ASME Turbo Expo 2008, June 9 – 13, Berlin, Germany

Property Risk Assessment for

Combined Cycle Power Plants
GT2008-50586

George J. Orme, PE
AEGIS Insurance Services, Inc. (USA)

Mauro Venturini
University of Ferrara (Italy)
 Introduction

Downtime from failure of any production

unit can result in high costs.
 Main Costs
Loss of production
„ Also identified as Business Interruption
„ Quantified in terms of plant availability and reliability

Maintenance performed to restore production

„ Minimizing cost of maintenance can result in preventive actions being
replaced with “ad hoc” actions
 An additional source of costs is the
risk of failure during operations

„ Risk is defined as the product of “likelihood of failure”

and “consequence of failure”

„ Problem of risk associated with power plants under

different points of view – technical and economic
considerations
Cooling Tower Fire
Transformer failure and resulting fire
Steam turbine generator fire
Failure of steam turbine resulted in a part going
through the building wall and striking the
transformer outside
Risk Identification and Evaluation

• Fire remains one of the major and most common risks

• Risk Assessment is a practical means of identifying and

evaluating risks

• Plant and process must be understood to conduct Risk

Assessment
A procedure for Risk Assessment

- Determination of two risk indices

PML – (Probable Maximum Loss)
MFL – (Maximum Foreseeable Loss)
- Establish plant risk rating
- Loss Likelihood
- Exposure to risk

Purposes of Risk Assessment

- Provide supplemental information on operating

practices and procedures
- Independent review of loss control practices and
procedures
 Methodology for Risk Assessment

„ Role of a Property insurer in the power

generation market

„ Risk assessment process using Risk

Indices
 The Role of a Property insurer in the
power generation market

„ Insurance is a risk transfer mechanism

„ Insurer assumes financial risk for a payment
„ A large loss at a power plant can result in losses to insurer
and in extreme cases put plant out of business
„ Managing risk enhances insurer’s business and can also
help assure continued operation of plant
„ Insurers have developed expertise in management of risk
„ Management of risk requires information for decisions
about risks
 Risk assessment process

„ Review of previous reports

„ Review of plant information
„ Engineering documents review
„ Location visit to learn specifics of operations
„ Indentify and quantify hazards
„ Create risk assessment report
 Risk indices

„ PML and MFL can be equipment specific or consider the

entire plant
„ Equipment specific considers mechanical damage
(Boiler Machinery)
„ Entire plant mainly considers fire loss
(Property)
 PML / MFL Calculation

PML

„ Establish estimated replacement cost for the considered machine

„ Consider percentage of the cost for damage from a PML event
„ Add expediting expenses
„ Consider business interruption (BI), if applicable, as a function of
power output and of BI duration

MFL

„ Establish the combined cycle arrangement (2x1, 1x1, simple cycle)

„ Evaluate if a single unit or if multiple units are separated
„ Estimate the replacement cost for the considered machine
Sample PML calculation procedure for steam turbines

Percent damage
of affected unit
varies with
rating

depends on
power output

depends on
power output
Gas turbine and steam turbine specific replacement cost

0.7
Gas turbine

Specific replacement cost

0.6
Steam turbine

[million $ / MW e ]
0.5

0.4

0.3

0.2

0.1

0.0
0 100 200 300 Pe [MW] 400

• Specific replacement cost for a gas turbine is always higher than for a steam
turbine.
• Gas turbine loss implies the interruption of the whole plant operation.
• In case of a 1x1 combined cycle configuration, gas turbine loss is more expensive
than steam turbine loss.
Application Of Property Risk Assessment Procedure to
Selected Plants

Test Case 1
Combined Cycle Power Plant with two Power Blocks – 405 MW

Test Case 2
Combined Cycle Power Plant with one Power Block – 521 MW

Test Case 3
Combined Cycle Power Plant with two Power Blocks – 1,200 MW

Test Case 4
Combined Cycle Power Plant with two Power Blocks – 1,290 MW
 Test Case 1

Combined Cycle Power Plant with two Power Blocks – 405 MW

Located in Asia
Powered by aero-derivative gas turbines and steam turbines

Gas turbine generator in one power block One of two steam turbine generators
 Test Case 2

Combined Cycle Power Plant with one Power Block – 521 MW

Located in USA
Powered by industrial frame gas turbines and steam turbines
 Test Case 3

Combined Cycle Power Plant with two Power Blocks – 1,200 MW

Located in USA
Powered by industrial frame type gas turbines and steam turbines
 Test Case 4

Combined Cycle Power Plant with two Power Blocks – 1,290 MW

Located in USA
Powered by industrial frame gas turbines and steam turbines
 Results and Discussion
Data reported in this section deal with the “Property” scenario
(Confidentiality agreements prohibit publishing detailed information)

„ Loss Estimation through PML and MFL indices

„ Risk / benefit evaluation
„ Risk / benefit application to recommendations
„ Feedback from customers
 Loss Estimation through PML and MFL indices
A trend line can be established from the available data from two of the test cases.

Potential loss increases almost linearly with respect to net power output

60

50

40
Million $

30
MFL Steam Turbine
20 PML Gas Turbine
MFL Gas Turbine
10

0
0 100 200 300 P e [MW] 400
- For a given value of power output, economic risk associated with MFL for a
gas turbine is higher than for the same level of loss for a steam turbine.

- Severity of loss is dependent on the equipment and whether BI is included.

- In the case where BI is included, the above statement is confirmed.

90

75

60
Million $

45
MFL Steam Turbine
30
PML Gas Turbine
15

0
50 100 150 P e [MW] 200
 Risk / benefit evaluation

Fire protection for a steam turbine generator is an example of the

benefit achieved through use of risk reduction practices.

Payback period serves as a financial index for risk.

Payback period is calculated as ratio of between cost of

installation for risk mitigation and cost of consequences of risk.

Crp PBP pay back period

PBP = Crp cost of risk prevention

(CBI + CPD )L CBI Cost of Business Interruption

CPD Cost of Property Damage
L Likelihood
Risk / benefit application to recommendations
The annual financial risk is calculated as the sum of the two losses deriving
from both a moderate severity event and a catastrophic severity event, since
both events may occur, according to their respective likelihood of occurrence.

Both recommendations involve additional fire protection, the former for turbine
generator lube oil systems and bearings (test case 1), while the latter for areas
beneath turbine generators (test case 3).

Scenario

Moderate Catastrophic
severity [20] severity [24]
Average property
[M$/year] 1.5 38.0
damage
Average forced
[day/year] 39 270
outage
Likelihood [event/unit/year] 0.00340 0.00023
Recommendations for additional fire protection for turbine
generator lube oil systems and bearings (test case 1).

For a steam turbine generator unit rated at 43 MW, the lost generation in case
of loss of the unit is 43 MW x 24 hr = 1,032 MWh/day.

At $100 per MWh, the daily output is worth $ 103,200.

However, this cost per MWh can vary significantly.

Step by step calculations are shown on the next slide.

 Test case 1 calculations
Moderate Severity
Average Property Damage = $ 1,500,000 (2003 dollars)
Average forced outage = 39 days
Average Property Damage = $ 1,500,000
Average Lost Generation = 39 x $ 103,200 = $ 4,024,800
Total = $ 5,524,800
Likelihood = 0.0034/unit/year
Therefore, moderate risk equals 0.0034 x $ 5,524,800, or
$ 18,784 / unit / year.

Catastrophic Severity
Average Property Damage = $ 38,000,000 (2003 dollars)
Average forced outage = 270 days
Property Damage = $ 38,000,000
Lost Generation = 270 x $ 103,200 = $ 27,864,000
Total = $ 65,864,000
Likelihood = 0.00023/unit/year
Therefore, catastrophic risk equals 0.00023 x $ 65,864,000, or
= $ 15,148/ unit / year.
 Test Case 1 Results

The annual financial risk is equal to the sum of the two contributions
($ 18,784 + $ 15,148), i.e. $ 33,932 per unit.

By considering the cost of sprinkler system equal to $200,000 per unit,

financial payback is 5.89 years ($200,000/$33,932).
Recommendation for additional fire protection for areas
beneath turbine generators (test case 3).

Unit 1 or 2 are rated at 301 MW output.

Thus, the lost generation in case of loss of the unit is calculated as
301 MW x 24 hr = 7,224 MWh/day.

At $100 per MWh, the daily output is worth $ 722,400.

However, this cost per MWh can vary significantly.

Step by step calculations are shown on the next slide.

 Test case 3 calculations
Moderate Severity
Average Property Damage = $1,500,000 (2003 dollars)
Average forced outage = 39 days
Average Property Damage = $1,500,000
Average Lost Generation = 39 x $722,400 = $28,173,600
Total = $ 29,673,600
Likelihood = 0.0034/unit/year
Therefore, moderate risk equals 0.0034 x $ 29,673,600, or
$ 100,890 / unit / year.

Catastrophic Severity
Average Property Damage = $38,000,000 (2003 dollars)
Average forced outage = 270 days
Property Damage = $38,000,000
Lost Generation = 270 x $ 722,400 = $195,048,000
Total = $233,048,000
Likelihood = 0.00023/unit/year
Therefore, catastrophic risk equals 0.00023 x $233,048,000, or
$53,601/ unit / year.
 Test Case 3 Results

The annual financial risk is equal to the sum of the two contributions
($100,890 + $53,601), i.e. $154,491 per unit.

By considering that lube oil tanks and bearings are already protected, as occurs
under the operating level, the cost of sprinkler system can be approximately
equal to $200,000 per unit.

Therefore, financial payback is 1.29 years ($200,000/$154,491).

 Discussion

„ Fire protection for risk reduction has been shown to be most

effective for this type of hazard. In contrast, for hazards such as gas
turbine oil systems in enclosures, other technology such as water
mist or gaseous systems could be more appropriate.

„ In the two test cases, the longest payback period is less than 6
years. This is much less than the useful life of the machine.
Moreover, it clearly confirms that the payback period for large
machines can be considerably shorter than for small machines.

„ The reduction in annual loss cost over the life of the machine also
has a positive effect on availability and reliability.
 Feedback from Customers
„ Response to recommendations (status and plans for implementation)

„ “How much will compliance reduce insurance costs?”

„ Discussion of recommendation completion helps to illustrate the reduction

in risk that can be accomplished

„ These actions should help plant managers to transform recommendations

into money savings by improving plant reliability and availability
 Effects on insurance buying decisions
„ Information gained from the risk assessment report can influence
decisions about buying insurance.

„ A risk manager can negotiate to obtain the best coverage and

pricing. An underwriter may be reluctant to insure a plant without a
recent risk assessment report.

„ Recommendations can also enter into the negotiations of pricing

and insurance conditions. Priorities can be negotiated in relation to
coverage, lower cost, etc. as well as overall risk reduction and a
customer’s desire to improve the standing of a plant.

„ By improving plant reliability and availability, savings can also be

realized through the improved risk profile of a plant. This can
reduce insurance cost and result in more favorable terms and
conditions of insurance for the plant owner.
 Acknowledgements

George Orme wishes to thank AEGIS management and staff and their
Member Utilities for their support.

Mauro Venturini gratefully acknowledges the Energy System Research

Group of the University of Ferrara for the useful suggestions provided
during the work.
Thank You For Your Time

ANY QUESTIONS?
Tab. 1 – PML and MFL scenarios for gas and steam turbines operating in a combined cycle power plant

PML MFL

Boiler Machinery

Gas turbine High cycle fatigue failure of turbine rotating or stationary Catastrophic mechanical failure of the steam turbine/generator
components with significant damage to the hot gas path; due to over-speed or high vibration with significant damage
or ingestion of a foreign object into compressor requiring major repairs/replacement

Steam turbine Loss of lubricating/seal oil to steam turbine/generator with major Catastrophic mechanical failure of the steam turbine/generator
damage; due to over-speed or high vibration with significant damage
or blade failure with significant damage to rotating and stationary requiring major repairs/replacement
steam path parts

Property

Gas turbine A lubricating oil and/or fuel oil fire involving the gas turbine with A lubricating oil and/or fuel oil fire involving the gas turbine with
damage limited to the turbine section significant damage to the unit and auxiliary equipment

Steam turbine A lubricating oil fire involving the turbine/generator unit A lubricating oil fire involving the steam turbine generator
controlled by fixed fire protective systems and manual fire operating deck and area beneath, with significant damage to the
suppression unit and its auxiliary equipment.
Additional damage can be expected to other areas