for extended periods.

·         Whatever the “actual” state of completion and readimess when accepted, we find likelihood that the LIL will operate reliably in the early months.  The LIL will remain prone to the uncertainties any new major facility faces early in its operating life, especially one involving technology new to the operating company.  In addition, the problems with GE are unlikely to simply go away.

·         Hydro models the LIL with a forced outage rate of 1 percent.  This assumption may be optimistic, given prior reports suggesting multiple monopole trips in the four winter months.  The immaturity of the LIL in the coming winter could produce many more outages.  Also, the limited duration of the required run (20 days) does little to add confidence that operations after acceptance will be continuous.

NL Hydro President, Jim Haynes
On Island Generating Assets:

Deterioration of the thermal assets, including the Holyrood TGS and the Hardwoods and Stephenville CTs, is well known.  Management has invested considerably in these facilities.  They continue to survive but in a debilitated condition.  Hydro intends to address the CT issues directly in the upcoming November 2018 supply analysis – an analysis that should include the long term plan for the assets and specifically address the remaining lives of Hardwoods and Stephenville.
Management has attributed many of Holyrood’s 2017-18 problems generally to on-going boiler and air heater fouling, and plans fixes for those problems in the fall of 2018.  This generalization understates the poor condition of these units.  The frequency of trips and de-rates, the large number of independent events, and the degree of overall degradation are so great we find it impossible to effectively summarize them here. … it seems impossible to expect any different results this year.

The condition of the thermal assets cones as no surprise, but the emergence of hydraulic asset problems does.  New and expanding penstock issues appear especially troubling.  Management reported the root cause of the Bay D’Espoir Penstock 1 in a March 23, 2017 report to the Board, but the current Hydro report states that the 2017 root cause analysis was wrong, requiring investigations to take a new focus.  Inspections comprise a key part of Hydro’s efforts now, but visual inspections may be proving inadequate.  Visual inspection of Penstock 3 in April 2017 showed no evidence of cracking, nut non-destructive testing (NDT) a month later confirmed that cracks did indeed exist.  The report suggests the need for an aggressive future inspection program, but makes no mention of any new NDT requirements versus visual inspections.

Other hydraulic unit problems continued in 2017, but still await repairs later in 2018.  These problems include the rotor key cracking at Upper Salmon, the bearing coolers at Hinds Lake and the Cat Arm spherical valve controls.  The report includes no discussion of Exploits, but we note that deliveries under this contract have fallen short of expectations for at least the last three years, resulting in high replacement costs for the lost energy.  Hydro has indicated that this issue is neither substantive or permanent.
The overall deteriorating condition of the fleet demands action by Hydro management. … In the meantime, the major threat for this winter is the Holyrood TGS.  That threat could produce very severe consequences on days when the LIL is unavailable. 

On the Maritime Link:
… access to firm capacity represents a notable missing benefit.  We believe that this benefit is becoming less practical because of commercial and operational issues, and firm capacity post-MF may not be practical at all, because the time lag to bring capacity into Newfoundland, even if it were available, will preclude its qualification as spinning (10 minute) or operating (30 minute) reserves.

Not to diminish the current and likely long term benefits of the ML, it will not, however, prove the source of long-term, firm capacity that some had hoped.
 On the No LIL Scenario:

A major loss of load event in this scenario requires a combination of circumstances: (1) LIL out of service, (2) loss of multiple Holyrood units and (3) a high load day.  The first condition is very likely, at least for the first part of the winter.  The second is increasingly more likely, given Holyrood’s reliability issues.  This all suggests that, for at least part of this winter, the IIS may be at the mercy of the weather. 
The full report may be downloaded here: