Project Green District Energy Feasibility Study - Partners in Project ...

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TRCA Pearson Eco-Business Zone District Energy Feasibility Study 10 April 2012 General Construction Issues As with any other facility construction project there are risks associated with unforeseen conditions, accidents or contractor performance, leading to higher costs, delayed completion or quality control problems. These risks are addressed for DE in much the same way as they would be for any facility construction project: Using reputable contractors and vendors under strong contracts A thorough procedure of pre-operational equipment and system checks, integrated with the construction process This is especially critical for distribution system construction as this is a more specialized area and because of the high costs of rectifying problems. Risks Measures to Control Risks Completion Turnkey contracts Liquidated damages Failure to meet specifications Performance bonds Costs over budget Control of change orders Force majeure and other delays Clear criteria for completion Completion undertaking by proponents Thorough and timely reporting by project manager Table 14 Summary of Construction Risks 7.1.11 Operations Reliable satisfaction of customer energy demand and system cost-effectiveness also has performance-related risk factors. Poor reliability performance can have devastating impacts on revenue generation and growth while higher than anticipated costs have obvious profitability implications. For the operational phase, key issues with both reliability and/or cost implications include: General operational competence Distribution system failure Low plant efficiency or other equipment performance deficiencies In addition, there is a potential liability risk associated with possible distribution system failure. General Operational Competence Ensuring competent operations is critical, particularly in the start-up phase. These risks can be minimized through a strong pre-operational training program and employment of experienced DE operators. In the past it was not possible for many Canadian DES to recruit experienced personnel as there were fewer operational systems. However, as the industry has grown, the number of experienced operators has increased. One good way to address this risk is to partner with a company that runs an existing DES. 55
TRCA Pearson Eco-Business Zone District Energy Feasibility Study 10 April 2012 Distribution System Failure A long term risk is excessive corrosion resulting from contamination or improper water treatment which results in a reduction in the distribution system life. Water loss due to failure of the distribution system results in reliability problems as well as an economic cost associated with refilling the loop with treated water. Risks can be reduced through: Chemical cleaning and flushing of building energy loops prior to start-up Using indirect connection where the primary distribution loop is separated from the customers internal systems with a heat exchanger A well-designed water treatment program using a reputable firm Low Production System Efficiency Lower than anticipated plant efficiency may result from problems inherent in the equipment or poor operational procedures. Poor performance by auxiliary systems can limit the capacity available for sale or the reliability of the production facility. Equipment risks can be minimized through sound procurement contracts and performance guarantees. Operating procedures should be developed based on solid DE operational expertise and should be implemented in conjunction with a strong staff training program. Low efficiencies and resulting high costs can also occur in meeting customer demand during spring and fall, when loads are generally low but can be quite variable. Thermal storage helps overcome these problems. However, particularly in the early phases of system development, thermal storage may not be implemented. An alternative is to include a small production unit in the plant mix. Liability Due to Distribution Failure There is a potential risk associated with liability resulting from impacts on underground utilities or building property due to failure of the district loop or building systems (in direct-connected buildings). This risk can be minimized through good distribution system design and construction and strong coordination with building representatives during design and start-up to ensure the integrity of all systems. Risks Measures to Control Risks Improper operation Operator Training Equipment failures Warranties and Extended Maintenance Agreement Insurance protection Energy source shut-downs, Provide standby/ back up facilities planned or unplanned Force majeure by customer Customer Assessment Volatility of fuel prices Procurement of fuel under a fixed price contract for several forward years Effective fuel price pass through in customer contract Table 15 Summary of Operations Technical Risks 56
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