Siemens is building the largest combined cycle gas turbine in the world. Managing the risks of a plant this size is far from straightforward.
Every once in a while an innovation will raise the bar on all that has gone before it. While not wishing to stand in the way of progress, risk managers find themselves confronted with a problem: if something hasn't been tried before, how can its safety and function be guaranteed?
Just such a situation has arisen with engineering giant Siemens' latest power plant. Despite its rather ungainly title, the SGT5-8000H gas turbine represents state-of-the-art design and technology. Not only is it the world's largest fully air-cooled gas turbine, but also has the highest rate of energy efficiency of any gas turbine in combined cycle application.
There is no questioning the technological advancements of the project, designed for a power plant in the German town of Irsching near Munich. The 440-ton turbine generates 340 megawatts (MW) of electricity in gaspowered single-cycle operation. In combined-cycle mode, when excess heat from the gas generation drives a second steam-powered turbine, it provides a massive 530 MW - enough energy for a city of 3 million people. Its energy efficiency rate of over 60% tops the current record for a combined-cycle turbine by two percentage points – a difference that equates to a reduction of over 40,000 tons of CO2 emissions per year. Added to this are extremely low life-cycle costs, high reliability, availability and flexibility.
Managing the unknown
All this cutting-edge technology inevitably involves new or bigger risks over and above those of the existing generation of gas turbines. The core difference between this project and standard constructions is the risks relating to the inner workings of the turbine. According to Gerhard Müller, a senior risk consultant at Allianz Global Corporate & Specialty (AGCS), "This plant will be the basis for a new family of gas turbines which is widening the process parameters, for example involving higher temperatures and more optimized aerodynamics than ever before."
Projects involving technological advances on this kind of scale represent a real challenge for the insurance market. Without several thousand hours of operational experience, the risks are considered prototypical, and therefore hard to insure. But the nature of technical evolution always involves risks. In the case of power generation, the dual demands of more electricity and lower CO2-emissions have to be met with new technologies.
Right from the start
To find a way out of this impasse, Siemens and others working on cutting-edge engineering projects, whatever their field, need to find a risk solution partner with the necessary experience and expertise to enable them to take the project forward. "Our first choice was Allianz because we have a relationship with them already," says Manfred Ott, Senior Insurance Consultant at Siemens Financial Services. "From our experience with them we knew that, based on their profound technical expertise, we had a realistic chance of ending up with cover for this project."
Specialist consultants and underwriters at AGCS were able to draw on their thorough, expert understanding of the design, methods and practices in order to truly understand the risks involved. They also commissioned an independent review of quality control, from the AGCS Allianz Center for Technology unit, which helped reassure management that insurance could be offered for the project.
In a new project of this nature, the insurer also needs to be involved from the early stages of product design, with ongoing discussion throughout the construction and testing phases. Allianz came in after the initial research and development and was offered an unprecedented level of insight into the proposal.
The first step was to get to grips with the risks involved in the planned project with a thorough examination of all aspects of the proposal. "Because Siemens is our partner, we were able to look in great depth into the design tools, methods and processes and for each component, we assessed what Siemens had done compared with the existing technology," says Müller.
As a result of those investigations, a report was compiled on each and every component of the turbine, detailing the possible risks and the probability of their occurring. In conjunction with its discussions with Siemens and the precautions the engineering firm was taking, Müller and his team prepared a risk metrics report covering the design, methods and processes.
"We tried to avoid the probable risks by placing restrictions on cover or imposing higher deductibles. Then where and when the risks were similar to those of a standard product, we were able to give a more standard type of coverage," says Müller.
Tests and awareness
In addition to insurance solutions, a team of specialist engineers from the AGCS Allianz Risk Consultants division have also accompanied the program. They have concentrated in particular on project execution. As with any gas turbine project, fire protection is one of the key risk areas. Risk consultants have held in-depth discussions with the design engineers as well as regularly visited the site at Irsching to discuss aspects of safety with the workers. This helps to build a keen awareness of risk management among all the different teams working at the plant.
The other, vital aspect of risk consulting is to support the client's own rigorous testing and risk management regime. For this project, Siemens followed a disciplined product development process from the early stages through to manufacture of the gas turbine, as well as the main design groups and all significant subcomponents. Comprehensive tests were carried out at each developmental stage, both in-house and at external laboratories and institutes.
This work included atmospheric combustion engine testing at Siemens Power Generation Inc. in Orlando, Florida and high-pressure combustion tests conducted at the Italian utility Enel and at DLR, Germany's aero-space research center. Aerodynamic and heat transfer tests were performed at laboratories in Germany and in collaboration with US institutions, such as the University of Central Florida.
On-going risk management is no less thorough. Around 3,000 sensors will monitor the gas turbine, with every aspect described in minute detail by engineering in some 75 test requirement specifications. A special customized IT network is even being set up for the testing system at the Irsching construction site that will connect all the engineers working on the project, wherever they are in the world.
A new family of turbines
As the Siemens gas turbine test bed in Berlin is not large enough to accommodate such a high-capacity model, the turbine at Irsching was actually built as a prototype test plant in order to assess it under actual operating conditions. That 18-month test phase for the single-cycle turbine will come to an end this summer. Then construction will begin to transform the existing singlecycle plant to combined-cycle operations. A further testing period of up to six months will follow before ownership is transferred to the plant operator in the summer of 2011.
Going forward, Siemens intends the Irsching plant to be just the first of a new family of combined-cycle gas turbines, all operating to the same high specifications and operational efficiency as the original. The work undertaken at Irsching will ensure that the future of gas turbine technology can be both increasingly sustainable, and insurable.