renewable energy projects project...

Renewable Energy Projects

Project Management

Considerations

Connie Hsiung, PMP

PMI KC Mid America ChapterProfessional Development Day

September 19, 2016

Renewable Energy Projects Project Management Considerations © 2016 Connie Hsiung

Slide 2

Outline

• Renewable Energy Industry

• Renewable Energy Project Lifecycle

• Challenges of Renewable Energy Projects

• Project Management Considerations

• Conclusion

Renewable Energy Industry


Slide 4

What is Renewable Energy

Renewable Energy (RE) is energy that is derived from natural processes (e.g. sunlight and wind) that are replenished at a higher rate than they are consumed. Solar, wind, geothermal, hydro, and biomass are common sources of RE.

Sources of Renewable Energy –https://greenenergy1.wikispaces.com/Renewable+Energy

Source: International Energy Agency - https://www.iea.org/about/glossary/r/


Slide 5

RE Power Plant - HydroHydroelectric PlantThree Gorges, ChinaCommissioned 2003-2012$37B to build 32 turbines

22,500 MW (22.5M homes)

Left: : Getty - http://www.dailymail.co.uk/news/article-2178951/Three-Gorges-Worlds-powerful-dam-opens-China-gushing-water-generates-power-15-nuclear-reactors.html

Right Top: NASA - https://svs.gsfc.nasa.gov/3433Right Bottom: Cargo Volume Passing Through Three Gorges Dam –http://www.gov.cn/english/2010-06/22/content_1633305.htm


Slide 6

RE Power Plant - Geothermal

Geothermal Power PlantsThe Geysers, CaliforniaCommissioned 1960-1989

725 MW net (725k homes)

Top: The Geysers -http://www.energy.ca.gov/tour/geysers/Bottom: Ted Wilmsen, 1970 –http://thegga.org/50years-1970.htm


Slide 7

RE Power Plants - Wind

Top: The London Array, NASA Earth Observatory, 2013 - http://earthobservatory.nasa.gov/IOTD/view.php?id=82844Bottom Left & Right: Operational & Construction Platform, London Array – http://www.londonarray.com/offshore-2

Offshore Wind FarmLondon Array, North SeaCommissioned 2013$2.4B USD to build

630MW (500k homes)


Slide 8

RE Power Plant - Solar

Top: Solar Star Satellite View –https://cleantechnica.com/2015/06/26/largest-solar-plant-

planet-earth-solar-star-comes-online/Bottom: Solar Star –

https://www.mortenson.com/solar/projects/solar-star-i-and-ii

Photovoltaic Solar PlantSolar Star, CaliforniaCommissioned 2015

579MW (255k homes)


Slide 9

RE Power Plant - Biomass

Bio-fueled Cogen PlantAlholmens Kraft, FinlandCommissioned 2001

265 MWDistrict Heating

Top: The World’s 10 Largest Renewable Energy Projects –http://www.scientificamerican.com/slideshow/10-largest-

renewable-energy-projects/Bottom: Energy Production –

http://www.alholmenskraft.com/en/


Slide 10

Comparing Generation Capacity

Installed Capacity per Plant(top 5 to date)

Hydro 8000 – 28500 MWNuclear 5800 – 8000 MWCoal 5000 – 5500 MWNatural Gas 4600 – 5600 MWGeothermal 300 – 1500 MWWind 800 – 1000 MWSolar PV 300 – 600 MWBiomass < 300 MW

Source: List of Largest Power Stations in the World, Wikipedia –https://en.wikipedia.org/wiki/List_of_largest_power_stations_in_the_world


Slide 11

RE Trends in Power Generation

• Technology Advancement

– Wind/Solar increase capacity & efficiency

– Tolerance of electric grids

• Competitive Economies

– Dramatic RE costs decline

– Reduced oil & gas prices

• Financial Model Innovations

– Long-term stable pricing (PPA, FIT) for RE

Levelized Cost of ElectricityLCOE ($USD/mwh)

Source: JISEA 2015, p. v-ix, 3-6, 13-14. IEA 2015.


Slide 12

RE Trends in Power Generation

• Environmental Impacts

– No GHG & air pollutant emissions

– Conserve water during generation (except goethermal)

• Government Policies

– Highly influential in RE growth rate

• Energy Security

– RE reduces risk of fossil-fuel cost escalation

• Public Opinions

– Strong stakeholders support is essential

– Support incentivesSource: JISEA 2015, p. v-ix, 3-6, 13-14. EA 2015.


Slide 13

RE Investment

“In 2015, renewable energy set new records for investment and new capacity added. Investments reached nearly $286 billion, … and, for the first time, more than half of all added power generation capacity came from renewables. In spite of these positive findings, to keep global temperature rise well below 2 degrees and aim for 1.5 degrees, we must immediately shift away from fossil fuels. ”Ban Ki-moonSecretary-General, United Nations

Source: FS-UNEP 2016, p. 5, 22.9 Figures to Help you Understand the State of Renewable Energy –http://grist.org/climate-energy/9-figures-to-help-you-understand-the-

state-of-renewable-energy/

Global New InvestmentIn RE By Region

2015, $BN


Slide 14

Generation by All Source2010-40 (trillion kwh, net)

Source: EIA-0484 2016, p. 83

Generation by RE Source2010-40 (trillion kwh, net)

World Electricity Projection

Source: EIA-0484 2016, p. 83

Demands Up 70% by 2040

Renewable Energy Project Lifecycle


Slide 16

Inside of a Wind Turbine

The Inside of a Wind Turbine - http://energy.gov/eere/wind/inside-wind-turbine-0


Slide 17

Outside of a Wind Turbine

Left: Turns were especially challenging, LM Wind Power –

http://www.manufacturing.net/news/2016/07/photos-day-what-it-takes-build-americas-first-offshore-wind-farm

Right: Utility Scale Wind, DOE EERE, 2016. - http://apps2.eere.energy.gov/wind/windexchange/utility-scale-wind.asp


Slide 18

RE Project Lifecycle

Project Lifecycle Stage-Gate Roadmap (Offshore Wind Farm)

Source: Deloitte 2014

De

ve

lop

me

nt

Ca

n w

e b

uil

d i

t? • Conduct feasibility studies (wind, site, geotechnical, environmental, grid access)

• Conduct optioneering (turbine, foundation)• Identify strategic partners (investors, turbine supplier)• Engage community• Establish conceptual project layout• Assess economic feasibility (energy yield, business case)• Permitting

Maturation Construction OperationDevelopmentStage:

Gate:


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Ma

tura

tio

n

Ho

w t

o b

uil

d i

t? • Secure optimal project layout (detailed design)

• Structure project teams/contractors & secure strategic partners

• Secure long-term pricing & buyers (PPA)

• Reinforce public support

• Refine business case• Secure capital �Project governance & structure�Financing cost (Capex)�Construction costs (Capex)�O&M costs (Opex)�Energy production�Energy price�Risk assessment


Gate:


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Co

ns

tru

cti

on

B

uil

d i

t!

• Strong project management & execution against Capex• Strong project teams & interface management• Fabrication• Assembly & Installation• Testing• Commissioning• O&M mobilization• Update business case


Gate:


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Op

era

tio

n

Ru

n i

t!

• Operation & Maintenance (part of Opex)�Maximize availability and reliability�Minimize unplanned outages

• On-going evaluation of business case, policies, investment performance, technologies, forecasting tools

• Decommission or repower (part of Capex)


Gate:


Slide 22


Maturation Construction OperationDevelopment

20-30 yrs1-3 yrs1-2 yrs4-6 yrs

65-85% 10-30%<3%<3%


Est. Time:

Est. LCOE %:

Stage:

Gate:

Source: Deloitte 2014, p. 5. NREL 2014, p. viii. IRENA 2012, p. 44.

strong O&MstrongmoderateProject Org:


Slide 23

Passing Through the Gates

Source: AT Kearney 2011. [U.S.] Wind Energy Project Timeline - http://www.renewableenergyworld.com/articles/print/rewna/volume-3/issue-3/solar-energy/project-management-cross-industry-project-management-practices.html

Challenges of Renewable Energy

Projects


Slide 25

RE Challenges – Financial Risk

Characteristics Challenges

Capital Intensive & Low O&M Costs

• Business viability highly sensitive to insufficient capital or Capex overrun

• Cannot be made up by operating efficiency

Variable EnergyProduction

• Weather-volume electricity production impacts cash flow

• Revenue uncertainly remains high risk despite long-term PPA


Slide 26

RE Challenges – Political Risk


Sensitive to Public Opinions

• Can lead to project cancellation, espprior to Financial Closing.

• Buy-in on tariff & siting

Sensitive to Policies & Regulations

• Policies (incentives) impact business case & investment decision

• Regulations complex & confusing


Slide 27

Permits & Regulations


Slide 28

RE Challenges –Construction & Operation Risks


Shortage of Capabilities

• Shortage incl human resources, knowledge base, critical equipment (vessel/crane), supply chain

• Lack of existing mature and reliable process to follow

• Lack of reliable historical data

Diverse Stakeholders & MultidisciplinaryTeams

• Multiple expectations increase ambiguity and risk

• Increased challenges in team interfaces


Slide 29

RE Project Teams & Stakeholders

Teams

• Owner/Sponsor• Project Management• Legal• Finance• Business Development • Engineering/R&D• Construction Management• Public Affairs• Permitting & Environmental Affairs• Health Safety Environment (HSE)

Compliance• QA/QC• Procurement• HR• Administration

Stakeholders

• Investors (banks)• Strategic partners

(suppliers)• Government agencies

(fed, state, local)• Political Lobbyists• Special interests• Customers (utilities)• Communities (fishing,

residents, cultural)• NGO


Slide 30

RE Challenges – Economic Risk


Long Project Lifecycle

• A lot can changes, esp emerging industry

• Team, policies, technologies, costs, macro-economy etc.

Emerging Market & Technology

• Tech advancement & better cost economy increase opportunity cost of capital & decrease value of project

Project Management Considerations


Slide 32

PM - PMBOK

Source: PMBOK Guide - http://www.pmi.org/pmbok-guide-standards/foundational/pmbok


Slide 33

PM – Think Big

• Manage around Project Lifecycle

– Treat project lifecycle like a program

– Align project strategies with portfolio/business strategies

– Align project budget with business case

– Design out risks in O&M

• Have expanded perspectives

– Business development perspectives

– Help owner obtain financial closing (Capex & Opex)

– Help owner be profitable through execution


Slide 34

PM – Execute Small

• Decompose project lifecycle (program) into multiple projects

– Each stage (project) with distinctive scope & team capabilities

• Strictly enforce Stage-Gate

– Clear demarcation of definitive scope & contracts

– Use progressive elaboration to accommodate changing landscape

– Run it like a complete project with QA/QC process before passing through the gate

• Further decompose by milestone or package


Slide 35

PM – The Vital Few

• Optimize around the vital few (80/20)

• RE capital intensive, optimize around costs than schedule

– Construction Costs (65-85% LCOE)

– Turbine & Foundation Costs (50-70% of Construction Cost)


Slide 36

PM – Procurement & Partnership

• Traditional “bid and buy” not suitable for critical elements

• Strategic partnership with suppliers (turbine, foundation) for risk transfer

• Pool O&M needs through partnership


Slide 37

PM – Interface Management

• Large complex projects require numerous contractors & package managers - many boundaries and interface points

• Coordination incl

– Project Management: scope, schedule, cost, input/output, demarcation points

– Risk: risk burdens

– System: system interoperability, testing

– Regulatory: compliance plan

• Particularly important w/ emerging technology and lack of standardization


Slide 38

PM – Politics, Regulations, HSE

• Need project focus on Public Affairs, Government Affairs, Health, Safety, Environment (HSE)

• Maintain frequent and detailed communication with policy makers, regulators, industry bodies

• Once permits granted, HSE specialist issues Project Environmental Compliance Plan (PECP) for Construction and Operation for all contractors to follow


Slide 39

PM – Risk Management

• Design out risk is key esp. for O&M stage

• Provide training, improve supply chain, use proven technology in construction

• Risk transfer to suppliers

• Contingency estimate

• Insurance

– High premium, lack of standardized products

– Insurable: Financial, Construction, Operation risks

– Not available: political/regulatory, weather-related volume risks.


Slide 40

PM - Capabilities

• Develop internal human resource capabilities with long-term attraction and retention plan

• Cultivate leadership talent

• Place high value in execution excellence

Conclusion


Slide 42

Take Away

1.Think Big

2.Execute Small

3.Optimize around the Vital Few

4.Manage Interfaces

5.Develop Capabilities


Slide 43

Top: Eco Technology Background– http://www.pptbackgrounds.org/eco-technology-backgrounds.htmlBottom: Professional Development Days - http://kcpmichapter.org/content.php?page=pdd&bypassCookie=1


Slide 44

References

• AT Kearney 2011. Cross-Industry Project Management Practices. Khemani, Walters, Haischer, A.T.Kearney. RenewableEnergyWorld.com.

• Deloitte 2014. Establishing the Investment Case Wind Power. Deloitte Touche Tohmatsu Ltd, UK.• EIA-0484 2016. International Energy Outlook 2016. U.S. Energy Information Administration,

Washington DC, US. http://www.eia.gov/forecasts/ieo/exec_summ.cfm• EIU 2011. Managing the Risk in Renewable Energy. The Economist Intelligence Unit Ltd, Geneva,

Switzerland.• IEA 2015. World Energy Outlook 2015 Factsheet, Global Energy Trends to 2040. International

Energy Agency, Paris, France. • IRENA 2012. Renewable Energy Technologies Costs Analysis Series: Wind Power. International

Renewable Energy Agency, Abu Dhabi, UAE.• FS-UNEP 2016. Global Trends in Renewable Energy Investment 2016. Frankfurt School of Finance

& Management, Frankfurt, Germany.• JISEA 2015. Renewable Electricity: Insights for the Coming Decade. Joint Institute for Strategic

Energy Analysis, Golden, CO, US.• NREL 2014. Cost of Wind Energy Review. Moné, Stehly, Maples, Settle. National Renewable

Energy Laboratory, Golden, CO, US.• PMI 2013. Pulse of the Profession In-Depth Report, Navigating Complexity. Project Management

Institute, Newton Square, PA, US.


Slide 45

About the Author

Connie Hsiung has over 20 years of experience in applying engineering and technology solutions to advance business objectives for clients in renewable energy, electric utility, telecommunications, and IT industries. Her responsibilities included project, program, resource management, and project management office; most of which involved global teams in multiple disciplines.

Connie has extensive experience in international business, including forming multimillion-dollar ventures and managing business expansion in China for U.S. companies. She joined the former U.S. Secretary of Commerce and dignitaries on a business development mission to China to promote trade balance.

Connie earned her B.S. and M.S. in Electrical Engineering from University of Missouri, and is a certified Project Management Professional (PMP). She enjoys a good adventure and has visited all 50 U.S. states and 7 continents.

[email protected]

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