IDENTIFYING RISK FACTORS IN THE
GENERATING SECTION OF THE POWER PLANTS
THE N.V. ENERGIE BEDRIJVEN SURINAME CASE
By
SHUNG TAK, CHAN
(SRFHR0407010)
Supervised by
Dr. Hans van Ees
This paper was submitted in partial fulfillment of the requirements for the Masters of
Business Administration (MBA) degree at the Maastricht School of Management (MSM),
Maastricht, the Netherlands, May 2009.
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Copyright © Shung Tak Chan, 2009.
All rights reserved. No part of this thesis may be reproduced, stored in a retrieval system or
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or otherwise without the prior permission in writing of the author.
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ACKNOWLEDGEMENTS
I would like to take this opportunity to express my sincere appreciation to my thesis advisor,
Dr. Hans van Ees, for his tremendous guidance and support through my research.
To my employer “N.V. EBS” for giving me the opportunity and support to enrich my
knowledge and skills through this MBA course.
My sincerest appreciation to all the participants in the interviews who gave freely of their
valuable time. These participants are from N.V. EBS, Suralco and SPCS.
I also owe deep appreciation to Mr. Hans Lim A Po and his administrative team from FHR
Lim A Po Institute, for their tremendous guidance, support and good accommodations
facilities.
Finally, to my ever loving family, especially my wife Iris and my sons Yau Tchu and Yau Fa
for their patience, support and encouragement all the times.
Sincerest thanks to all.
Shung Tak CHAN
May 2009
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ABSTRACT
Electrical energy is in this modern world indispensable. This commodity cannot be stored and
needs to be generated at the instant when it is needed. The customers also demand for
continuity and reliability of this commodity. Historical data shows that blackouts and rolling
blackouts (i.e. load shedding) are results from shortages of electrical power in the power
plants.
The Surinamese electrical energy sector is regulated. One vertically integrated electricity
company “N.V. EBS” provides the service through its generation, transmission and
distribution sections. In addition, electrical energy is purchased through PPAs with IPPs
which N.V. EBS is very dependent on. This company is the sole supplier of this commodity
and has to protect its reputation.
Can N.V. EBS (as a monopolist) guarantee a delivery of continuous and reliable electrical
energy? The problem statement is how to achieve an optimal guarantee of electrical energy
supply to customers in Suriname. The guarantee is a direct derivative from the conditions of
the power plants. The general objective of this study is to help the N.V. EBS to understand
the involved risks of the different interconnected power plants for optimal dispatching of
electrical energy. In order to improve the service of electrical energy supply, an integral
approach for the identification of existing and potential risk factors of the power plants is
conducted where the role and the risky ness of the power plants are determined. This
information will give better insight for the N.V. EBS in order to transform into a sound
dispatcher.
The method use in the research is a top-down approach with the pre-determined variables or
sets of variables from the research questions, related to the objectives of the research i.e. the
role of the different power plants, risk models, risk factors, ranking and prioritization. Data
gathering is done through interviews with experts and management in the generating section
of the power plants. An integral methodological approach of the assessed risks is defined and
tested for N.V. EBS. The transformation into a sound dispatcher is described with the
organizational changes needed to achieve this goal for N.V. EBS.
v
The overall finding is that N.V. EBS can guarantee continuous and reliable electrical energy.
The guarantee lays in the defining of the weighting matrix of the power plants in risky ness
that serves as and input for the improved methodological framework with decision tree for
dispatching electrical energy by N.V. EBS. These topics are the centre focus of this research
and are in details in this paper further described.
vi
LIST OF FIGURES
Figure 1
General overview of the flow of electrical energy from generating to
transmission to distribution and to customer………………………………......2
Figure 2
Suriname energy consumption forecast……………………………………......3
Figure 3
Research model for the thesis topic……………………………………………8
Figure 4
AU-NZ Risk Process………………………………………………………....14
Figure 5
General risk-based maintenance (RBM) model ……………………………..17
Figure 6
Enterprise Risk Scorecard…………………………………………………….19
Figure 7
A block diagram illustrates the research design……………………………...22
Figure 8
A methodological framework and decision tree for
dispatching electrical energy…………………………………………………53
Figure 9
Improved methodological framework with decision tree
for dispatching electrical energy……………………………………………...54
LIST OF TABLES
Table 1
Weighting matrix of the categories vs. the power plants……………………..51
vii
GLOSSARY
Definitions
Blackouts:
Power was lost completely
Brokopondo Agreement:
A power purchase agreement of Hydro electrical energy between Suralco LLC and Suriname.
Annually the amount of 800 GWh of electrical energy is dispatched.
GWh (Gigawatt-hour):
One billion watt-hours of electrical energy. A unit of electrical energy, which equals one
gigawatt of power used for one hour.
Load shedding or rolling blackout:
Controlled way of rotating available generation capacity between various districts or
customers, thus avoiding wide area total blackouts
MW Megawatts:
The unit of measure for active power in power systems. When only linear loads are
considered, this quantity is an indication of the amount of power. This power is the sum of
the losses and also the actual rate at which work has been done by the electrical energy in
turning motors and obtaining mechanical energy etc. A 1000 kilowatts make up one
megawatt or MW.
MWh Megawatt-hour:
The unit of measure for electrical energy. It is the amount of electrical energy, which is
consumed by a load or is generated by a generator. It is equivalent to the situation when the
rate of electricity demand or supply (also called the power) is one megawatt and is sustained
for a one-hour period by the load or generator. It is also equivalent to 3600 Mega joules of
energy.
viii
SCADA:
The Supervisory, Control and Data Acquisition system. In process control, programmable
logic controllers (PLCs) pass information to the central SCADA system, which collates and
presents it to an operator who then has a systems view of the plants control system. The
operator then uses the information from the SCADA system to implement control changes to
the control system using this same SCADA system.
Abbreviations
DEV
Dienst Electriciteitsvoorziening
ERM
Enterprise Risk Management
EPAR
Energie voorziening Paramaribo
COSO
Committee of Sponsoring Organizations
GDP
Gross Domestic Product
HFO
Heavy Fuel Oil
HMI
Human – Machine Interface
ICT
Information and communication technology
IPP
Independent Power Producer
ISO
International Organization for Standardization
kV
kilo Volts
N.V. EBS
N.V. Energie Bedrijven Suriname
SPCS
Staatsolie Power Company Suriname
SBU
Strategic Business Unit
PPA
Power Purchase Agreement
RBM
Risk Based Maintenance Model
ROI
Return On Investment
ix
TABLE OF CONTENTS
ACKNOWLEDGEMENTS ................................................................................................iv
ABSTRACT…….................................................................................................................. v
LIST OF TABLES .............................................................................................................vii
GLOSSARY…...................................................................................................................viii
CHAPTER 1
INTRODUCTION..................................................................................... 1
1.1
GENERAL ........................................................................................... 1
1.2
Background information....................................................................... 2
1.3
Scope of research.................................................................................. 6
1.3.1
Research area ............................................................................................... 6
1.3.2
Reason for choosing this topic ..................................................................... 6
1.3.3
Research problem ........................................................................................ 6
1.3.4
Validity in management field....................................................................... 7
1.3.5
Research objectives ...................................................................................... 7
1.3.6
Research main question ............................................................................... 7
1.3.7
Research central questions .......................................................................... 7
1.3.8
Research model ............................................................................................ 7
1.4
Limitations ........................................................................................... 8
CHAPTER 2
LITERATURE REVIEW (A description of
alternative approaches to risk) .............................................................. 10
2.1
General............................................................................................... 10
2.2
Risk in different industries.................................................................. 11
2.2.1
Industries.................................................................................................... 11
2.2.2
Categories of risks...................................................................................... 11
2.2.3
Sub-summary ............................................................................................. 12
2.3
Probabilistic vs. Subjective framework............................................... 12
2.3.1
2.4
Sub-summary ............................................................................................. 13
Risk models........................................................................................ 13
2.4.1
COSO ERM................................................................................................ 13
x
2.4.2
AU-NZ Risk model..................................................................................... 13
2.4.3
Risk-based maintenance (RBM) model..................................................... 15
2.4.4
Real-Time Risk Based Model .................................................................... 17
2.4.5
Enterprise Risk Scorecard Model ............................................................. 19
2.4.6
Sub-summary ............................................................................................. 20
2.5
Conclusion ......................................................................................... 20
CHAPTER 3
RESEARCH METHODOLOGY ........................................................... 22
3.1
General............................................................................................... 22
3.2
Research material ............................................................................... 23
3.3
Research technique............................................................................. 23
3.3.1
Method and data ........................................................................................ 23
3.3.2
Sample ........................................................................................................ 23
3.3.3
Reliability ................................................................................................... 24
3.3.4
Analyzing data ........................................................................................... 24
CHAPTER 4
FINDINGS............................................................................................... 25
4.1
General............................................................................................... 25
4.2
Power plant SPCS .............................................................................. 25
4.2.1
Data set ....................................................................................................... 25
4.2.2
Findings ...................................................................................................... 26
4.2.3
Summary .................................................................................................... 28
4.3
Suralco ............................................................................................... 29
4.3.1
Data set ....................................................................................................... 29
4.3.2
Findings ...................................................................................................... 30
4.3.3
Summary .................................................................................................... 31
4.4
EBS .................................................................................................... 32
4.4.1
Data set ....................................................................................................... 32
4.4.2
Findings ...................................................................................................... 33
4.4.3
Summary .................................................................................................... 34
4.5
Dispatch Centre .................................................................................. 35
4.5.1
Data set ....................................................................................................... 35
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4.5.2
Findings ...................................................................................................... 36
4.5.3
Summary .................................................................................................... 36
4.6
Conclusion ......................................................................................... 37
CHAPTER 5
ANALYSIS .............................................................................................. 38
5.1
General............................................................................................... 38
5.2
Part one: Unitization, Categorization and
Inferences of findings for answering the research
main questions ................................................................................... 39
5.2.1
Research Central Question 1 ..................................................................... 40
5.2.3
Research Central Question 2 ..................................................................... 42
5.2.4
Research Central Question 3 ..................................................................... 44
5.2.5
Research Central Question 4 ..................................................................... 47
5.2.6
Research Central Question 5 ..................................................................... 48
5.3
Part one: Conclusion........................................................................... 50
5.4
Part two: Implementation of the results from part one to EBS. .......... 51
5.4.1
Research Central Question 6 ..................................................................... 52
5.4.2
Research Central Question 7 ..................................................................... 55
5.5
Summary ............................................................................................ 55
CHAPTER 6
CONCLUSIONS, RECOMMENDATIONS
AND FUTURE RESEARCH ................................................................. 57
6.1
General............................................................................................... 57
6.2
Conclusions ........................................................................................ 57
6.2.1
Role of the power plants ............................................................................ 58
6.2.2
Risk models, risk factors, ranking and prioritization............................... 59
6.2.3
Dispatch Centre.......................................................................................... 60
6.2.4
Changes in the organization of EBS.......................................................... 60
6.3
Recommendations .............................................................................. 61
6.4
Future research ................................................................................... 62
REFERENCES……. .......................................................................................................... 63
xii
APPENDIX 1
LIST OF INTERVIEWEES OF SPCS................................................... 65
APPENDIX 2
LIST OF INTERVIEWEES OF SURALCO ......................................... 66
APPENDIX 3
LIST OF INTERVIEWEES OF EBS..................................................... 67
APPENDIX 4
LIST OF INTERVIEWEES OF
THE DISPATCH CENTRE OF EBS ..................................................... 68
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CHAPTER 1
INTRODUCTION
1.1 GENERAL
The role of the power plants is very important for the continuous and reliable electrical energy
supply, which is important for the development of the country. It is unimagined to stay
without electricity in today’s high tech and modern world. The electrical energy sector has
two forms namely de-regulated and regulated. Globally the trend is to move to de-regulated
electrical energy environment. This is already highly improved in many developed countries.
Still in many developing countries, the Government controls the electrical energy sector. This
structure, as the case of Suriname, may result in a not optimal service of the electrical energy.
The problem statement is how to achieve an optimal guarantee of electrical energy supply to
customers in Suriname. The guarantee is a direct derivative from the conditions of the power
plants. In order to improve the service of electrical energy supply, an integral approach for
the identification of existing and potential risk factors of the power plants will be conducted.
The inputs of these identified risks from the different power plants will give better insight for
the N.V. Energie Bedrijven Suriname (from this point on mentioned as EBS) in order to
transform into a sound dispatcher.
Risks are present in every stage, from the planning phase to the design and construction phase
and in the expansion phase. It is therefore important to identify risk factors in every stage,
understanding them and put control mechanism to mitigate them. This will benefit the
organization in performance and avoid negative criticism. Also by not proper understanding
this issue will lead to loosing opportunities and facing with choosing the improper decisions,
actions and planning. This will result in higher costs, inefficiency and ineffectively in the
operation.
To understand the risks of the different plants in Suriname, an analysis of the regulated
energy environment is necessary. It is important to distinguish the different role of the power
plants in a regulated energy environment and understand how the risk appetites are
formulated.
1
1.2 BACKGROUND INFORMATION
Electrical energy is important for the development of the economy of a country. It is a
cornerstone on which the economy and the daily lives of the Surinamese citizens depend.
This essential commodity has no substitute and cannot easily be stored, so it must be
produced at the same instant it is consumed.
The basic processes of electrical energy consist of a generating part, a transmission part and a
distribution part as it is depicted in figure 1.
Figure 1
General overview of the flow of electrical energy from generating to transmission
to distribution and to customer.
The generating part is in the power plant and may include steam turbines, diesel engines, or
hydraulic turbines connected to alternators that generate AC electricity. Generators produce
three-phase current at voltages ranging from 2,000 to 24,000 volts. This electricity must be
transformed to higher voltages for efficient long-distance transmission.
The transmission part is the interconnection between power stations, through underground
cables and overhead lines, and is terminate at substations.
The distribution part is where the voltage in the substations is reduced to the primary
distribution voltage e.g. from 33 kV to 12 kV. This voltage is then supplied directly to large
industrial users or is further transformed down to e.g. 227 V / 127 V for local distribution.
2
The goal of the modern-day power systems is to generate and deliver electrical energy to
customer as reliably, economically, and safely as possible while maintaining the important
operating parameters (voltage, frequency, and phase angles) within permissible limits.
The electrical energy sector in Suriname is still regulated by the Government. In a regulated
market, the regulator decides the electricity price charged to consumers. Regulated electrical
energy systems have been facing major challenges to generate enough resources for future
development to cope up with the demand growth of electrical energy. Figure 2 gives the
predicted relation of the base-, low and high scenarios of energy consumption against time
for the Surinamese situation.
Figure 2
Suriname energy consumption forecast
Source: IDB study 2008
EBS is fully Government-owned and has the monopoly position in the transmission and
distribution of electrical energy to customers consisting of households (88%), commercials
(9%) and industries (3%).
The power plants, which are contributing to the electrical grid, are:
-
The EBS;
A Government-owned company with its thermal power plant.
3
-
The Suralco LLC;
A subsidiary of Alcoa with its hydro- and thermal power plants. Part for the
generated electrical energy is for own consumption for the refinery and melt
shops. The rest of the available electrical energy is for the State according to the
Brokopondo agreement and transferred to EBS for further transmission and
distribution.
-
The SPCS (Staatsolie Power Company Suriname);
An Independent Power Producer with its thermal power plant. The generated
electrical energy is available for EBS for further transmission and distribution.
-
Dienst Elektriciteitsvoorziening (DEV);
Small thermal power stations operated by Ministry of Natural Resources for rural
areas and the interior.
While there may be some commonalities among the risk factors in the generating section of the
different power plants, each risk is unique as for the different roles they play in the regulated
environment.
History has shown that the electrical energy sector in Suriname has many shortcomings.
These shortcomings relate to the generating capacity of the power plants.
In late 2004 there where shortages of generating capacity from power plant of Suralco due to
low lake level at the hydro-dam. Emergency power in the form of mobile containerize units
where forced to be hired at an instant from the company “Aggreko”. The director of NH
(natural resources) stated that this action was to mitigate the shortages of electrical energy
and to prevent blackouts (where power was lost completely) and “load shedding" or a rolling
blackout (controlled way of rotating available generation capacity between various districts
or customers, thus avoiding wide area total blackouts). The Government’s opinion was that
Suralco power plant should contribute electrical energy according to the Brokopondo
agreement for 800 GWh annually. Suralco’s defence was that the low lake level the result
was of a drought, an act of God, and thus classified as force majeure (Staat en Suralco oneens
over verdeling kosten generatoren, De Ware Tijd; 02/02/2005). In the end, both parties had to
split the bill for the services of the emergency power. In this case, the compliance and
operation risks were present.
4
Another shortcoming was, when the power plant of EBS could no longer guarantee the
electrical energy due to the increasing diesel fuel price (Stroomlevering verder onder druk.
Loadshedding onvermijdelijk, De Ware Tijd; 10/18/2008). EBS was not allowed to adapt it
electrical energy tariff with the rising fossil fuel price. The tariff is still controlled and
decided by the Government (EBS niet happy met voorstel energiecommissie, De Ware Tijd;
06/08/2006). In this case, the operation risk was present.
Due to the generating capacity struggle of EBS, an Independent Power Producer (SPCS) was
granted the concession right by the Government to generate electrical energy also (Staatsolie
bouwt elektriciteitscentrale voor energielevering aan EBS, De Ware Tijd; 05/06/2005). In
this case, the strategic risk was present.
In August 2006, SPCS went into operation with a contractual PPA (power purchase
agreement) between EBS and SPCS for purchasing 100 GWh of electrical energy annually.
This agreement did not execute effectively until today. As in the months that follow, heavy
seasonal rain was filling the lake at the hydro-dam with high speed that there was a threat of
excessive water, which had to be spilled in avoiding critical operation of the turbines. The
Government intervened by dealing with Suralco to expand the purchasing contact to prevent
spilling and waste of resources (hydro) and avert a float in the villages in vicinity and
downstream of the dam. With this intervention, EBS made great use of cheaper hydro
electrical energy and was able to manage its cash flow better by using less thermal generation
with fossil fuel (EBS zit goed op stroom, De Ware Tijd; 06/06/2008). In this case, the
strategic-, compliance and operation risks were present.
On October 5, 2008, EBS announced through news ads and TV spots to the households and
industries to reduce the electrical energy consumption. The reason was that the power plant
of Suralco had to reduce its generating capacity due to preventive maintenance at the hydrodam (Verlaagde weekend-energie door daminspectie Suralco, De Ware Tijd; 10/06/2008). As
in this case, the dependency on one big power plant is crucial. In this case, the operation risk
was present.
The historical data has shown that in certain times there is not enough generating capacity
from the power plants. This is always the case when demand does not match supply. The
5
consequences are discontinuity of electrical energy supply, rolling blackouts (cutting off
electrical energy at interval) and in the worst case a total blackout.
As there are more cases and the list can goes on and on, it is clear from the mentioned
shortcomings that
running power plants deals with risk and opportunities. An integral
approach in identifying the risk factors of the generating section of all the power plants and
dealing them with proper will assure better electrical energy for the Surinamese citizens.
The motto of every stakeholder must be Let there be continuous “light”.
1.3 SCOPE OF RESEARCH
The customers have constantly questioned the quality of service provided by the electricity
company EBS. Today’s customers do not tolerate poor quality or discontinuity of electricity.
The guarantee of good service lies primary in the performance of the power plants. These are
the places where the electrical energy is generated. It is therefore of great importance to asses
the risks factors associated with the operation and strategic of the power plants. In the next
paragraphs, the outline of this research will be discussed.
1.3.1 Research area
The research area is the associated risk in the generating section of different power plants and
their role in the regulated electrical energy environment.
1.3.2 Reason for choosing this topic
A continuous and reliable electrical energy service is important for the electricity company.
Electricity is a commodity, has no substitute, and cannot be stored. The demand of electrical
energy must be generated in the power plants at the same moment. If the demand-supply
equation is not managed in an adequate manner, there will be total blackouts or rolling
blackouts (cutting off electrical energy at interval). Shortages, breakdowns and maintenances
are major aspects to consider as these factors influence the demand-supply equation.
1.3.3 Research problem
Can EBS (as a monopolist) guarantee a delivery of continuous and reliable electrical energy?
There should be a thorough understanding of the generating capacities of the different power
plants and their future developments.
6
1.3.4 Validity in management field
Understanding the risk factors of the power plants will lead to creating and setting up control
mechanism to mitigate these risk factors. This will guarantee the continuous and reliable
electrical energy services. For the companies the benefits will be a positive financial position,
avoiding and minimizing negative critics, operational effectiveness and contributing to
economic growth.
1.3.5 Research objectives
To assess the current and potential risk factors in the different power plants
Formulate an alternative methodological approach to assure a better or excellent
energy supply service by EBS
To assess the organizational changes required for EBS to transform into a sound
dispatcher.
1.3.6 Research main question
Can the supply of electrical energy be improved through an integral methodological approach
by using the assessed risks factors of the different power plants?
1.3.7 Research central questions
What is the role of the different generating sections of the power plants in a regulated
environment?
Which risk models do the power plants pursue?
What are the existing and potential risk factors?
What is the operation and maintenance philosophy?
Are the different risks prioritized and what are the criteria?
How can EBS as the dispatcher of electrical energy guarantees improvement with the
integral methodological approach of the assessed risk factors?
What are the organizational changes required for EBS to transform into a sound
dispatcher.
1.3.8 Research model
The research model is depicted in figure 3. The approach is to focus only on the strategic and
operation risks in the power plants that are relevant for the performances. There are also
financial risks but these will be limited in this research. The primary focus is thus the
7
continuous and reliable service of electrical energy contributed by the different power plants.
An assessment of the strategic and operation risks for the different power plants are then
conducted with in mind the different role they fulfill in the regulated energy environment.
Strategic.
risks
Power
plant 1
Conclusions
Operation.
Identified
Integral
risks
Risk
Methodology
&
factors
Recommendations
Financing
risks
Power
EBS
plant n
case
Figure 3
Research model for the thesis topic.
The next step is to identify the crucial risks and then tries to incorporate in the electricity
company (EBS) risk-base for a better understanding and judgment to optimize strategic and
operation performances. EBS is the sole provider (monopolist) of electrical energy directly to
customers and is accountable for this service. The integral methodological approach of the
assessed risks will be formulated and tested in EBS. This will result in a transformation of
EBS into a sound dispatcher thus optimize the performances and mitigate poor services. The
follow-up is to establish the conclusions and recommendations for eventually organizational
changes if implementing this formulated methodology.
1.4 LIMITATIONS
The limitation of this research is that the results are case specific and may not be applicable
for other similar industries. The limitations are:
Monopolistic position of EBS
Surinamese regulated electrical energy environment
Distinguish only the role of the power plants in the regulated energy environment and
not the structure.
8
There is no international interconnection between the transmission networks.
Interconnected power plants in the EPAR (“Energie voorziening Paramaribo” i.e.
supply of energy to Paramaribo and surroundings) system.
The recommended process changes for EBS are limited to Power Plant and Dispatch
sections in mitigating operations and strategic risk.
9
CHAPTER 2
LITERATURE REVIEW
(A description of alternative approaches to risk)
2.1 GENERAL
This Chapter deals with some related background information on risks for this research.
Various studies have been done on identifying the risk factors in different industries. Many
policies and strategies regarding risk management have been developed to mitigate failure
rate and uncertainty. Various models are adopted in the environment specific situations such
as the case in the electrical energy environment.
The literature study begins with the description of risks involving in all kind of industries.
The identification of risks is a process where the generic ERM framework, a well-known and
used model, is pursued by all industries for managing risks and mitigates the impact on the
business. Different industries have different risks, but identification and handling process of
these risks factors may be the same. For the identification purposes, risks are grouped in
major risk areas and sub-areas.
Once the risks are identified and categorized the next step is to assess the probability and
consequence. This is done in a probabilistic- and a subjective framework and the results are
then prioritized.
A company can pursue several risk models. For enterprise level approaches, the generic
models like the COSO ERM and the Australian – New Zealand risk model has been proven
to work for the electrical energy sector. For businesses with valuable assets as in the power
plant, a more comprehensive and in-depth framework at micro level is being used. This
framework is based on the justification whether and when to plan a maintenance on a system
and sub-system. The data collection and input for this risk-based maintenance model is
nowadays improved with the development and aid of ICT (information and communication
technology). Real-time data is collected and processed for better judgment by the decisionmakers. At the end, the success of a business is measured through several indices related with
the overall performance and the risks assessment. These factors must be balanced and
managed which can be done with the Enterprise Risk Scorecard model to create value for all
stakeholders.
10
2.2 RISK IN DIFFERENT INDUSTRIES
2.2.1 Industries
Risk has been recognized and dealt with several industries e.g. process plants, transportation,
pipelines, environment, health etc. (Taylor J., 1994). Risk is defined in the different industries
as the probability of loss. These losses may be of many kinds: loss of opportunity,
production, equipment failure or breakdown, environmental damage, injury e.g., which have
an overall impact on the financial status of the company. Every industry has different risks
but the handling of these risks can be the same with the overall and general objectives to
mitigate and eliminate risks. The objectives of the power plants are to manage the resource
inflows and identify the impact of their disruption or termination, contingencies and
measurements etc., then consider how best to manage and minimize or eliminate the risk
factors. The resource inflow can be fossil fuel, scheduled preventive maintenance (PM),
environment issues etc.
2.2.2 Categories of risks
The awareness of risk has changed in the recent years (Mitchell and Jones, 2007). In today’s
business, one has to consider the multiple sources and type of risks he or she might
encounter. A strategy has to be developed to mitigate these risks. This will not be reached
only with the increasingly hours spent in boardroom brainstorming about risks, but every
organization should develop risk policies for each risk category and having fully accountable
risk owners.
As in the different industries, risks are divided into major areas and sub-areas for
identification purposes. General the three main categories of risks are:
1. Catastrophic risk, 2. Strategic risk and 3. Operational risk.
These risks have the probability of resulting in failures for the business. These failures are not
mutually exclusive. Catastrophic risk has to do with impact on the business due to external
(originate in the business environment) and internal factors (originate within the company).
Strategic risk is when a company pursues an inappropriate strategy or drifting away from the
core missions. This will result in exhaustion of recourses with losses at the bottom line.
Operational risk is when the company cannot deliver its products or services to key
stakeholders in a satisfaction way.
Moeller R. (2007) has a more comprehensive approach of the business risk model.
11
There are four main risks – Strategic, Operation, Finance, and Information –, which are
further subdivided into relevant risks in the main categories. Some examples are Process risk,
Compliance risk, People risk, Credit risk, Technological risk etc. Thus, the risks are classified
as the result of the impact and the effect that it has on business.
2.2.3 Sub-summary
The involvement of risks is in every industry present. Different industries encounter different
kind of risks but the approach of risk identification and risk response may be the same. For
identification purposes, risks are divided in major areas and sub-areas. The result of a risk is
the probability of failure for a business.
2.3 PROBABILISTIC VS. SUBJECTIVE FRAMEWORK
The next step in the development of a risk model after categorizing the risks, is to assess the
two measurable parameters involving each risk namely probability (or likelihood) and
consequences (or occurrences). Weighting of these factors depends on individual (or group)
perceptions and interpretation of risk and on historical data and events. An overall detail of
knowledge of the studied environment is needed.
In the electrical energy sector, risk is approached in a probabilistic and subjective framework.
A probabilistic risk framework emphasizes a statistically descriptive form and is very
complex, while the subjective framework imposes lack of robustness, transparency and
repeatability because of no formal structured approach to include risk (G. Latorre, R. Cruz, J.
Areiz, and A. Villegas, 2003).
The probabilistic framework uses differently structured approaches like the Monte Carlo
simulations, Fault trees and Event trees analyses. These structuring approaches define the
failure logic to quantify the probability or likelihood of critical failures. These approaches are
well-used techniques especially for random systems and equipment failure interval in a power
plant. It is indented for internal risk factors because they can be easily accessed and
controlled within its boundaries to mitigation core business damages.
A subjective framework has the advantage of capturing the subject matter expertise from the
plant operators and managers in their daily operations. This group, because of their daily
involvement and expertise, must formulate the best-input data and defining risk appetite. The
disadvantage is that the dependence on the operators and managers is high, thus more
subjective and this can influence the outcome of the analyses. This is the effect of missing a
12
formal structured risk approach. The consequence is that this approach will lead to individual
perception and interpretation of risk.
Nevertheless, the subjective risk framework is a frequently used approach in the power plants
because certain events are not yet recorded or missing, for example new installed equipments
where failure rate is unknown. Assigning a probability in these cases is not possible.
2.3.1 Sub-summary
The weighting process of the identified risks is done with a probabilistic- and subjective
framework. The advantages and disadvantages of both frameworks are briefly discussed. For
the electrical energy section, the subjective framework is the most commonly used model.
2.4 RISK MODELS
This paragraph will focus on the applicable risk models for the thesis topic.
2.4.1 COSO ERM
For any activity whether implementation of a project, changing in condition and daily and
routine operation, risk is the only given certainty. It is important to identify measure, assess
and mitigate the effect of such risk. It is therefore not surprising that also the electrical energy
section applies risks assessment and management (Wenyuen Li, 2005). In today’s world, risk
cannot be managed in “silos”. As in a regulated electrical energy sector where an electricity
company is typical vertical integrated (generation, transmission, distribution), a paradigm
shift from silos approach to an enterprise level approach has to be realized. That is why it is
recommended that the electricity companies should pursue the COSO risk model for
achieving
enterprise
level
risk
management
(online
available
at
www.coso.org/Publications/ERM/COSO_ERM_ExecutiveSummary.pdf (2004).
2.4.2 AU-NZ Risk model
A commonly used risk model for the electrical energy sector is the AU-NZ (Australian –
New Zealand) risk model (Risk management handbook, AS/NZS 4360:2004). The AU-NZ
risk model provides a comprehensive framework for treatment of risk. This model imposes a
generic one and is independent of any specific industry or economic sector. The design and
implementation of risk management system are influenced by the various needs of an
organization, its particular objectives, its products and services, and the processes and
13
specific practices employed. In figure 4 is the AU-NZ risk process depicted. As the figure
shows, there are seven steps approaches – Establish the context, Identify Risks, Analyze
risks, Evaluate the risk, Communicate & Consult, and Monitoring & Review.
Establish the context
•
•
•
•
•
The strategic context
The organizational context
The risk management context
Develop criteria
Decide the structure
Identity Risks
•
•
What can happen?
How can it happen?
Determine
Determine
Likelihood
Consequences
Estimate Level of Risks
Evaluate Risks
•
•
Monitor and Review
Communicate and Consult
Analyze Risks
Determine existing controls
Compare against criteria
Set risk priorities
Yes
Accept
Risks
No
Assess Risks
Treat Risks
•
•
•
•
•
Figure 4
Identify treatment options
Evaluate treatment options
Select treatment options
Prepare treatment plans
Implement plans
AU-NZ Risk Process
Source: Risk Management Handbook, AS/NZS 2360:2004 handbook
Establish the context is where strategy, culture and organizational structure play an important
part. The risk appetite is derived from these factors.
Identify risk is the phase where the current and possible risk events are being assess with
questions like “what” and “how”.
14
Analyze risks is the step where identified risk events are being analyzed and put against
control plans to determine the likelihood and consequences.
The next step is the evaluation phase where the criteria of the organization (risk appetite) are
put against the results of the risk analyses. The outcome of this comparison is to accept risks
or not. If risks are not accepted then treatment plans should be engaged to mitigate these
effects. Communication, Consult, Monitoring and Review are constantly active throughout
the whole process.
This model is suitable for the power plants and the electricity company (Varadan S.,
Mittelstadt W.A., Aggarwal R.K., VanZandt V., Silverstein B., 2008). The biggest challenge
is to adopt these specified guidelines from the standards to the specific environment. The
organization’s culture and the ability to embrace changes play a crucial role of success
because the model with it seven steps must be followed in the structural sequence. A culturaland change management is therefore necessary.
2.4.3 Risk-based maintenance (RBM) model
The most important asset (key success factor) for a power plant is to have a good running and
on time maintained piece of equipment. Managing and improving equipment availability with
better prevention of failures will results in reliability and continuity in supply of electrical
energy. Various studies have been done about equipment reliability improvement and
management (Khan F., Haddara M., and Krishnasamy L., 2008). Many maintenance policies
and strategies have been developed in order to minimize failure rate and improve equipments
reliability and availability like corrective maintenance, scheduled maintenance, conditionbased maintenance, and reliability-centered maintenance. The objective of these maintenance
policies is to safeguard the availability of the system so they can perform as its required
function at a given time or over a stated period of time. A well-known and general used Riskbased model (Arunraj J.M. (2007) is depicted in figure 5. The methodological approach here
is to start with defining a major system and its subsystems. A major system in the power plant
is comprised of several subsystems. The generator for example is a major system and rotating
- , seal oil & lubricant -, cooling system is categorized as subsystems. The analysis is to focus
on a total failure scenario and not on poor performance, or partial production scenarios. The
next step is to investigate the failure modes of the system, and its associated subsystems
(hazard estimation). The data-input comes from the power plant’s operators, which is then
ranked in a fault trees and event trees. The quality of the input information depends greatly
on human expertise, interest to the method and capability to access the information. In this
15
stage, the difference between continuous and non-continuous subsystems must be cleared.
With non-continuous subsystems are meant components that are not designed to operate
continuously, such as alarm, emergency, and standby systems. These subsystems may suffer
failures while they are in a non-operating state. The failures are not detected until the system
is called upon to operate. These failures are often caused by manufacturing defects, corrosion,
or mechanical fractures. These failures affect the availability of the system. An effective
inspection strategy is required to ensure the availability of the system when it is needed.
After assessing the likelihood and consequences estimation, the result is analyzed in the risk
evaluation phase and rank in high, medium and low risk units. The last two steps test the risk
appetite of the organization and contingency policy in operation. A system must be secure for
(n-1) contingency perspective to guarantee continuous operational. This approach (n-1) is a
well-accepted planning practice where no loss of operation is experienced when any single
component (for a possible n component) in the power plant fails. This means that there
should be redundancy (reserve capacity) built in the system for continuously operation.
16
Begin
Divide the system in to manageable units
Consider a unit
Hazard analysis
Likelihood estimation
Consequence estimation
Risk evaluation
Maintenance planning
Identify high, medium and low risk units
Is risk
Yes
acceptable?
No
Yes
Is there any
other unit?
No
End
Figure 5
General risk-based maintenance (RBM) model
Source: Arunraj, 2007
2.4.4 Real-Time Risk Based Model
The disadvantage of the earlier described Risk-Based Maintenance Model is that the quality
of data input relies heavily on human factors. It should be emphasized that focusing on data
retrieval and updated - as automatic as possible - to prevent risks analyses obsolescence, is
very important.
17
Real-Time Risk Monitors are now being used routinely to provide risk information for use by
plant operators in managing the power plant more effective and efficient (Mili A., Hubac S.,
Bassetto S., Siadat A., 2008).
First, data is collected by software programs from the major – and subsystems. The data
generates risk information for use in the day-to-day management of operations and provides
an input for maintenance planning. The objective is to ensure that these activities are
scheduled in such a way that high peaks in the risk are avoided wherever possible and the
cumulative risk is low. They provide information on which components should be returned to
service before particular maintenance activities are carried out and which of the remaining
operational components are the most important to ensuring plant safety during specific
maintenance outages. There is even software programs to control and monitor systems
(Supervisory Control And Data Acquisition) and its subsystems which are integrated for the
whole power plant. The user friendly HMI makes decision making very simple with risk
bands that is presented as risk information in the form of colored displays that give the user a
clear visual indication of the level of risk. This is normally done using a four band scheme as
follows:
-
low risk band where maintenance can be carried out with no restrictions,
-
moderate risk band where maintenance needs to be completed quickly,
-
high risk band where severe time restrictions need to be imposed and compensatory
measures may be required, and
-
unacceptable risk band which is not entered voluntarily and immediate action needs to
be taken to reduce the risk.
The risk information is sometimes presented in a three band scheme where the moderate and
high bands are combined. Entering a higher risk band will also result in actions to heighten
the awareness of plant personnel and often require higher levels of management involvement
and approval to allow additional or continued maintenance activities.
Second, with the automated collected data the power system operator can made on-line
contingency analysis to provide a continuous assessment of current power system conditions
and vulnerabilities. This analysis is automatically updated periodically (such as every 10 min)
and may consider several hundred worst-case contingencies. Based upon this information, the
probability of falling below (or above) plant acceptance criteria can be determined.
18
2.4.5 Enterprise Risk Scorecard Model
An overall performance for the enterprise can be approach through several indices. As
performances are measured through the Balance scorecard (Kaplan and Norton et al, 1996) so
is also risks measured through the Enterprise Risk Scorecard. This model was adopted by
Calandro and Lane (2006). The basic idea is that both performance and risk should be
measured and managed to create value. Figure 6 depicts the Enterprise risk Scorecard.
The electrical energy sector is regulated and thus the electricity tariff is fixed. The challenges
for these power plants are to operate efficient, cutting down cost and mitigate risks. It is
interesting to investigate in the power plants if the Enterprise Risk Scorecard is already
applicable and applied. Literature survey shows further on that risk is an uncertain event that
if occurs, has a negative effect on the objective of an organization. Managing risk is a process
where all stakeholders are involved. Processes, tools and techniques should be developed to
cope with risks. The process steps for risk management can be done with quantitative and
qualitative risk analysis (Moeller R., 2007).
Financial risk
Perspective
Customer risk
Perspective
Internal
Business risk
Perspective
Innovation and
learning risk
Perspective
Figure 6
Enterprise Risk Scorecard
Source: Calandro and Lane
19
2.4.6 Sub-summary
The generic COSO ERM and AU-NZ risk model are accepted in the electrical energy sector
and are applied at macro level for assessing risks. At micro level, risks are assessed with the
risk-based maintenance model. The enterprise risk scorecard is a model for expressing the
performance and managing risk process in a scorecard.
2.5 CONCLUSION
The literature review point out that risk is present in every business and industry. The
assessment of risks involves every stakeholder of the organization. It starts with the
company’s vision and mission. To reach the target objectives of an organization, a balance
between performance and managing risks should be maintained. Organization in today’s
business environment is dealing with risk in a broader way. Enterprise Risk Management is a
common tool for doing business today.
The overall objective for the power plant is to strive for continuity, reliability, and keeping
least cost option. A very well known Risk-based maintenance model is used as a basis for the
data collection, identification and evaluation. In the fast changing technology world, ICT
simplifies the data collection of events and make the identification and ranking of risks easier
and faster.
In general, the electrical energy sector is facing many challenges. One is the constant pressure
for more reliable and stabile power from the electricity provider(s). This is especially the case
in a de-regulated electrical energy environment where the different entities - generation,
transmission and distribution – with separate owners have to operate efficient and effectively
to reduce cost. In the de-regulated environment, the customers (end-users) have the obligation
to choose and switch to any electrical energy provider. These providers search for the best
offering from the power generating sections. Competition is encouraged alone the whole
process line.
On the other hand, in a regulated electrical energy sector one electricity company has been
granted for the operation of the three entities: generation, transmission and distribution,
which are vertically integrated in one company. This does not necessarily imply a monopoly,
only that competition is regulated and less intense.
20
In both cases, the Government has put emphases on the utilities to guarantee continuously
electrical energy because it affects the development of the economy, which results in socio
benefit for the country.
The objective of the different entities, generation, transmission and distribution, is to
safeguard the electrical energy supply. This thesis will focus only at the primary source
namely the power plants in Suriname where electrical energy is generated. As in the past
there was only one power plant in Suriname, nowadays there are four power plants tide in the
transmission grid. The development for the future is unpredictable and for now it is of
importance to maximize the output of these power plants in a most efficient and effective
way. Future incremental changes have to be considered and planned. To achieve this goal, the
power plants have to identify the risk factors effecting their operation and strategic goals for
pursuing the continuity of service to the whole nation without any interruption.
The electricity company with its Dispatch Centre plays a crucial role in the demand-supply
chain. It is in this centre where all the Power Purchase Agreements (PPA) are performed.
This centre must be able to oversee in advance the availability of the different power plants,
especially in the Surinamese case where there are few generating stations.
In the process of identifying risk factors in the generating section of the power plants, the
relationship and the applicability of the topics from the literature study are being investigated.
The investigation consists of the following major steps:
Determine the power plant’s existing vision and mission.
Determine the power plant’s risk model
Determine the evolvement of the used risk model
Determine the major risk areas and sub-areas
Determine the risks assessment and appetite
Determine the process maintenance schedules
Determine the relationship with the dispatcher of electrical energy (EBS)
Further explanation on the investigation is described in the research methodology Chapter 3.
21
CHAPTER 3
RESEARCH METHODOLOGY
3.1 GENERAL
This chapter explores the research technical design as depicted in figure 7 more in-depth.
Secundary
data
Literature
review
- risk models
- industries
- regulated
environment
- mitigation
plan
- ERM
etc
Figure 7
Primary
data
Interview
for
Identifing
risk
factors of
the
different
power
plants
Qualitative
analysis
Analysis
Plant A:
……..
Improvement
Integral
approach
Results
Sound dispatcher
EBS
case
Plant B:
……..
A block diagram illustrates the research design
The research was conducted in the power plants of Suriname. The research strategy was to
collect data by taking semi-structure interviews with the key persons responsible for the
generating section of the power plants. The sample for the data collection consisted of
operational-, maintenance and management staff. An individual and focus group semistructure interview technique was used for more broad view where then the qualitative
analysis approach was followed. In this phase the risk models or equivalent models of the
power plants where reviewed and the similarities and differences were analyzed. An integral
methodological approach of the assessed risks was defined and tested for EBS. The
transformation into a sound dispatcher was described with the organizational changes needed
to achieve this goal for EBS
22
3.2 RESEARCH MATERIAL
The research material for the topic of this thesis consists of:
-
Primary data through interviews with keys stakeholders.
-
Secondary data through literature studies focusing on risks, different industries, risk
framework, control and mitigation processes, ERM and implementation, etc.
-
Records (maintenances, failures, accidents) of the power plants.
3.3 RESEARCH TECHNIQUE
3.3.1 Method and data
The aim of the study is to help the electricity company EBS to get a better understanding of
the involved risks of the different power plants for the dispatch operation of electrical energy.
The result will benefit the improvement of the quality and reliability of electrical energy
supply.
The literature review and secondary data serve as the basis for a better understanding of the
risks involved with the generating section of a power plant. Several risk model approaches
will be questioned and an in-depth exploration of the existing and used models of the power
plants will be conducted.
The method use in the research is a top-down approach with the pre-determined variables or
sets of variables from the research questions. Data gathering will be through interviews with
experts and management in the generating section of the power plants. The interview will
focused on “what” are the risks and “why”. Further on the “how” to mitigate, prioritize and
ranking. The independent variables may consist of organization structure, culture, risk
appetite and human factors. The moderate variables are the different role of the power plants
in the regulated electrical energy environment. The dependent variables are the various
potential risks the dispatcher has to encounter and manage to mitigate the effects.
3.3.2 Sample
The studied objects are the four power plants of the three different entities in Suriname
namely Suralco, SPCS and EBS (also dispatcher)
23
The selection of the sample is focused on plant operators, maintenance crew, mangers and
decision makers for their expertise. This will limit the sample size to less then 20.
3.3.3 Reliability
To achieve high reliability of data, the interviews are mostly conducted in focus group where
the subjectivity is minimized. The personal interviews with the managers and decision
makers will complete the data set.
3.3.4 Analyzing data
After assessing the different risks factors, the data is categorized and grouped. The risk
factors are then prioritized and serve as input for the integral methodological approach for the
dispatcher for day-to-day operation, which leads to improvement in this function.
24
CHAPTER 4
FINDINGS
4.1 GENERAL
The general objective of this study is to help the electricity company EBS to understand the
involved risks of the different interconnected power plants for optimum dispatching of
electrical energy. To do so, data is collected from the different power plants with their role in
the regulated energy environment.
The data sets are derived from the interviews with the different stakeholders. The selection of
the interviewees is based on the experience and expertise in- and around the power plants.
The interviews are focusing on the role of the power plants, risk models, risk factors,
operation and maintenance - and prioritization and ranking philosophy. The purpose is to
assess the risky ness of these power plants.
4.2 POWER PLANT SPCS
The power plant of SPCS consists of two diesel generator sets of 7.5 MW each (an installed
capacity of 15 MW) and running on HFO (Heavy Fuel Oil). This power plant produces
electrical energy since August 2006 and operates as a subsidiary of State Oil Company. This
co-generation plant produces also heat (steam), in the process of generating electrical energy,
for the oil refinery in the surrounded area. With the expansion vision of State Oil Company in
its refinery capacity, SPCS has to adopt also the strategic plan for increasing its electrical
generating capacity and secure the heat demand. Currently SPCS is considering installing an
additional 15 MW of generation. The current PPA is to supply 100 GWh and delivers 15
MW, approximately 10% of base load to EBS.
4.2.1 Data set
The data is gathered by carrying out interviews with a focus group consisting of the
employees directly involve with the power plant. These are Manager, Superintendent,
Operation Supervisor, Maintenance Supervisor and Electrical Engineer. The experience in
this group varies between inexperience to experience respectively 1 year of working skills to
many years. The place of interviews is at the power plant of SPCS on Monday April 6, 2009
25
and last about two hours. A focus group is chosen because of the researcher time-frame and
the availability of the interviewees for this research.
The interviews are semi-structure with flexibility in question design and follow up, especially
in a focus group with diversity of expertise. Questions are asked to every participant of the
focus group and there is no dominator noticeable that monopolizes and influences the
answers. It is further noticeable that the respondents in this focus group are willing to
corporate and give complete response to the questions.
The details of the interviewees are in appendix 1.
4.2.2 Findings
The electrical energy business is a new branch of core business for State Oil Company. SPCS
operates as a SBU and arises from the Corporate Vision 2020. According to the power plant
manager, this SBU is a challenge for the State Oil Company for entering into the electrical
energy sector. Equipped with the Corporation’s management skills and experience, the power
plant manager hopes to succeed its mission. The rest of the interviewees agree that SPCS will
add value to the Corporation.
All the interviewees agree that this SBU adopts the overall strategic, operational, reporting
and compliance rules of the Corporation. They understand that the oil and electricity
businesses are different. That is why this SBU strives to adopt the existing best practice
proven model to its business environment and learn from the peers i.e. from the power plant
of EBS and own Corporation’s small emergency back-up power plants.
The power plant Manager and the Superintendent are responsible for the formulation and
description of processes. Both agree that these tasks are doable due to the advantage of
having processes of the Corporation that mostly are ISO certified and accessible for using in
the SPCS power plant. The well-proven standardized processes in the Corporation’s oil
business can be easily adopted for the electrical energy environment.
The Operation Supervisor, Maintenance Supervisor and Electrical Engineer find the
execution of processes with the ISO certification structural and effective. They all agree that
SPCS still has to standardize some specific processes regarding the generation of electrical
energy to get an ISO certification. Their input to the overall process is thus important.
26
The focus group does not know and have not heard about the COSO ERM framework or
AU/NZ risk model. The interviewees recognize some part of these frameworks when
confronting with the content. The focus group further states that this SBU does not pursue a
specific risk model. Their risk model does have the essential components of identification-,
analysis-, evaluation-, response process and communication. They agree that their risk
process is not so structural and formal like the COSO ERM framework and the AU/NZ risk
model and that is limited to department or division level. Thus a more silos approach,
managing one risk at a time and not holistically.
The overall opinion of this focus group is that in the quantitative risk analyses process, the
probabilistic approach is used for the justification of a new project or a project affecting high
financial consequences. For existing processes and sub-processes, the overall approach is a
combination of subjective and probabilistic method with skewing to the subjective method.
The power plant Manager explains further that the ranking and prioritizing of the assessed
risk factors rely on experience of the appointed team that participates in the risk process of a
project or system and is highly subjective. The remaining interviewees agree with this
statement.
The Superintendent, Operation Supervisor, Maintenance Supervisor and Electrical Engineer
agree that they have to manage the costly assets. Their priority of ranking varies from
manufacturing recommendation to fault events to human judgment. Their opinion is that the
working force will achieve higher goals if they adopt the learning process.
The power plant Manager states that he is responsible for the learning and training programs
so that the working force can make better judgment for the maintenance and operation of the
power plant.
The power plant Manager also states that he is responsible for contracting and hiring
experienced personnel for key processes to become competitive. He strives for empowerment
in this organization and let everybody knows their role and accountability. The
communication is from top-down and vice versa and across. The rest of the interviewees
agree to this statement.
27
All of the interviewees state that SPCS has a good infrastructure in fuel pipeline from the
refinery that guarantees the fuel intake. Their opinion is that SPCS operates optimum, which
results in cost and time reduction, by having a sound procurement and purchase system for
major- and minor parts and consumables. Owing to this, the organizational external risks i.e.
depending on suppliers are mitigated significantly.
All of the interviewees state that the corporate evaluation process is not supporting
performances with risk management. This is still a vague and new concept. The employees
are review from their performance indices.
The power plant Manager states that at this moment, the PPA is not adequate executed and
the supply of electrical energy to EBS is merely 25%. The below-target realization is due to
the low off-take by EBS, as a result of the availability of excess hydropower from Afobaka
power plant. The sole customer under this PPA is EBS. Nevertheless, the need for expanding
the installed capacity is under debate and confidential at top level of the Corporation. The rest
of the interviewees agree with the low off take of electrical energy but do not have an opinion
about the expansion plan. This is above their competence.
All of the interviewees state that the objective is to be available, contribute at any moment to
EBS, and make a profit for further existence.
4.2.3 Summary
The findings of SPCS are listed below.
a) SPCS is a young and learning organization with minimum experience in running a
power plant.
b) SPCS aspires to guarantee continuity in electrical energy supply.
c) SPCS uses ISO certified models from the Corporation and adapts to its organization.
d) SPCS uses no specific risk model but recognizes part of elements from the COSO
ERM or AU/NZ risk model i.e. the identification-, evaluation-, response process and
communication. The risk processes have a more silos then holistically approach.
e) SPCS empowers the work force, communicates from top-down and vice versa, and
across and holds each individual responsible for his or her actions.
f) SPCS uses probabilistic approach for justification of new project.
28
g) SPCS uses probabilistic and subjective approach for existing processes with more
emphasis on the subjective approach.
h) SPCS prioritizes and ranks risk factors on organization and personal experience.
i) SPCS maintenance philosophy ranks from manufacturing recommendation to failure
rate to human judgment.
j) SPCS has minimum suppliers threat.
k) SPCS wants to expand its installed electric generating capacities.
l) SPCS PPA contract with EBS is not optimal executed.
m) SPCS measures only performances indices and no risk management indices.
4.3 SURALCO
Suralco is a subsidiary of ALCOA and operates as an independent company that owns and
operates generation, transmission and distribution in the southern part of Suriname – from
Afobaka to Paranam. This system contributes and serves to the Surinamese power system as
the main source of power. Suralco operates two power plants.
1. The Afobaka Hydro Power Plant consists of six turbine generators and an installed
capacity of 189 MW (3x33 MW and 3x30 MW turbines). The generated electricity is
transported from Afobaka to Paranam through a 161 kV transmission double circuit. A part
of this electrical energy is used for the alumina refinery and the rest is transferred to the
Government according to the Brokopondo Agreement, a PPA between Suralco and the
Government of Suriname. After closing of the Suralco aluminum smelter at Paranam in 1999,
the availability from the hydro electrical energy for the Government (i.e. to EBS) has
increased considerably, especially with the high seasoning rainfalls resulting in the high
water inflow into the lake of the dam. This covers almost 90% of the load of EBS.
2. The Paranam Thermal Power Plant has an installed capacity of 78 MW and is located at
the Suralco alumina production plant in Paranam. The main objective of this power plant is to
supply heat and electrical energy (co-generation plant) for the Suralco operations. This power
plant does not contribute to the PPA.
4.3.1 Data set
The data is gathered by carrying out interviews with a focus group consisting of the
employees directly involve with the power plant. These are Manager, Superintendent,
Operation Supervisor, Maintenance Supervisor and Electrical Engineer. This group has many
29
experiences in managerial- and operational fields. The place of interviews is at the power
plant of Suralco at Paranam on Thursday April 9, 2009 and last about one and a half hours. A
focus group is chosen because of the researcher time-frame and the availability of the
interviewees for this research. The interviews are semi-structure with great flexibility in
question design and follow up, especially in a focus group with diversity of expertise.
Questions are asked to every participant of the focus group and there is no dominator
noticeable that monopolizes and influences the answers. It is further noticeable that the
respondents in this focus group are willing to corporate and give complete response to the
questions. The details of the interviewees are in appendix 2.
4.3.2 Findings
The power plant Manager explains the vision and mission of the Corporation. Alcoa is known
for its alumina businesses around the world. Suralco as an independent subsidiary add also
value to its mission by delivery of electrical energy at the lowest attainable cost, consistent
with economic conditions. The rest of the interviewees state that signs with missions are
hanging in every building and these are well known to all employees.
The power plant Manager knows the COSO ERM framework and had work with this model
in previous Corporation projects, especially in feasibility studies. The power plant does not
use this comprehensive model. The other interviewees do not know and have not heard of the
COSO ERM framework or the AU/NZ risk model.
The focus group states that experience and knowledge are inputs to higher management for
risk evaluation. The risk processes start with an internal proven document “BLITZ” This
document starts with the identification phase of a process or project by the power plant or
Corporation. Several stakeholders from different discipline and background are then selected
by their experience for brainstorming. They aim for least impact on environment, health and
safety, cost saving, sustaining, strategic modernization and growth. The interviewees state
that this approach is more holistic.
All interviewees agree that a combination between probabilistic and subjective approach
influences the decision-making. The power plant Manager states that he is fully responsible
and accountable for the success or failure of the approved projects or processes.
30
According to the Superintendent, the power plant adopts the Reliability Excellence (ReX)
program. This program involves all employees in the ReX continuous improvement process
that will reduce maintenance, material and operating costs and improve equipment efficiency
by re-engineers business processes around materials management, work management and
reliability engineering. The focus group further state that the ReX program is updated, tested
by benchmarking and undergoes an annual audit process.
The power sector seems to evolve with the need of electrical energy for the alumina industry.
According to the power plant Manager and the Superintendent, the installed electric
generating capacity (Afobaka Hydro power plant and Paranam Thermal power plant) is
enough to sustain contractual and refinery demand. They further state that the PPA is
executed based on long-term agreements and system limitations. The rest of the interviewees
agree with this statement.
The focus group states that Suralco guarantees for continuity of processes due to a sound
procurement system. Listed alternative suppliers of Alcoa worldwide cover also the resource
replenishment for Suralco.
The power plant measures its performances but not in combination with the risk management
process. All of the interviewees agree that their performances are measured through only
performance indices. The opinion of the power plant Manager is that managing risks do not
have to add direct noticeable value to the performances in the same period. That is why it is
difficult to link these two indices.
All of the interviewees agree that the operation of Suralco depends heavily on the bauxite
reserve in Suriname. The organization faces at this moment some setback in the world market
price of alumina.
4.3.3 Summary
The findings of Suralco power plants are listed below.
a) Suralco is an old and experienced organization that operates two power plants with
enough knowledge and expertise in the energy business.
b) Suralco aspires to guarantee continuality in electrical energy supply.
31
c) Suralco does not use a comprehensive risk model like COSO ERM. They use standard
in-house working procedures i.e. “BLITZ document” and “ReX”. These processes
have more a holistic approach.
d) Suralco appoints the overall responsibility to the manager.
e) Suralco uses probabilistic approach for justification of new project.
f) Suralco uses probabilistic and subjective approach for existing processes with more
emphasis on the subjective approach.
g) Suralco prioritizes and rank risk factors on collective input from their “Blitz” working
document process.
h) Suralco uses ReX for maintenance philosophy that is benchmarked and audited.
i) Suralco has minimum suppliers threat.
j) Suralco has no need for expanding its installed electric generating capacities and the
PPA contract with EBS is within the limits.
k) Suralco measures only performances indices and no risk management indices.
4.4 EBS
EBS owns a thermal power plant that is located in Paramaribo. The plant consists of 11
Diesel Generator Sets. Four of the machines are recently (2005- 2008) installed, while the
rest are other diesel generator sets varying between 14 to 30 years old. The output of these
older engines is approximately 25% less than the nameplate capacity. The total installed
capacity of the power plant is 82 MW with an actual output of about 68 MW, an average of
83% actual capacity. EBS has managed to convert four old engines to HFO (Heavy Fuel Oil)
use and the performances of these engines are optimum. Only three remaining engines, which
are also the oldest ones, run on premium diesel fuel. The conversion on the engines is not
feasible.
The electricity company EBS is 100% Government owned with a vertically integrated
organization structure of generation, transmission and distribution.
4.4.1 Data set
The data is gathered by carrying out interviews with a focus group consisting of the
employees directly involve with the power plant. These are the Director of Generation &
Transmission, Manager, Operation -, and Maintenance Mechanical Engineer. Further, an
individual interview with the Operation Electrical Engineers is conducted. These groups have
32
many experiences in managerial- and operational- and maintenance fields. The place of
interviews is at the power plant of EBS at Saramaccastreet on Wednesday April 8, 2009, for
the focus group and Tuesday April 14, 2009 for the individual interview. The duration is
respectively two hours and one hour. A focus group is chosen because of the researcher timeframe and the availability of the interviewees for this research. The interviews are semistructure with great flexibility in question design and follow up, especially in a focus group
with diversity of expertise. Questions are asked to every participant of the focus group and
there is no dominator noticeable that monopolizes and influences the answers. It is further
noticeable that the respondents in this focus group are willing to corporate and give complete
response to the questions.
An individual interview with the Operation Electrical Engineer is chosen due to the
organizational structure of the power plant, which is divided into mechanical- and electrical
division. The details of the interviewees are in appendix 3.
4.4.2 Findings
According to all interviewees, EBS is in a transformation phase for realizing its corporate
vision and mission 2009-2013. This process is thoroughly explained and exercised from top
to bottom. Every employee is responsible and accountable for his or her actions.
The Director of Generation and Transmission points out that one of the core missions is to
supply reliable and affordable electrical energy nation wide. This is achieved by applying
improved technology and obtaining the operational excellence tactics, which is agreed by all
the interviewees.
The power plant Manager and the Operation Electrical Engineer agree that the power plant
does not use a specific risk framework. All of the interviewees do not know and have not
heard about the COSO ERM framework or AU/NZ risk model.
The Director of Generation and Transmission states that processes are now standardized and
executed. According to the rest of the interviewees, the process begins with the formulation
and identification with a probabilistic and subjective method. The emphasis is more on
subjective method.
33
According to all interviewees, the risk appetite is low due to the commitment of the
Corporation for continuous supply of electrical energy. The power plant uses high-tech
system for monitoring and controlling. The collected data serves as input for the operation
performance and maintenance frequency.
The opinion of the Operation -, Maintenance Mechanical Engineer and the Operation
Electrical Engineer is that with the improved system the maintenance and operation is more
efficient.
The power plant Manager explains further that the ranking and prioritizing of the assessed
risk factors relies on experience of the appointed team that participates in the risk process of a
project or system and is highly subjective. Their risk processes have more a silos approach
and limited to divisions. The remaining interviewees agree with this statement.
All of the interviewees state that the Corporation does not link the performances with risk
management. It is also not one of the objectives of the corporate mission.
The Director Generation and Transmission and the power plant Manager state that the power
plant depends heavily on fuel and consumables for the generating of electrical energy. There
is only one supplier of the HFO, namely State Oil Company. Their opinion is that the
procurement processes are not always optimum and need improvements.
The rest of the interviewees agree with this statement.
The opinion of the interviewees is that the power plant has to expand the generating capacity
to sustain the (n-1) criteria. This will guarantee the supply of electrical energy.
4.4.3 Summary
The findings of EBS power plants are listed below.
a) EBS is an old and experienced organization with enough knowledge and expertise in
the energy business.
b) EBS aspires to guarantee continuality in electrical energy supply.
c) EBS is in the beginning phase of describing all working procedures for
standardization in their vision and missions 2009-2013 programs.
d) EBS holds every employee responsible for his or her actions.
34
e) EBS uses no specific risk model. The risk processes are more division oriented.
f) EBS uses probabilistic and subjective approach for justification of new project.
g) EBS uses probabilistic and subjective approach for existing processes with more
emphasis on the subjective approach.
h) EBS prioritizes and ranks risk factors on organization and personal experience.
i) EBS maintenance philosophy ranks from manufacturing recommendation to failure
rate to human judgment.
j) EBS does not have a sound procurement procedure and is heavily dependent on
external suppliers.
k) EBS has need for expanding its installed electric generating capacities to reach the n-1
criteria.
l) EBS measures only performances indices and no risk management indices.
4.5 DISPATCH CENTRE
The four power plants are connected to the transmission and distribution network of EBS.
The Dispatch Centre monitors and controls the off takes of electrical energy from the
different power plants according to the PPA within the boundaries of the grid. This centre
also coordinates between the generation and the network segment of the power system by
maintaining the system frequency of 60 Hertz, optimize economic operations, and to perform
coordination in case of interruptions in the power supply.
4.5.1 Data set
The data is gathered by carrying out interviews with a focus group, consists of Dispatch
Centre personnel in the function of Dispatch Electrical Engineer. The experience in this
group varies between inexperience to experience respectively 1 year of working skills to
many years. The place of interviews is at the Dispatch Centre of EBS on April 2, 2009 and
last about one hour. A focus group is chosen because of the researcher time-frame and the
availability of the interviewees for this research. The interviews are semi-structure with great
flexibility in question design and follow up, especially in a focus group with diversity of
expertise. Questions are asked to every participant of the focus group and there is no
dominator noticeable that monopolizes and influences the answers. It is further noticeable
that the respondents in this focus group are willing to corporate and give complete response
to the questions. The details of the interviewees are in appendix 4.
35
4.5.2 Findings
The focus group states that there is a constant pressure on the Dispatch Centre. The
transformation of the corporation is also noticeable in this part of the organization.
All of the interviewees do know the corporate vision and mission 2009-2013. The role of the
Dispatch Centre is to assure a continuous flow of electrical energy by regulating the off take
from the different power plants. Furthermore, they agree that they have to standardize
processes to achieve operational excellence.
All of the interviewees state that risk scenarios, risk response and energy demand is exercised
in every working shift. They use real-time data, collected by the advance monitoring and
control systems i.e. SCADA and POWER DATA. This data is well stored for future analyses.
The focus group does not know and has not heard about the COSO ERM framework or the
AU/NZ risk model.
The opinion of the focus group is that due to the high dispatch of electrical energy from the
Afobaka hydro power plant, EBS can currently operate reliable without additional resources
from the SPCS thermal power plant and its own power plant.
According to all of interviewees, the communication and the cooperation with EBS power
plant is excellent. This is because these two divisions are under the same Corporation.
4.5.3 Summary
The findings of Dispatch Centre of EBS are listed below.
a) The Dispatch Centre communicates with the power plants and executes the PPA
within the boundaries of the grid.
b) The Dispatch Centre does not know and have not heard about the COSO ERM
framework or AU/NZ risk model.
c) The Dispatch Centre exercises risk scenarios and identifies weaknesses in the day-to
day operation.
d) The Dispatch Centre has a good relation with the power plant of EBS.
36
4.6 CONCLUSION
The collected data is described with the setting, the respondents, the sources and positions of
interviewees. After exploring the data sets, the findings are extracted and summarized.
Referring to the research model of figure 3, the research has already covered the blocks of the
strategic- and operation risks that impact the power plants.
The next step is the analysis of these findings and will be covered in the next chapter.
Again referring to the research model of figure 3, chapter 5 will describe the blocks of the
identified risk factors and the integral methodology that will be applicable for EBS to become
a sound dispatcher of electrical energy. Chapter 6 will cover the conclusions,
recommendations and future research work.
37
CHAPTER 5
ANALYSIS
5.1 GENERAL
This chapter deals with the analyses of the findings from the previous chapter with the focus
on the research objectives and the research central questions.
The research objectives of this study are:
To assess the current and potential risk factors in the different power plants.
Formulate an alternative methodological approach to assure a better or excellent
energy supply service by EBS.
To assess the organizational changes required for EBS to transform into a sound
dispatcher.
These research central questions for reaching these objectives are:
1. What is the role of the different generating sections of the power plants in a regulated
environment?
2. Which risk models do the power plants pursue?
3. What are the existing and potential risk factors?
4. What is the operation and maintenance philosophy?
5. Are the different risks prioritized and what are the criteria?
6. How can EBS as the dispatcher of electrical energy guarantee improvement with the
integral methodological approach of the assessed risk factors?
7. What are the organizational changes required for EBS to transform into a sound
dispatcher.
These research central questions are divided into two main parts: one part, question 1 to 5,
relates to the role and assessment of the risks. The other part, question 6 and 7, relates to and
depends on the inputs from part one and applies to EBS for finding the necessary changes for
improvement.
38
For part one:
The strategy is the inductively based analytical strategy and procedure, which involves
organizing data in understandable formats that can be easily processed so that conclusions
can be reached.
The analysis process starts with the unitizing process of the variables from the research
central questions. These variables form the centre focus in the data gathering. A unit may be a
number of words or sentence that represents the variables. In this study, the top-down
approach is chosen where the units are pre-determined for the data collection through
interviews. This approach has the intension to answer and reach the research objectives.
The next step is the categorizing process by using findings from chapter 4 and relating them
with the units to formulate the categories.
The following step in the analysis process is the inference process of each category where the
commonalities and differences are compared for the different power plants.
The conclusions are then derived in the final phase of this analysis process and will be
covered in chapter 6.
For part two:
The results and conclusions from part one serves as the input for this part of the analysis. It
relates to the electricity company EBS with the objective to aspire for the necessary changes
to improve the supply of electrical energy.
5.2 PART ONE: UNITIZATION, CATEGORIZATION AND
INFERENCES
OF
FINDINGS
FOR
ANSWERING
THE
RESEARCH MAIN QUESTIONS
The analysis process for answering the research central questions has the following steps:
-
Unitization
-
Categorization
-
Inferences
-
Derived information to answer the research central question
39
5.2.1 Research Central Question 1
What is the role of the different generating sections of the power plants in a regulated
environment?
Step 1: Unitization
This question strives to distinguish the different role of the power plants in the regulated
environment of Suriname. What impact do they have on the electrical energy sector and what
are the future developments?
The unit of this question is “role of the power plants”
Step 2: Categorization
The structure in this phase is to categorize the unit by linking primary findings and secondary
data that are related to the unit.
Power
Category 1
plant
Role of the power plants
SPCS
Is an Independent Power Producer.
Source
Secondary source from
Operates as co-generation and produces heat for the company information
(chapter 4.2).
refinery.
Contributes maximum 10% to base load of EBS
Aspires continuous supply of electrical energy to Primary source from
EBS for economic reason.
interviews (chapter 4.2.3).
Considers expansion of generating capacity in
conjunction with the expansion of the refinery.
Suralco
Is an Independent Power Producer.
Secondary source from
Assures power for the alumina refinery.
company information
Contributes maximum to EBS (i.e. 90% of the (chapter 4.3).
electrical energy demand) due to high lake-level at
hydro dam.
Aspires continuous supply of electrical energy to Primary source from
EBS for economic reason.
interviews (chapter 4.3.3).
No need for expansion in the generating section
40
EBS
Is a Government owned company.
Secondary source from
company information
(chapter 4.4).
Aspires continuous supply of electrical energy to Primary source from
interviews (chapter 4.4.3).
customer nation wide.
Has the need for expansion in the generating capacity
for n-1 criteria.
Step 3: Inferences
In this phase, a comparison is made of the different power plants. The commonalities and
differences are then abstracted from the data set in the category.
Commonality
1.
The power plants strive to perform optimal for economic reason.
2.
They want to guarantee the supply of electrical energy.
Difference
1. SPCS and Suralco are both IPPs. EBS is a Government owned company.
2. Customers recognize EBS as the electricity company because of the vertical
integrated organization. An electrical energy shortage is directly linked with
the performance of the electricity company’s power plant and the Corporation.
3. The off take of electrical energy is not balanced between the three power
plants. The highest off take comes from Suralco due to the high lake level at
the hydro dam.
4. Suralco uses water as primary source while EBS and SPCS use fossil fuel
(diesel) for generating electrical energy. There is a significant difference in the
price per kWh of the hydro- and thermal electrical energy.
5. SPCS practices co-generation with the power plant and uses heat for the
refinery. This may cut down the price per kWh.
6. Suralco does not indent to increase the generating capacity while SPCS and
EBS are willing to expand.
41
Step 4: Derived information to answer the research question 1
1. All power plants strive to maximize the output in an economic way and while doing
so, make a profit.
2. The hydro power plant of Suralco plays an important role in the energy sector of
Suriname and covers almost 90% of the demand. The reason behind this operation is
that the hydro electrical energy is by far the cheapest and cleanest energy and should
be maximized.
3. The off take of electrical energy from Suralco cannot be further increased in the
future. EBS and SPCS should cover the remainder of the total energy demand with
their expansion plans.
4. There may be an interesting PPA with SPCS if the demand in heat for the refinery is
increasing due to the expansion capacity of the refinery. With economy of scale, this
operation may reduce the price per kWh and may compete against the power plant of
EBS.
5. Shortages in the electrical energy supply will always be linked to the electricity
company and the performances of its power plant. That is why EBS is striving for n-1
criteria and is in need of expansion.
5.2.3 Research Central Question 2
Which risk models do the power plants pursue?
Step 1: Unitization
This question strives to assess the risk models in the power plants. Are there similarities in
the COSO ERM or AU/NZ risk models?
The unit of this question is “risk models”
Step 2: Categorization
The structure in this phase is to categorize the unit by linking primary findings that are related
to the unit.
42
Power
Category 2
Source
plant
Risk models
SPCS
Uses no specific model.
Primary source from
Does not have any knowledge of COSO ERM or interviews (chapter 4.2.3).
AU/NZ risk model but exercises some part of it.
Risk processes have a more silos approach.
Combines probabilistic and subjective approaches.
Adopts ISO certified processes and models from the
Corporation, but has no experience in electrical
energy business.
Suralco
Primary source from
Uses no specific model.
In general, they do not know the COSO ERM or interviews (chapter 4.3.3).
AU/NZ risk model.
Risk processes have a more holistic approach.
Combines probabilistic and subjective approaches.
Processes
are
standardized,
benchmarked
and
audited.
EBS
Primary source from
Uses no specific model.
Does not have any knowledge of COSO ERM or interviews (chapter 4.4.3).
AU/NZ risk model.
Risk processes have a more silos approach.
Combines probabilistic and subjective approaches.
Is
in
transformation
phase
for
standardizing
processes.
Step 3: Inferences
In this phase, a comparison is made of the different power plants. The commonalities and
differences are then abstracted from the data set in the category.
Commonality
1.
The power plants use no specific risk model.
43
2.
The power plants use probabilistic and subjective approaches in assessing
projects or processes.
3.
In general, the COSO ERM and AU/NZ risk model are not known.
4.
SPCS and EBS have a more silos risk approach tactic.
Difference
1. The risk processes in Suralco are more structured and standardized. These
processes are benchmarked with other Alcoa subsidiaries and are annually
audited.
2. SPCS uses in-house ISO certified processes from the Corporation.
3. EBS does not have structural risk processes.
4. EBS is lacking on standardized procedures and processes.
5. Suralco uses a more holistic risk approach tactic.
Step 4: Derived information to answer the research question 2
1.
The power plants do not use a specific risk model. The COSO ERM and AU/NZ
risk models are generally not known.
2.
Risk processes have a more silos approach for SPCS and EBS, while Suralco has a
more holistic risk approach.
3.
Suralco has more standardized processes by benchmarking and auditing, followed
by SPCS and then EBS. This dictates the ranking of the power plant in risky ness.
5.2.4 Research Central Question 3
What are the existing and potential risk factors?
Step 1: Unitization
This question strives to assess risk factors in the power plants. The focus is more on the
strategic- and operational risk factors that may affect the performances. These can be an
opportunity or threat.
The unit of this question is “risk factors”
44
Step 2: Categorization
The structure in this phase is to categorize the unit by linking primary findings and secondary
data that are related to the unit.
Power
Category 3
Source
plant
Risk factors
SPCS
Strategic risk:
Secondary source from
- The development of the oil business worldwide can
company information
be an opportunity or threat. The investment of
(chapter 4.2).
expanding the refinery in conjunction with the
power plant is depending on this.
Strategic risk:
Primary source from
- The competition with other IPPs. The off take of
interviews (chapter 4.2.3).
electrical energy is currently low and may affect
the ROI.
Operations risk:
Primary source from
- Low running hours of the engines and minimum
interviews (chapter 4.2.3).
heat production. This is the result from the low off
take by EBS.
- The work force has less operational skills, is young
and less experienced due to the low off take by
EBS.
Suralco
Strategic risk:
Secondary source from
- Depends on development of alumina business
company information
Worldwide and is also dependent of Alcoa.
(chapter 4.3).
- Regulatory change by the Government
Operations risk:
Primary source from
- High off take of electrical energy by EBS may
interviews (chapter 4.3.3).
result in worn-out of assets, higher frequency of
maintenance and high maintenance costs.
45
EBS
Strategic risk:
Secondary source from
- Competition from other IPPs.
company information
- Changes of structure in the Government owned
(chapter 4.4).
Company
Operations risk:
Secondary source from
- The location of the power plant in Paramaribo may
company information
not be in compliance with environmental issues.
(chapter 4.4).
Operations risk:
Primary source from
- Heavily dependent on suppliers and lacking of
interviews (chapter 4.4.3).
standardized processes.
- May not be able to reach n-1 criteria
Step 3: Inferences
In this phase, a comparison is made of the different power plants. The commonalities and
differences are then abstracted from the data set in the category.
Commonality
1.
SPCS and EBS have strategic risk, as they are each other competitor. They
generate electrical energy with diesel and the price per kWh is derived
from the actual price of the fossil fuel.
2.
SPCS and Suralco businesses respectively oil and alumina, are heavily
volatile and therefore classify as strategic risk.
Difference
1. EBS has more operational risk due to a weak system of replenishment of
resources.
2. Suralco operates almost maximum with its hydro generation. This will affect
the maintenance and aging of the assets, which may affect the operational risk.
3. SPCS has low running hours of the engines and may not be reliable due to
inexperience and therefore affecting the operational risk.
46
Step 4: Derived information to answer the research question 3
1.
Every power plant has strategic- and operational risks.
2.
For the guarantee of continuity, SPCS and Suralco are more reliable due to the
existing procurement procedures and alternative suppliers.
3.
EBS depends heavily on suppliers of raw resources and machine parts.
4.
The execution of the PPA has high operational risk for Suralco (i.e. high off take
with frequent maintenance) and SPCS (i.e. low intake with low running hours and
inexperienced work force).
5.2.5 Research Central Question 4
What is the operation and maintenance philosophy?
Step 1: Unitization
This question gives more insight about the operational risk and focus on the operation and
maintenance philosophy. Is there a link with the risk-based maintenance (RBM) model as
mentioned in chapter 2?
The unit of this question is “operation and maintenance philosophy”
Step 2: Categorization
The structure in this phase is to categorize the unit by linking primary findings that are related
to the unit.
Power
Category 4
Source
plant
Operation and maintenance philosophy
SPCS
Maintenance philosophy ranks from manufacturing Primary source from
recommendation to failure rate to human judgment.
interviews (chapter 4.2.3).
Uses a subjective approach.
Every employee is responsible.
Suralco
Uses benchmarked and audited ReX maintenance Primary source from
philosophy.
interviews (chapter 4.3.3).
The power plant Manager is responsible.
47
EBS
Maintenance philosophy ranks from manufacturing Primary source from
recommendation to failure rate to human judgment
Uses
subjective
approach
with
interviews (chapter 4.4.3).
organizational
experience.
Every employee is responsible.
Step 3: Inferences
In this phase, a comparison is made of the different power plants. The commonalities and
differences are then abstracted from the data set in the category.
Commonality
1. The maintenance philosophy of SPCS and EBS ranks from manufacturing
recommendation to failure rate to human judgment.
2. The operation and maintenance processes have a subjective approach with the
involvement of every employee.
Difference
1. EBS has more organizational experience in running a power plant than SPCS.,
therefore its subjectivity is more reliable.
2. Suralco uses benchmarked and audited maintenance programs and is therefore
less subjective.
Step 4: Derived information to answer the research question 4
1.
Suralco is the only power plant with structural and holistic operation and
maintenance processes i.e. “ReX” and can be linked with the RBM.
2.
The operation and maintenance approaches of SPCS and EBS are more silos and
subjective processes. EBS has the advantage of having more experience than
SPCS and their judgments have more validity.
5.2.6 Research Central Question 5
Are the different risks prioritized and what are the criteria?
48
Step 1: Unitization
This question gives information about the prioritization and ranking of the assessed risks.
This is a part of the COSO ERM framework. How do the power plants exercise this part?
The unit of this question is “prioritization and ranking”
Step 2: Categorization
The structure in this phase is to categorize the unit by linking primary findings that are related
to the unit.
Power
Category 5
Source
plant
Prioritization and ranking
SPCS
Uses organizational and personal experiences.
Primary source from
interviews (chapter 4.2.3).
Suralco
EBS
Uses
standardized
evaluation
process
through Primary source from
collateral brainstorming from different disciplines.
interviews (chapter 4.3.3).
Uses organizational and personal experiences.
Primary source from
interviews (chapter 4.4.3).
Step 3: Inferences
In this phase, a comparison is made of the different power plants. The commonalities and
differences are then abstracted from the data set in the category.
Commonality
1.
The power plants do prioritize and rank the assessed risk.
2.
SPCS and EBS use organizational and personal experiences in the prioritization
and ranking of risks.
Difference
1. Suralco uses standardized evaluation process through collective brainstorming
from different disciplines.
49
Step 4: Derived information to answer the research question 5
1.
The power plants do exercise the prioritization and ranking of risks.
2.
SPCS and EBS use the organizational and personal experience but the difference
lies in the many experience of EBS.
3.
Suralco involves key stakeholders from different disciplines for their judgment.
This process is more in-depth and enterprise oriented.
5.3 PART ONE: CONCLUSION
After the unitization, categorization, inference process and the derived information to answer
the research questions, the weighting process follows. The weighting scores are marked with
(L)ow, (M)oderate and (H)igh in the matrix of the categories vs. the power plants.
The structure is to answer every research central questions using the derived information
from the 5 identified categories.
Impact of the role of the power plants:
Suralco has the highest role in the electrical energy sector in Suriname. This is the result of
the high off take by the electricity company.
EBS has a moderate role due to the second largest supplier.
SPCS has the lowest role due to low off take by the electricity company.
Use of Risk models:
Suralco uses a more holistic risk model; therefore, the ranking is the highest (thus least risk)
SPCS uses silos approaches and ISO certified processes; therefore, the ranking is moderate.
EBS uses silos approaches and has less standardize processes; therefore, ranking is low (thus
high risk).
Identified Risk factors:
EBS is riskier due to lacking of a sound procurement and alternative suppliers; therefore,
ranking is high with high risk.
Suralco is ranked moderate due to the high off take of electrical energy and high
maintenance.
SPCS is ranked moderate due to the low off take of electrical energy and low ROI.
50
Effective operation and maintenance philosophy:
Suralco uses standardized processes like the “ReX” and is benchmarked and audited;
therefore, ranking is high (thus least risk).
EBS and SPCS use silos and subjective approaches. EBS has more experience and therefore,
ranking is moderate.
SPCS has less experience and therefore, ranking is low (thus high risk).
Prioritization and ranking criteria:
Suralco involves key stakeholders from different disciplines for their judgment and the
process is more in-depth and enterprise oriented; therefore, ranking is high (thus least risk)
SPCS and EBS use the organizational and personal experience but the difference is in the
experience of the organization of EBS; therefore, ranking is moderate.
SPCS has the ranking low (thus high risk)
The summary of the weighting matrix of categories vs. the power plants is depicted in table 1.
Table 1
Weighting matrix of the categories vs. the power plants
SPCS
L
M
Suralco
H
L
M
O
Impact of the role of the power plants
O
Identified Risk factors
O
philosophy
Prioritization and ranking criteria
H
L
O
Use of Risk models
Effective operation and maintenance
EBS
O
M
H
O
O
O
O
O
O
O
O
O
O
5.4 PART TWO: IMPLEMENTATION OF THE RESULTS FROM
PART ONE TO EBS.
Part two relates to the inputs from part one and the application to the electricity company
EBS. The objective is to aspire for the necessary changes to improve the supply of electrical
energy.
51
The questions related to this part are from chapter 1.
How can EBS as the dispatcher of electrical energy guarantee improvement with the
integral methodological approach of the assessed risk factors?
What are the organizational changes required for EBS to transform into a sound
dispatcher.
5.4.1 Research Central Question 6
How can EBS as the dispatcher of electrical energy guarantee improvement with the
integral methodological approach of the assessed risk factors?
To objective is to assess the existing methodological framework of the Dispatch Centre and
try to improve this model with the available information.
5.4.1.1.
Existing methodological framework of the Dispatch Centre.
The Dispatch Centre follows a methodological framework as depicted in figure 8.
The Dispatch Centre registers all real-time data of the power grid and makes prognoses of the
demand of electrical energy (MWh). Simultaneously the on-line data also gives a prediction
of the current peak demand of electrical power (MW). The Dispatch Centre looks at the
availability of the power plants for supplying this demand and considers the PPA, economic
reason and grid limitation.
The decision after this process results in buying or not buying. This loop repeats again with
the monitoring of the prognoses vs. real-time demand of electrical power.
52
BEGIN
Prognoses for demand of
electrical energy (MWh)
Prognoses vs. real-time
demand of peak power (MW)
Consider PPA between NV
EBS and other power plants
No
No
SPCS
Available MW?
No
Suralco
Available MW?
Yes
NV EBS
Available MW?
Yes
Yes
Decision of the Dispatch centre
Respecting PPA, economic reason and grid limitation
No
Buy
From SPCS?
No
Buy
From Suralco?
Yes
Figure 8
Yes
No
END
Buy
From NVEBS?
Yes
A methodological framework and decision tree for dispatching electrical energy.
53
5.4.1.2.
Improved methodological framework for the Dispatch Centre.
This existing framework (figure 8) is lacking on two items namely: the (n-1) criteria and risk
assessment of the power plants. These two factors are mutual exclusive and have to be
assessed separately. Figure 9 shows the improved methodological framework for the
Dispatch Centre.
BEGIN
Prognoses for demand of
electrical energy (MWh)
Prognoses vs. real-time
demand of peak power (MW)
Consider PPA between NV
EBS and other power plants
No
SPCS
Available
(n-1) MW?
No
Suralco
Available
(n-1) MW?
No
NV EBS
Available
(n-1) MW?
Risk
assessment
Yes
Yes
Yes
With
High
Moderate
Low
Impact
Decision of the Dispatch centre
Respecting PPA, economic reason and grid limitation
Accept
No
Buy
From SPCS?
Yes
No
Buy
From Suralco?
Yes
No
Do not
Accept
Buy
From NVEBS?
Yes
END
Figure 9
Improved methodological framework with decision tree for dispatching
electrical energy.
54
The two colored areas “available (n-1)” and “risk assessment” are introduced in the
framework. The focus in the “available (n-1)” is to assess the availability of reserve
generating capacity. The reason for not having (n-1) availability is when the generating
capacity is already at maximum or when there is a unit (or units) out of service due to
maintenance or defect. After assessing the (n-1) availability and if the answer is “yes”, the
operator makes the decision of buying or not buying, considering the PPAs and grid
limitation. If the answer is “no” then the operator has to make a risk assessment of the power
plants, still guaranteeing the dispatching of electrical energy. The operator makes use of
analytical and logical reasoning, to perform multiple tasks, adapting to a changing
environment. This is the risk assessment phase for ranking the power plants. The operator
uses the results of the weighting matrix from table1 as an input for this risk assessment.
If risk is accepted then the decision of buying or not buying follows. If the risk is not
accepted then there is no off take from this power plant.
5.4.2 Research Central Question 7
What are the organizational changes required for EBS to transform into a sound
dispatcher.
The Dispatch Centre has an important role and must be more active in the communication.
The success of the improved methodological framework depends on the empowerment of the
Corporation to the Dispatch Centre. The Dispatch Centre will assure high reliability i.e.
effective use of the available capacity of the power plants by using the improved
methodological framework from the previous sub-paragraph. This dispatch function is also
particularly important in the case of technical failures resulting in interruptions in the power
supply. Although technical failures by their very nature will always occur, an effective
dispatch can minimize the impact and duration of the resulting interruptions.
5.5 SUMMARY
The analytical process of the findings is divided into two main parts. The first part answers
the research questions about the risk identification process. The second part answers the
55
research questions regarding the organizational improvement and changes to the electricity
company EBS.
From part one, the result from the analysis is the weighting matrix of power plants vs.
categories.
From part two, the result from the analysis are the improvement and changes to the electricity
company EBS.
Because EBS is in a transformation phase, the success from the improvement depends on the
degree of the adaptation of the vision and mission. At this moment, no conclusion can be
taken regarding this part of the research.
56
CHAPTER 6
CONCLUSIONS, RECOMMENDATIONS
AND FUTURE RESEARCH
6.1 GENERAL
EBS is the sole supplier of electrical energy to customers. To meet the demand of the
customers, this electricity company has to manage the off take of the electrical energy from
the different power plants because their own generating capacity is not enough. The Dispatch
Centre is the part of the electricity company that regulates the supply for the demand by
purchasing electrical energy from other IPPs.
Nowadays, the customers are more critical about the quality and continuity of electricity.
That is why EBS has dedicated in its vision and mission 2009 – 2013 to improve the service.
Nevertheless, can EBS (as a monopolist) guarantee a delivery of continuous and reliable
electrical energy with an integral methodological approach by using the assessed risks factors
of the different power plants?
The main objectives for this study as mentioned in chapter 1 are:
To assess the current and potential risk factors in the different power plants.
Formulate an alternative methodological approach to assure a better or excellent
energy supply service by EBS.
To assess the organizational changes required for EBS to transform into a sound
dispatcher
This study carries out semi-structure interviews in the power plants. An assessment of the
existing and potential risk factors is made. The research strategy is more inductive with a
qualitative research approach. The sample size is less than 20 and exists of persons working
directly and with experience in the power plants. The findings are derived from interviews
with this sample group.
6.2 CONCLUSIONS
The focus in this paragraph is to highlight the main items from the derived information of the
categories from Chapter 5.
57
6.2.1 Role of the power plants
The role of the power plants is important for reliable and continuous electrical energy. EBS
as the sole supplier of this commodity has to protect its reputation. Electrical energy cannot
be stored and needs to be available whenever it is demanded. The electrical energy also
stimulates the development of the Surinamese economy and the GDP.
EBS owns a power plant and a Dispatch Centre. This Dispatch Centre has an important role
in monitoring and regulating the off take of electrical energy from the different power plants
with respecting the PPAs. These PPAs are based on a certain amount of electrical energy
(MWh) annually with a limitation to a certain peak amount of electrical power (MW).
The IPPs do guarantee the annual contract but cannot guarantee the day-to-day available
electrical power (MW). Assume that power plant A has an installed capacity of X (MW) and
can only supply X-Y (MW). The shortage in electrical power multiplied by hours is the
electrical energy. This shortage of electrical energy can be restored within the next days or
period when the electrical power Y (MW) is already available, multiplied by the running
hours. This example shows that at certain moments, the Dispatch Centre has a shortage in
electrical power (MW), especially in the peak hours of the daily demand. This is the case
when the power plants are putting engines down for maintenance or when there are defects
on the engines.
The IPPs want to operate as much as possible as base load for the demand, meaning that the
engines are running constantly over a certain period till it is time for a maintenance check-up.
This is in contrast with the peak demand operation, whereas the engines are only
synchronized with the grid in the peak hours. This operation brings costs in the maintenance
(worn out of parts) due to the start and stop operation of the engines.
Every IPP wants to operate and supply electrical energy and earn a profit. This is the main
driver for an optimal maintenance philosophy (i.e. minimum downtime) and brings the power
plants in ready and stand-by mode.
58
Conclusion 1:
The availability of the power plants is high due to the main driver of supplying electrical
energy to earn a profit. This implicates that the maintenance philosophy and schedules are
having high priority to reduce downtime.
6.2.2 Risk models, risk factors, ranking and prioritization
The power plants do not use an integrated risk model. They use more traditional risk
management, which can be characterized by fragmented responsibility, rather than a holistic
approach. The focus is more on discrete events rather than part of a larger portfolio of
objectives. Parts of the COSO ERM or AU-NZ risk model are recognized and exercised,
especially the risk components, little on the risk management objectives and less on entity
and unit level components.
The risk factors differ for the different power plants. This has to do with the type of
generation, the expectation of assets life cycle, maintenance philosophy and the experience in
this sector.
Suralco is a multinational and subsidiary of the Alcoa and uses in-house and proven models.
This is an advantage with the benchmarking and auditing of the models. Theoretical, this
power plant has the lowest risks.
SPCS is a young organization and due to lack of experience and insufficient running hours of
the engines due to low off take, this power plant is then ranked with the highest risk.
EBS’s power plant and the Dispatch Centre are within one organization with good
communication and relationship. Due to this relationship, the assessment of risks by the
Dispatch Centre can be very biased. When considering the most economic off take of
electrical energy, the transfer pricing phenomenon between these units in EBS has to be
considered before making any judgment.
Conclusion 2:
The power plants do not pursue a generic risk model or maintenance model. All models are
in-house models that have proven to work and are derived from experience and expertise.
Suralco has an advantage of having benchmarked and audited in-house models.
59
Conclusion 3:
Risk factors vary from strategic to operation risks and are specific for every power plant in
its environment and role.
6.2.3 Dispatch Centre
The availability of power system capacity is crucial in accommodating the demand growth
and through this, further economic development of Suriname. The Dispatch Centre assures
high reliability i.e. effective use of the available capacity by good coordination and
monitoring and centrally dispatching of electrical energy.
The Dispatch Centre has a structural framework for the off take of electrical energy but does
not consist of elements for assessing the risk factors of the power plants and the n-1 criteria.
The assessment of risk factors from the power plants is needed with the current PPAs and the
limitation in the availability in capacity (MW).
A more active role and implementing the integral methodological framework consisting of
these elements will upgrade the effectiveness of the Dispatch Centre. The off take of
electrical energy from the different power plants can be improved with consideration of the
best operation scenarios.
Conclusion 4:
The Dispatch Centre should use an integral methodological framework with the assessed risk
factors from the power plants and decision tree for optimal dispatching, thus striving for
continuity and reliability.
6.2.4 Changes in the organization of EBS
For unbiased decision-making between the Dispatch Centre and the power plant of EBS,
some organization changes have to be in place.
The future power-sector model for Suriname can be characterized as a so-called Single Buyer
Model where limited competition is introduced in the form of the possibility for new
generation capacity to be competitively procured.
The IPPs will set up generation plant and produce electricity for selling to the so-called
Single Buyer namely EBS. The IPPs will not be allowed to sell power directly to end-users
but can only sell to EBS. These sales are regulated through PPAs concluded between the IPPs
and EBS. The tariff paid by EBS to the IPPs will consist of both fees for energy (kWh) as
60
well as for capacity (kW). The fees as well as escalation of these fees by e.g. international oil
prices or inflation are part of the PPA. EBS will subsequently sell the electricity purchased
from the IPPs to its end-users through the Generation Tariff that will be based on the actual
costs in obtaining the electricity.
Under the Single Buyer Model, EBS will also have the possibility to submit bids for new
generation capacity. In order to assure transparency, a separate business unit will be created
for EBS’s generation. This new generation business unit will in practice act as an IPP
although it can remain part of EBS.
The dispatch function entails the coordination between the generation and the network
segment of the power system. The basic objectives of the dispatch are to maintain the system
frequency of 60 Hertz, to optimize economic operations, and to perform coordination in case
of interruptions in the power supply. The dispatch function will be carried out within the
technical and financial constraints of the PPAs between the IPPs and EBS. The dispatch
function will be the responsibility of EBS.
Conclusion 5:
Organizational change is needed to influence the role and operation of the Dispatch Centre
and power plant of EBS.
6.3 RECOMMENDATIONS
Abstracting from the conclusions, the following recommendations are formulated.
At unit level of EBS:
The Dispatch Centre has to adopt the improved methodological framework with
decision tree for effective dispatching of electrical energy.
At organization level of EBS:
Transforming the power plant and Dispatch Centre into SBUs in the single buyer
model of electrical energy.
61
6.4 FUTURE RESEARCH
The study shows that the electricity company can guarantee continuous and reliable electrical
energy by empowering the Dispatch Centre and making use of an integral methodological
framework and decision tree with the assessed risk factors of other IPPs.
EBS as the electricity company should also separate the two main functions i.e. the power
plant and the Dispatch Centre into SBUs. It is a fact that EBS is in a transformation phase and
strongly moving towards it vision and mission 2009-2013 strategies. It is still too soon to
notice the significant changes or improvement.
What is important for future study, is the efficiency and effectiveness of this change in the
EBS case. Several research questions that can be raised are:
Does unbiased ness exist between the two SBUs?
What is the transfer pricing between the two SBUs if the power plant also competes in
supplying of electrical energy in the single buyer model?
How is the PPA between these two SBU?
How will these changes affect the Corporation?
Is this organization change in line and synchronized with the vision and mission
2009 -2013?
Is the organization culture ready for this change?
Thus, time will revealed more about the success of this future development.
62
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64
APPENDIX 1 LIST OF INTERVIEWEES OF SPCS
Mr. E. Fränkel:
Manager of the power plant
Mr. Fränkel is a mechanical engineer, previously employed at State Oil Company, and was
the project manager from starting phase of this power plant. He is currently the manager of
the power plant and has more than 15 years of working experience.
Mr. A. Robles:
Superintendent of the power plant
Mr. Robles is a retired manager of the power plant of EBS for almost 15 years. He is hired
for his experience and expertise in and around the power plant.
Mr. R. Persaud:
Electrical Engineer
Mr. Persaud is a young engineer that recently graduated from the University of Suriname. He
has no working experience.
Mr. D. Biharie:
Mechanical Engineer
Mr. Biharie is a young engineer that recently graduated from the University of Suriname. He
has no working experience.
Mr. B. Tobey:
Maintenance engineer
Mr. Tobey has some experience in diesel machines and receives internal training with the
installed engines of the power plant.
65
APPENDIX 2 LIST OF INTERVIEWEES OF SURALCO
Mr. R. Liems:
Manager of the power plant
Mr. Liems has experience in the management field for almost 30 years. He has participated in
many projects regarding risks and feasibility studies. His previous position was head of the
engineering department. He is constantly upgraded through Alcoa training sessions.
Mr. D. Bhagwandin:
Superintendent of the power plant
Mr. Bhagwandin has more than 30 years of working experience. He has done many Alcoa
training in operation, safety and management. He is constantly upgraded through Alcoa
training sessions.
Mr. F. Chin Joe:
Electrical Supervisor
Mr. Chin Joe, with a university degree, has more than 8 years of working experience. He is
an experience in metering, calibration and instrumentation. He has done many Alcoa training
in operation and safety. He is constantly upgraded through Alcoa training sessions.
Mr. R. Singh:
Sr. Electrical Engineer
Mr. Singh, with a university degree, has more thann 15 years of working experience. He has
many experience and function as consultant. He is constantly trained with Alcoa training
sessions.
Mr. A. Narain:
Junior Electrical engineer
Mr. Narain, a graduate from the University of Suriname, has two years of working
experience. He is constantly trained with Alcoa sessions.
66
APPENDIX 3 LIST OF INTERVIEWEES OF EBS
Mr. S. Mehairjan:
Director Generation & Transmission
Mr. Mehairjan, an electrical engineer with a master degree, has more than 28 years of
experience in generation, transmission and management field. With his current position, he is
responsible for the power plant, transmission and substations.
Mr. J. Wanner:
Manager of power plant
Mr. Wanner, a mechanical engineer who graduated from the University of Suriname, has
more than 12 years of working experience in the power plant. He is an expert in maintenance.
Mr. A. Sital:
Operation Mechanical Engineer
Mr. Sital, a mechanical engineer who graduated from the University of Suriname, has 3 years
of working experience in the power plant. He participated in the transformation of the marine
diesel engines to HFO diesel engines.
Mr. M. Wijntuin:
Operation Mechanical Engineer
Mr. Wijntuin, a mechanical engineer who graduated from the University of Suriname has
more than 12 years of working experience in the power plant. He conducted a study about the
cooling system of the engines for his study at the University of Suriname. He participated in
the transformation of the marine diesel engines to HFO diesel engines.
Mr. A. Gafur:
Operation Electrical engineer
Mr. Gafur, an electrical engineer who graduated from the University of Suriname, has more
than 6 years of working experience in the electrical part of the generation. He conducted a
study about the protection system of EBS for his study at the University of Suriname.
67
APPENDIX 4 LIST OF INTERVIEWEES OF THE DISPATCH
CENTRE OF EBS
Ms G. Bean:
Electrical engineer
Ms. Bean has 4 years of experience in the Dispatch Centre. She graduated from the
University of Suriname with a study about the Dispatch Centre with SCADA possibility and
the application.
Mr. A. Santokhi:
Electrical engineer
Mr. Santokhi has 4 years of experience in the Dispatch Centre. He graduated from the
University of Suriname and the Dispatch Centre benefits with his knowledge of information
technology supporting the SCADA system.
Ms. A. Chikhoer:
Electrical engineer
Ms. Chikhoer has one year of experience in the Dispatch Centre. She graduated from the
University of Suriname. She has passed the internal training for the function in the Dispatch
Centre. She did a network study with loadflow- and short circuit calculations.
Mr. R. Slamet :
Electrical engineer
Mr. Slamet has one year of experience in the Dispatch Centre. He is in the final phase of his
study at Poly Technisch College (PTC) and has passed the internal training for the function in
the Dispatch Centre.
68