Energy Calculations

Forensic Services Newsletter

This month's newsletter on energy losses is prepared by Rob Stott, a mechanical engineer specializing in gas turbine and energy losses. While losses in the energy sector can be significant in terms of physical damage, these can be dwarfed by the continuing loss of power while equipment is repaired or replaced. Usually alternative sources are used in this interim period, and the decisions made can greatly influence the monetary value of the loss. An engineering input can establish if the work undertaken has the technical merit to provide an economic solution.

Forensic Services can assist insurers in evaluating the decisions made in sourcing alternative supplies and in calculating the real loss. Our approach is technical, complimenting accounting techniques. We will give some examples of areas where we can assist.

  1. In one recent job where we were involved, there was a failure of one of a number of turbine generators in a factory complex providing the main source of electrical power to the factory. The factory also received a small amount of power from the local grid network. However, the internal electrical distribution network was arranged in such a manner that the generators and distribution feeders were not interlinked and it was not a simple matter to replace the lost power to the appropriate feeder, even though on an overall basis the remaining internal electrical generation capacity was sufficient to meet the factory demand.

    Following the accident, the choices were to re-engineer the internal distribution system with temporary cables and switchgear, provide a temporary generator on site, or use a supply from the local network. It was decided to import most of the required power from the local network. As well as the technical feasibility of the scheme and the timescales of each scheme, an economic evaluation was made to determine that the supply from the local network was the most economic and in the interests of both the insured and insurer.

  2. Determining if the temporary measures truly lead to an increased cost of working (ICOW).

  3. Even when the repaired or new equipment is installed there will be a shakedown commissioning period when the bugs can be eliminated from the systems and then, truly the factory will then be operating 'as it was'. There are obviously extra costs involved with these actions and it has to be determined if they are reasonable and incurred in the cost of restoration.

  4. To determine the cost of operation of a power plant there are various factors to be taken into account, for example, the fuel generation cost, staffing costs, depreciation costs and administration costs. In determining the fuel generation cost, factors such as calorific value, efficiency, load factor, hours run are used in the calculation. If inappropriate values are used, say, for example, the higher calorific value instead of the lower calorific value, which differ by approximately 10% dependent upon the type of fuel used, the consequences will result in higher costs being claimed.

In addition to the above information, we can assist in depreciation calculations. We can indicate the expected life of plant, taking into account the following factors.

  1. Plant type, eg, coal fired thermal plant, gas turbine, diesel, combined cycle.
  2. Application, eg. refinery, steel mill (significant load swings), power generation.
  3. Usage, eg, base load, peak lopping, mid merit.
  4. Running and maintenance regime.
  5. Type of fuel used, eg, natural gas, heavy fuel oil, high-speed diesel, coal.
  6. Insurers and adjusters should direct inquiries to :

    Rob Stott (H/P : +60 12 200 5255)
    Barry Dillon (H/P : +60 12 217 7702)


    Rob Stott