During May 2016, I gave a long talk as a risk expert at an Asian Power Conference in Singapore about identifying risks and uncertainties for Power Plant developers

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Risk Identification of
Power Plant
Investment Projects
!0 May, 2016
Asian Power Utility Forum
Conrad Centennial Hotel

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 What is risk?
 What is risk management?
 Why bother with it?
 Different perspectives of Risk
 A suggested process
 Identify
 Quantify (assess)
 Response
 Avoid (Terminate)
 Transfer
 Mitigate (Treat)
 Accept (Take)
 Monitoring and Review

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Risk ≠ Uncertainty

4. ISO 31000
According to ISO 31000:2009, risk is the
“effect of uncertainty on objectives”
and an effect is a positive or negative
deviation from what is expected.
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5. What Can Go Wrong?
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Contract Risk
 The lawyers did a bad job

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Political Risk
 War
 Nationalisation

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Development Risk
 The engineers get it wrong

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Environment Risk

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Operational Risk

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Corporate Risk
 Their stock
suffers, or they
are subject to a
takeover bid

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PHASES OF RISK
MANAGEMENT

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Identify Risks
What are the uncertainties associated with achieving the objectives?2Step
Assess Risks
Which risks are most significant?4Step
Respond to Risks
What do you choose to do about risks?5Step
Establish the Context: Understand The Business
What is the Business, and the Environment in which it operates?1Step
3Step Analyse Risks
Utilise consistent analytical methods

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Risk Identification Tools and Techniques
 Documentation Reviews
 Information Gathering Techniques
 Brainstorming
 Delphi Technique
 Interviewing
 Root cause identification
 SWOT analysis
 Checklist Analysis
 Assumptions Analysis
 Diagramming Techniques
 Cause and Effect (Fishbone) diagrams
 System or process flow charts
 Influence diagrams
 Stakeholder Identification and mapping

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16. Risk Identification
When a power plant development project goes wrong
there can be several things to blame, ranging from
inexperience at the hand of the developer, to site
specific problems, technical issues, regulatory
problems and permitting issues, all of which affect
financial and technical viability of the project.
Failure to develop a project can come at a great cost to
the developer, and other stakeholders involved.
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17. Some Questions?????
Which key risks impact the development of a power plant project?
How do risks vary in practice by energy source, and location?
How do these risks impact development performance?
How do developers manage these risks?
Where along the development process do these risks make impact?
How do risks impact new project investment decision making?
How do risks impact power plant development project selection?
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18. Power plant development projects
 Typically capital intensive
 Comprise of a complex network of interconnected risks which can
impact the development's performance.
 Failure to develop the power plant to meet the performance
constraints can come at a great cost to the developer and other
stakeholders involved.
 It is essential for developers to be able to analyse the risk in
their project opportunities to develop investment strategy plan
based on their risk appetite, and ability to manage the risk.
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19. Power generation technologies
 Biomass
 Coal
 Geothermal
 Hydro
 Nuclear
 Oil, Gas
 Solar
 Wind
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20. Average power plant development
time and plant lifetime
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21. Project development categories
Power plant size: The generation output of the
power plant.
Development type: Whether this is a new plant,
expansion or a version thereof.
Site characteristics: Including if this is an
undeveloped site or not.
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22. Power plant developers
 Investor Owned Utilities (IOUs),
 Public Owned Utilities (POUs),
 Independent Power Producers (IPPs)
In recent years utility mergers, redesigned holding structures, and
establishment of non-regulated subsidiaries that own power plants and
foreign owned utilities, have changed the nature of these boundaries.
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23. Project Development Process
Development of new power plants is generally
either in the hands of
 a regulatory authority (in centralized
regulated systems),
 or the energy companies (in liberalized
deregulated systems).
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24. Phases of development
The power plant lifecycle can be divided into the
following general phases:
1) Planning phase,
2) Construction and commissioning phase,
3) Operation phase, and
4) Decommissioning phase
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27. Project evaluation
Bottom up process (reactive)
 Landowner seeks developers
 Referral and word of mouth
 Relationships and past customers
 Tenders
Top down process (proactive)
 The geographic location,
 The energy technology,
 The ideal site
 the project specifics
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28. Stakeholders
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29. Forms of Partnering
 Partner's experience
 Size of project under development
 Risk management
 Will they contribute?
 Will they pay cash calls?
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30. Alignment is critical
 Strategic Partnerships
 Public-Private partnership
 Joint Ventures
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32. The process of identifying risks varies from project to
project.
During pre-selection phase, initial risk identification may
be developed by specialized groups on behalf of the
developer or the developer themselves depending on
in-house knowledge.
Once a project has been selected, effective, ongoing risk
identification requires input from the entire project
team and from others outside it, such as owner's
representatives, contractors, and internal and
external consultants or advisors
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33. Country attractiveness
 Developer's network in that geographic area
 Ease of development
 Labor resource availability
 Stakeholders‘ influence
 Political pressure
 Prior project commitments
 Level of expertise knowledge in that area
 Country's power plant portfolio mix and renewable . energy
targets
 Government support
 Country's future outlook
 Climate change strategy
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34. Select energy technology
 Perceived technology risk
 Competitive advantage
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35. Select the site
 Connection points
 Resource availability
 Land availability
 Accessibility
 Environmental analysis
 Floods and earthquakes
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36. Select the project
 Investment strategy
 Analysis bias for project selection
 Country risk analysis
 Resource growth potential
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39. Development Phases
 Planning risks
 Construction risks
 Operation risks
 Decommissioningrisks
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40. Risk Classification
1. World system risk
2. World price risk
3. Country risk
4. Institutional and regulatory risk
5. Industry and competitive risk
6. Project risk
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41. Develop a matrix for each
classification……
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48. Additional Slides
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49. Power plant size
Mega Projects: Mega Projects typically cost
over USD 1 billion and attract public attention
because of their substantial impact on
communities, budgets, and the environment.
Such projects suffer from a high risk of being
derailed or cancelled entirely due to the
difficulties of implementing such large,
complex, and frequently politically as well as
environmentally sensitive projects.
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50. Biomass
 Pyrolysis-based biofuels,
 Lignocellulose sugar-based biofuels,
 Direct Combustion,
 Cofiring with Coal,
 Biomass Gasification,
 Municipal Waste,
 Pyrolysis,
 Landfill Gas,
 Anaerobic Digestion,
 Sewage Digestion
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51. Geothermal
 Dry Steam (Vapor),
 Flashed Steam,
 Binary Cycle,
 Petrothermal (Hot Dry Rock),
 Geothermal Preheat,
 Fossil Superheat
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52. Hydro
 Large (Pelton Turbine,
 Francis Turbine,
 Propeller Turbine,
 Kaplan Turbine),
 Small/Mini (Run of river),
 Micro,
 Hydrokinetic turbines
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53. Oil and Gas
 Reciprocating,
 Natural Gas (Shale Gas),
 Simple Gas Turbine (Aero-Derivative Gas Turbine,
 With Recuperation,
 Humid Air Turbine,
 Cascaded Humid Air Turbine,
 Heavy Frame Gas Turbine),
 Combined Cycle,
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54. Coal
 Pulverized,
 Atmospheric Circulating Fluidized-Bed,
 Pressurized Fluidized Bed Combustion,
 Integrated Gasification Combined Cycle,
 Integrated-Gasification Humid-Air Turbine,
 Direct Coal-Fired Combined Cycle,
 Supercritical & Ultra-Supercritical Coal Comb
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55. Nuclear
• Nuclear Fission (Boiling Water Reactor,
• Pressurized Water Reactor,
• Pressurized Heavy Water Reactor,
• Advanced Gas-Cooled Reactor,
• High Temp Gas-Cooled Reactor,
• Gas Turbine Modular Helium Reactor,
• Breeder Reactors),
• Nuclear Fusion
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56. Solar
Solar PV
 Crystalline silicon,
 Thin film,
 Amorphous Silicon,
 Thin film,
 Indium Diselenide,
 Flat Plate,
 High Efficiency Multi Junction,
Solar Thermal
 Trough,
 Tower,
 Dish,
 Salt Pond
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57. Wind
 Onshore Wind Turbines,
 Offshore Wind Turbines,
 Higher-altitude wind generator,
 Wind kites
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