Avoiding a Crisis in the Hydropower Industry

Concerned about quality control issues when it comes to hydropower asset replacements and repairs, one utility in Washington State offers an opportunity for the hydroelectric industry and its vendors to have a discussion and to find ways to improve hydropower asset life.

At the Chelan County Public Utility District (Chelan PUD), we have become increasingly concerned about the level of quality assurance and quality control (QA/QC) with hydro turbine construction and repairs. In our view, this is a problem across the industry.

In talking with others in the industry, it seemed like the time was right for a conversation between industry representatives and industry vendors to seek alignment on the delivery of high-quality products and increased hydro turbine service life, as well as meet operation and maintenance expectations through quality assurance.

The problem

Recent experience at Chelan PUD’s Rocky Reach and Rock Island Dams and hydro projects revealed two major problems:

– Products delivered that are damaged or do not meet design criteria; and

– Turbines and generators suffer significant failures that are well short of expected design life.

Fortunately, Chelan PUD has only had a few of these problems. However, these are serious problems that could, if not corrected, threaten the future of the hydropower industry more broadly.

With the increasing market penetration of subsidized resources, the value of energy in the marketplace has been rapidly declining. As hydropower owners, we constantly evaluate the trade-offs of refurbishment, modernization or replacement of hydropower units versus the relative benefits. These analyses assume that equipment will be delivered in a ready-to-operate state that will achieve the projected design life. At this point, we are not changing these planning assumptions. It is timely for our industry to address this issue now in advance of needing to make a change that reduces the assumed probability of high performance.

Hydropower value

Hydroelectric power is the leading least-cost energy generating source in the world. It has generating characteristics necessary to maintain reliability, especially in a world increasingly dependent upon clean, alternative energy resources that produce low to no greenhouse gas (GHG) emissions. We have a responsibility to assure that hydropower remains that essential, reliable foundation for an electric power system that is going to be called on to meet aggressive GHG emission goals.

An analogy to the automobile industry is appropriate. That is, when quality no longer was a priority in that industry, there were devastating consequences that reverberated even decades later. The market demand has significantly improved expected standards and the resulting quality of the vehicles produced has increased. The time for the hydropower industry to act is now, before these issues become more significant and more prevalent.

Demand for hydropower turbines

We recognize that hydroelectric turbine demand is increasing worldwide because of an aging fleet of energy-producing facilities. Likely, that increases stress on production facilities and results in an increased use of subcontracted shops that may not have the same level of QA/QC processes that are in place at the original equipment manufacturers. The high demand is likely contributing to the delays in equipment delivery, too.

We are concerned that another potential factor diminishing quality is the vendor practice of not allowing for consequential damages or providing extended warranties. These practices insulate vendors from the true cost of QA/QC issues. Hydro project owners, however, are experiencing these costs in the form of a double hit from repair costs once warranties expire and the associated lost production.

The QA/QC problem has not reached a crisis point. But if not addressed early, it could become a crisis.

Recommendations

We recommend the following four actions:

1. Hold industry-wide discussions between vendors and project owners that review the scope of the problem and the impacts to gain a better understanding.

2. Develop a way to evaluate the performance of manufacturers on QA/QC and contract performance. Use this evaluation process to identify industry-wide concerns and deficiencies.

3. Develop the actions vendors and hydro project owners need to take in order to increase QA/QC. This burden does not rest solely with vendors. There will be actions that the industry will need to take to support a QA/QC initiative.

4. Conduct earnest discussions about the opportunities presented by having vendors increase the length and scope of warranty protections. Currently, hydro facilities operate in a very inefficient system. There are limited vendor warranties and those that exist are less than five years and that precludes recovery of consequential damages, which creates substantial risks for the operator. To manage risk, hydro project owners frequently purchase insurance to cover what vendor warranties are not covering. It is inefficient to establish a middleman in the form of insurance companies that have limited experience with hydro technology and also have no control over the QC/production environment.

In addition, accountability is a core principle of effective management and improving QA/QC standards. Placing clear accountability at the manufacturing process is certain to enhance the long-term quality of products. Equipment manufacturers should be willing to provide longer, more extended warranties. We understand this has cost/price implications, but we would expect it to be less costly than our current practices of purchasing insurance.

The QA/QC problem has not reached a crisis point. But if not addressed early, it could become a crisis. It is always more difficult to address and rebound from a crisis rather than performing early intervention.

Chelan PUD is taking the next step by gathering input from hydroelectric owners so plans can be made to start the discussion. We want to assess how prevalent the issues are. Then we will schedule meetings with major manufacturers to gather input on common issues. Together, we can seek ideas on potential solutions to improve the quality of hydro equipment supplied today and ensure that the intended design life is realized without significant forced outages and downtime. It’s a win-win for everyone, especially the energy customer.

If you are interested in more information on this topic or want to be involved in the QA/QC design discussions, contact Kirk Hudson at kirk.hudson@chelanpud.org.

Editor’s Note: This article was developed from a paper presented at the National Hydropower Association’s Hydraulic Power Committee meeting in October 2017.

Steve Wright is general manager and Kirk Hudson is managing director — transmission and generation with Chelan County Public Utility District, which owns and operates the Rocky Reach, Rock Island and Lake Chelan projects.

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