The cost of implementing a robust operations and maintenance (O&M) strategy for hydropower accounts for a relatively small percentage of the value of electricity generated. However, failure to implement adequate and sufficient O&M can result in very high costs due to increased losses of production (direct and indirect) and higher needs for rehabilitation and equipment replacement.
The development of hydropower continues throughout the world, with some 22GW of hydropower being added in 2018, bringing the world’s hydropower capacity to around 1,290GW. In 2018, the estimated generation from these facilities amounted to 4,200TWh, or some 16% of the world’s electricity production.
A key distinguishing feature of hydropower is its potential longevity. A hydropower facility can operate for 100 years or more, compared with 20-30 years for most other generation technologies. This article outlines the best O&M strategies that can be applied to maintain the longevity of hydropower plants through a step-by-step approach.
Step 1: Diagnose existing O&M arrangements, budgets and owner/
For existing hydropower fleets, assess the condition and performance of the
assets and services, including risks related to major equipment and need for replacement and repairs. The intended outcome of the diagnosis is to
identify what aspects of O&M need to be improved, and to establish whether the owner needs external assistance for operation of its assets.
Carrying out the diagnosis is also a good preliminary tool for assessing the status of the existing equipment, prioritizing rehabilitation and, if needed, launching related feasibility studies to improve performance and ensure future safe operation. Diagnosis of an existing fleet’s performance can focus on contractual or standard industry key performance indicators (KPIs).
When financing a new facility to be added to an existing fleet, consideration
should be given to the current fleet’s O&M performance record. This will help guide the O&M strategy for the new facility, and possibly trigger changes to the O&M strategy for the existing fleet. Where the new project is a stand-alone facility, including those developed by an independent power producer (IPP), the same KPIs can be assessed on past or existing facilities for which the IPP team has or had responsibility.
Step 2: Define the objectives to be achieved through the implementation of the O&M strategy
Meeting the define objectives – based on the diagnosis in Step 1 – should be seen as a long-term goal that may require multiple iterations, such as changes in the operational management of facilities, short- and medium-term maintenance, and refurbishment, or the upgrading of the facilities. In order to ensure that a company’s business plan does not become too focused on only one or two performance areas (such as finance or reliability), multiple goals and objectives are required.
The objectives of the strategy must be defined by indicators to be applied at all levels, including technical, financial, human resource services, and management, among others. Vision and mission statements may be used, if they exist, or formulated, if they do not, as an anchor point for the O&M strategy. Their primary objective is to communicate the company’s strategic goals and is often linked to operational performance. Such vision and mission statements only have value if they are used by management as guiding principles for the business.
Step 3: Explore various activities to be undertaken to achieve these objectives
Considerations to be addressed while preparing the list of activities for the O&M strategy should go beyond assessment of asset repairs and refurbishment to examining root causes and long-term and sustainable solutions. The output from this step includes identification of the core activities and measures required in order to achieve the strategic objectives established in Step 2, based on the diagnosis completed in Step 1.
Step 4: Examination of O&M contractual models
Depending on the capabilities identified in Step 1, along with the activities selected in Step 3, explore O&M contractual models to identify which activities will be implemented internally and which will be outsourced. This can be broken down into three models to identify which model works best, namely:
• Model one: Owner retains sole responsibility for O&M.
• Model two: Owner outsources some O&M responsibilities to consultants, contractors, or suppliers.
• Model three: Owner outsources all O&M responsibility to an independent operator.
Step 5: Training and human resources management
Explore organization and staffing options (and organograms) according to owner capacity and requirements for external training and human resources. The success of the organization depends on the quality of its employees (skills, knowledge, and experience) at all levels of the company and how well the human resources are selected, trained, and managed.
The differences between the performance of well-run and poorly performing utility fleets are evident at multiple levels. The greatest responsibility rests at the senior and management levels. Shortcomings should be identified during the diagnosis in Step 1 and through a more detailed operational audit.
Step 6: Financing for the implementation of the O&M strategy
Estimate financial resources required for implementing the selected model, including any external contracting. For the purposes of validating the O&M strategy, the costs are often estimated in USD. However, local or other international currencies may also be used, matching the currency that was adopted for estimating the benefits in Step 2. The costs of hydropower facility O&M vary considerably due to a range of factors including:
• Nature of the facilities: complex facilities with multiple units, extensive civil works, and extensive associated infrastructure cost more to operate than simple compact facilities.
• Age: older hydropower facilities with manual controls, analogue systems, and outdated equipment cost more to operate than modern, fully automated, remotely operated digitalised plants.
• Condition: facilities in poor condition requiring continuous attention and suffering frequent failures cost more to operate than facilities in good condition. Facilities in poor condition are likely to require significant capital investment programs.
• Location: facilities in remote locations, especially where accommodation, utilities, and other facilities need to be provided for O&M staff, cost more than hydropower facilities in urban locations.
• Country: since staff costs form a significant portion of OPEX, the labor costs and available skill levels in the country have a significant impact on O&M costs, especially if lack of skills means that expatriates are required. Some other input costs (vehicles, fuel, etc.) also vary by country.
• Regulatory regime: the cost of permits, licenses, registrations, rents, and other administrative outgoings varies from facility to facility and by country.
• Owner’s approach to staffing: many traditional public utilities carry larger staff resources than commercial organizations with leaner operations.
The cost schedules from this Step will be used in the cost-benefit analysis to validate the strategy and check whether the proposed strategy is sustainable and bankable.
Step 7: Cost-benefit analysis of proposed strategy
Carry out cost-benefit analysis to assess the economic viability of the proposed strategy. If the strategy does not pass the test for economic viability, it may be necessary to go back to Step 2 to adjust objectives, activities, and resources. Once financial viability of the proposed strategy is achieved, internal and external validation can be sought. This Step also includes a check that adequate funding will be available.
Step 8: Monitoring and key performance indicators
Implement the strategy and prepare annual and rolling five-year operating plans and longer-term capital programs. Overall performance of the strategy will be monitored through KPIs specified in appropriate agreements and contractual arrangements. The terms and conditions in the O&M contract will need to reflect the obligations of the owner under its concession agreement and PPA in the case of an IPP, or the requirements of the electricity regulator in the case of a public utility.
Model 3 case study: Nalubaale-Kiira Hydropower Complex, Uganda
The Ugandan government, working with the Uganda Electricity Generation Company (UEGCL), awarded a 20-year operational, management and maintenance concession to Eskom Uganda Limited (EUL), a subsidiary of Eskom, to cover both the Nalubaale Power Station and the adjacent Kiira Power Station.
The concession agreement commenced in 2003, with the electricity generated being sold to UETCL; the agreement expires on April 1, 2023. In this Model 3 concession arrangement, all O&M responsibilities are assumed by EUL, the private operator, for a fixed duration. UEGCL supervises the asset health and assumes all risks that are deemed to be catastrophic in nature. The owner reports to Electricity Regulatory Authority (ERA) to enforce performance standards, especially during the periodic renewal of generation license performance targets.
EUL, the O&M operator, assumes all operational risks and mobilizes all the required capital funding to keep the assets in good condition under an investment incentive structure, based on a 12% return on investment on all verified investments (any capital replacement made by EUL is recovered through asset depreciation plus a 12% ROI) during the contract period. “Utility Prudent Practices” are generally the yardstick by which the assets are to be maintained. So far, no specific details of these practices have been defined in the existing contract between EUL and UEGCL due to the broad definition of prudent practices.
Under the current 20-year O&M contract with Eskom Uganda, UEGCL has
experienced challenges and successes, which include:
• Transfer of knowledge – Eskom Uganda has facilitated knowledge and skills transfer to a number of trainees from academic institutions as part of the usual industrial practice of internship programs.
• Modernization – the operator has modernized some of the critical plant
systems, albeit at a slower pace than what was anticipated at contract
signing. These improvements reduced the number of forced outages at the Nalubaale Power Plant.
• Due to the generic definition of prudent practices, the success of the O&M contractual arrangement with Eskom Uganda cannot be fully appraised in the absence of appropriate qualitative or quantitative assessment. Discussions are ongoing to amend the contract to improve the contractual performance measures with a focus on asset management.
• Due to rapidly advancing technologies and long procurement lead times, there is an ongoing requirement to stock spare components to avoid loss of
generation due to forced outages.
• Alkali Silicate Reaction (concrete expansion) at the Nalubaale HPP has been (and continues to be) a technical issue since 1964 when the first crack appeared, resulting in a significant reduction in the expected life of the civil structure. Therefore, a program has been undertaken to carry out a comprehensive rehabilitation of the power station, beginning with the feasibility study already underway.
• Skills retention continues to be a challenge due to ongoing
industrialization where skilled staff are in high demand by competitors.
Therefore, there is a need to continuously provide on-board training and competitive salaries to retain skilled workers.
In general, the emergence of private sector-led investment in other forms of
renewable energy, mainly from solar PV and other small hydropower projects on seasonal rivers, has resulted in an increase in peaking requirements and start/stop cycles for the large hydropower projects on the Nile River.
This additional demand for peaking will ultimately lead to a reduction in the design life of the hydro units, particularly for Kiira HPP which was designed for baseload conditions. The impact on Nalubaale units is not seen to be as significant because the units are Kaplans and can easily follow demand; i.e., each unit has an operating range from as low as 6MW up to 18MW, providing a healthy margin of spinning reserve.
In view of these challenges, a modernization plan for the Nalubaale-Kiira Hydropower Complex is in preparation, focusing mainly on the optimization of the two power plants to improve their plant factor, and to find a permanent solution to concrete expansion problems at Nalubaale Power Plant. ESI
This article was originally posted on ESI Africa and was republished with permission. The article first appeared in the ESI Africa online magazine: ESI Africa Issue 2-2020.
This is article is based on an adaption of the Operation and Maintenance
Strategies for Hydropower handbook, compiled by the World Bank with the
support of the Swiss State Secretariat for Economic Affairs and in collaboration with the International Hydropower Association. License: CC BY 3.0 IGO.