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Generators of value

Generators of value

19/09/2011 | Channel: Electricity

As part of its growth strategy, AES acquired Ballylumford Power Station and became the largest independent electricity generator in Ireland

‘‘Two significant events have characterised the past 12 months for AES in Northern Ireland,” says Mark Miller, nanaging director of AES Kilroot Power Ltd and Northern Ireland Country Manager. “The first related to the decision by the Northern Ireland Authority for Utility Regulation to cancel the power off-take agreements for the coal-fired units at Kilroot, while the second and arguably most exciting was the purchase of the 1,246MW Ballylumford Power Station. Given the proximity to Kilroot, there are synergies between the businesses that will promote more efficient operations in the future. Growth is an important element of the AES global strategy and the company is always looking for opportunities to create value. In the case of Ballylumford, AES was motivated by a combination of being able to acquire a high quality asset and having the ability to take advantage of local market presence and leverage it against our existing assets within the Irish market.”

AES made its first strides into the local energy market of Northern Ireland back in 1992 when it acquired the Kilroot Power Station and Belfast West Power Station (which closed in 2002) as part of its international expansion plans. With the purchase of the larger gas-fired Ballylumford plant, AES is today established as the largest independent electricity generator on the island of Ireland.

Based on the north shore of Belfast Lough, the Kilroot Power Station is a dual coal and oil-fired facility, comprised of two main generators, each capable of producing 260MW when firing oil. In addition the plant has black start
capability via two 29MW Avon powered open cycle gas turbine (OCGT) units fuelled by distillate. These units also provide peaking support for the system.

The first Kilroot unit went into service in February 1981 and the following year the plant was officially completed. In the aftermath of the oil crisis of 1985 it was recommended that the Kilroot units be converted to dual coal/oil firing capability in order to reduce Northern Irelands’ 90 per cent dependence on oil. Units 1 and 2 were converted during the period 1986 to 1989 and the power station has run almost exclusively on coal ever since. The Kilroot Power Station remains the only coal-fired plant in Northern Ireland offering valuable fuel diversity in a system dominated by natural gas. Additionally, in 2009 AES installed two 42 MW Frame 6 OCGT’s, fuelled by distillate, to provide additional peaking capacity.

The Ballylumford Power Station consists of three generating plants: 1) the 600 MW “C” Station which commenced operations in 2003 and includes two Combined Cycle Gas Turbines (CCGT) with combined efficiency of 48 percent running on natural gas and the ability to burn distillate as back-up fuel, 2) the 540 MW “B” Station which was constructed in 1974 and includes three natural gas units, each of which has an operating capacity of 180 MW, and 3) 112 MW of OCGT units, which began operations in 1976 and provide peaking services for grid support and emergency response. The CCGT, one of the three thermal units and the OCGT units are contracted to NIE Energy Ltd under long term Power Purchase Agreements, while the remaining “B” Station units sell their output on a merchant basis into the Irish Single Electricity Market.

One of the challenges for the company in the past year has been the integration of the Ballylumford Power Station into the AES structure; a process that Mark reveals has been aided by the development of a detailed and collaborative transition plan: “Looking back over the past nine months I believe we can say that the whole process has been very successful and has achieved the aims set out at the onset with minimum difficulty. What we found is that, as is the case with any major transition, operating with transparency and maintaining strong communications are absolutely fundamental elements of getting things right.”

“What you also have to consider is that Ballylumford was a fully developed and successful business at the time AES made its acquisition in 2010. Although there will obviously be some basic changes that come as a result of AES doing business slightly different than the previous owner, it should also be pointed out that this is far from a one-sided effort. Since the acquisition AES has witnessed an excellent level of co-operation between the two businesses and this has helped identify a number of different working processes and methods that can be adopted to improve the overall performance of both plants. Now the focus will shift to the development of a central service groups that will assist in aligning both the Kilroot and Ballylumford plants so that AES can carry out its daily business in a more efficient manner.”

Passionate about meeting the world’s changing energy needs through affordable and sustainable electricity generation, AES is faced with a unique situation in Northern Ireland, a country where energy policy has mostly been devolved by the local executive. Nevertheless certain aspects of UK policy, in particular the proposed carbon floor pricing, could have a significant impact on the company’s daily operations and potentially impact future electricity costs to Northern Ireland consumers.

In 2010 Northern Ireland set a target of achieving 40 per cent of electricity consumption from renewable resources by 2020. At present about ten per cent of all the consumed electricity in Northern Ireland comes from renewable resources and it is estimated that a further £1 billion of investments will be needed to achieve the 2020 target level. The bulk of renewable generation will likely come in the form of on-shore wind and will require the support of flexible conventional generators like those operated by AES. As the highest levels of electricity demand can occur on calm, cold winter days when there is very little wind, conventional generation will remain an essential part of the energy mix.

Although the company plays a very important role in meeting the electricity needs of the whole of Ireland, AES also prides itself on being an integral part of the local communities it is based in: “Community involvement and social responsibility continue to be high priorities for the businesses. AES interacts with and supports a wide range of initiatives that include active membership in the local Chamber of Commerce, donations to various charities and supporting local school programmes, in part by offering educational tours of the plant,” Mark continues. “The company also provides opportunities for under and post graduates to gain experience in expert fields such as mechanical engineering, business and information technology.”

As a global business, there are obvious benefits that come from being a part of the AES Corporation: “Aside from the usual range of support services the businesses have access to from the Corporation, probably the most important aspect of being part of AES relates to the values that underpin all AES businesses around the world,” Mark explains. “These values are applied to all operations, at all times, by all AES people.

“AES always puts safety first and this applies to all of its people and contractors as well as the communities it operates in. Integrity is also at the core of everything the Corporation does and drives how it conducts itself at all times and how it interacts with customers and stakeholders. Another value is that AES strives for excellence and to be the best in all that it does, consistently performing at a world-class level. Last, but not least, the Corporation takes the view that its work should be fun, fulfilling and exciting. It is important to enjoy the work you are doing and appreciate the fun that can be gained from working as part of a team that is actively making a difference. When the work done by AES stops being like this, it will change the way it does things to bring that sense of enjoyment and purpose back.”

Aside from these core values and beliefs that guide the people who work at the Kilroot and Ballylumford power stations, there is a strength of the businesses that Mark is keen to highlight: “What impresses me most about the teams is their ability to adapt to a wide range of challenges and push the boundaries in developing credible and value creating solutions. There is certainly a strong sense of ownership amongst the staff and the people at the plants take huge pride in delivering high levels of performance.”

Much of the change in energy policy in Northern Ireland, as in the whole of the UK, is currently driven by the European Union, which seeks to deliver a single European energy market, covering gas and electricity. With the SEM being a small, geographically remote part of the system, it is of vital importance that the governments work together with industry to deliver the best solution for customers while ensuring they also play a significant role in the change process as a whole.

Policy makers across Ireland continue to work on dealing with a range of issues including the development of a European grid with harmonised rules and cross-border trade standards. Historically the SEM imports electricity from Great Britain and it is widely believed this trend will continue. However, if imports into the SEM are ever reduced or reversed due to higher prices in Great Britain, electricity prices in the SEM could increase significantly as higher cost local generation will be needed to offset the reduction in imports. Regardless of this, capacity payments for thermal, conventional generators will remain essential to ensure the continued security of supply. Fuel diversity is also vital in ever-changing and uncertain global markets and with Northern Ireland at the forefront of addressing the challenges of managing renewable targets, AES is well and truly prepared to play its part.

The electricity industry on the island of Ireland has gone through significant change over the last few years and it is these changes and the challenges that come hand-in-hand, that is driving AES forward: “The reduction in system demand in recent years, changing commodity prices and the increase in renewable generation has altered the running regime of many conventional generators within the SEM,” Mark concludes. “The power sector faces many challenges in the coming decade due to ever increasing pressures from tighter environmental controls, aggressive renewables targets and the implementation of market integration efforts across the European Union.

“In the context of the wide range of issues facing the business, one of the next strategic decisions will be in relation to the Industrial Emissions Directive which will impose more restrictive NOx and SO2 limits. The main focus for the team over the next few years will be to understand how the AES Kilroot and Ballylumford businesses fit into the market with the changes that are taking place. In the meantime however, the company will continue to play a major role in supplying customers in Ireland with safe, reliable and cost effective power.”