This article was originally published by the Global Legal Group in the Commercial Dispute Resolution Magazine.

Energy supply markets have been convulsed by both the war in Europe and the post-pandemic spike in global demand. As a result, new pressures and uncertainties have been unleashed in the engineering and construction industry amid the accelerating transition of national energy systems from fossil fuels to renewables.

However, there are at least three over-arching trends for energy projects that we can be sure will prevail. First, even as more oil, gas and coal fields are exploited in response to these two shocks, the ‘great switchover’ will not lose momentum, not least because wind and solar offer savings in both costs and carbon emissions. Second, as energy-hungry developing nations – especially in the Asia Pacific – play catch-up with those countries in the developed world who are responsible for the lion’s share of atmospheric carbon, fossil fuel power plants will continue to be built into the medium term. And third, we can be absolutely certain of the stubborn reality that core engineering and construction problems will continue to bedevil power plants of all types.

We can assert this with authority from our forensic technical investigations of energy projects worldwide, from combined-cycle gas turbine (CCGT) and coal-powered plants to their cleaner counterparts in the wind and solar industries. And this judgement is reinforced by our CRUX integrated research programme.

CRUX analyses the causes of disputes and claims on capital projects. Focusing on power and utilities, we examined 130 projects launched in the 12 years to 2020. Located in 39 different countries, they had a combined capital expenditure of just under USD 90 billion. The average sum in dispute amounted to 45.4% of the planned cost, while the extensions of time claimed would typically add 50.9% in time to the scheduled programme.

The analysis identified and ranked the most frequent underlying causes of conflict in each project. While there are variations within the rankings, the same top-10 factors are common across all categories – from thermal power plants to renewables – and for the latter, both on- and offshore.

Power and Utilities – CCGT
Cause	Rank
Design was incomplete	1
Change in scope	2
Design was incorrect	2
Contract interpretation issues	2
Level of skill and/or experience	2
Installation failure	2
Operational performance	7
Targets and/or expectations were unrealistic	8
Workmanship deficiencies	9
Shortage of skilled and non-skilled workers	10

Power and Utilities – Offshore Renewables
Cause	Rank
Change in scope	1
Contract interpretation issues	1
Workmanship deficiencies	3
Design was incomplete	3
Design was incorrect	5
Installation failure	6
Operational performance	7
Level of skill and/or experience	7
Shortage of skilled and non-skilled workers	9

Power and Utilities – Onshore Renewables
Cause	Rank
Change in scope	1
Workmanship deficiencies	2
Level of skill and/or experience	3
Contract interpretation issues	4
Design was incorrect	4
Installation failure	6
Operational performance	7
Targets and/or expectations were unrealistic	8
Design was incomplete	8
Shortage of skilled and non-skilled workers	10

After change in scope, we find that contract interpretation, incomplete design, insufficient skill and/or experience, and shortages of workers are among the top three reasons for disputes in fossil power plants. Renewables have a similar mix, though with workmanship deficiencies supplanting skills shortages in the top three.

While we see these and other factors in sectors other than energy, the pattern of causation across power and utilities is clear and common. Moreover, our technical specialists see similar recurring failures first-hand in what many wrongly assume to be fundamentally different segments of the energy market.

New and emerging technologies are being exploited in several sectors, including fossil fuels. However, it is the technical engineering and construction know-how, fundamental to all power projects, that is usually found wanting in the vast majority of failures we investigate.

So, what are the most common technical problems driving disputes?

Burning questions

In coal power plants many of the issues stem from a perceived or actual mismatch between the design of various boiler and related systems, and the fuel they use. Our forensic technical-services investigations start with a comparison between the fuel a plant is designed to burn and what it is actually burning, before we go on to consider other critical factors.

Coal is a heterogeneous material. However, contracts must specify a range of parameters to facilitate appropriate design: it is crucial that boilers are equipped for the specified ‘design coals’ within the given ranges. To verify compliance, the incoming fuel needs to be sampled and analysed, preferably by mechanical, automated sampling, to ensure it remains within the specification. Information from regular sampling can be critical in establishing causation and responsibility.

Coal may be procured from alternative sources due to shifts in market prices or supply problems. Even run-of-mine coal will vary as new seams are tapped. Variations in the coal’s properties can compromise operations at any stage of the process. Fuel of lower calorific value that reduces output while increasing throughput to compensate can impact service life and performance. Contaminants such as tramp metals, limestone or other ‘hard’ material also accelerate wear and tear, chiefly in coal-handling plant, pulverisers and mills.

Similarly, high flue gas velocities and abrasive ash particles erode boiler surfaces more rapidly, leading to premature wear and failure. Although design is critical, manufacturing and workmanship factors are also in play. Pressure parts are subject to erosion and corrosion, punctures and weld failures, leading to steam leaks, and sacrificial protection on boiler tubes – which reduces this – may not be adequate to accommodate variations in fuel.

Slagging in the furnace and fouling of boiler surfaces with ash deposits often cause operational and maintenance challenges. These may not be directly related to the incoming fuel; the design parameters of the furnace and boiler, and associated temperatures and operating regimes are also relevant. Any design errors resulting in sub-optimal furnace dimensions are hugely expensive to rectify post-construction. An appropriate soot-blowing regime and increased inspection may be more palatable and affordable.

Design shortcomings, out-of-spec coal with a higher ash content, and increasing fuel throughput and slagging can all work to overwhelm systems for removing both fly ash and bottom ash.

On the steam side of the boiler, cleanliness and water chemistry are critical to successful operation. Lack of diligence in flushing and cleaning, leaving debris from construction, can cause tube blockages, hot spots and tube bursts. Inadequate water chemistry, sometimes in conjunction with poorly completed chemical cleaning, can exacerbate internal steam-side corrosion, leading to tube-wall thinning and subsequent leakage. These factors can manifest as early problems in the commissioning process, or later in boiler operation and maintenance.

Turbine trouble

From coal to CCGT plants to concentrating solar thermal power plants, another source of conflict and technical complexity is the steam turbine island. Steam turbine generators are intensively monitored by their manufacturers, who can be drawn into disputes with plant owners, operators, insurers, and engineering, procurement and construction (EPC) contractors.

Vibration is a major concern for such sophisticated, plant-critical rotating equipment as the consequences are serious if parameters are exceeded. The cause commonly lies in faulty construction of foundations, deficiencies in installation or balancing of the turbine, manufacturing defects in the blades, rotors, casing or associated steam valves, leading to problems in operation.

Given the loss of electricity exports and revenue, and potential penalties, operators are understandably reluctant to take turbines offline. Even when original equipment manufacturers flag problems in identical units in other plants, these may be due to their particular operating patterns. Within the turbine’s challenging environment of high pressure and high temperature, the risk of catastrophic damage is great. HKA’s turbine specialists have considered causes of vibration and our metallurgists have investigated cases of blade and casing cracking and failure where ultrasonic analysis has revealed sub-surface cracking.

Renewable records

Notwithstanding some countries’ continuing reliance on coal and other fossil fuels, the growth of renewables is accelerating, prompting the International Energy Agency (IEA) to repeatedly revise its annual forecasts upwards. The IEA predicts that renewables will account for almost 95% of the increase in global power capacity between 2020 and 2026. That equates to an increase of more than 60% from 2020’s level, or the current global power capacity of fossil fuels and nuclear combined.

Touching first on solar thermal, faults can arise in the tracking and mounting systems of the mirrors typically used to concentrate the heat of the sun’s rays to generate steam. But, as with conventional coal and gas power plants, many risks and conflicts are associated with the main mechanical and electrical systems as well as steam turbines.

Most disputes we investigate focus on similar technical problems to those encountered in other thermal process plants operating steam cycles. Additional areas are solar facilities’ heat exchangers and their quality of manufacture, maintenance and operation, including the fluids used. In particular, the welds of these large units and the ability to provide appropriate heat treatment critical for strengthening may contribute to premature failure.

Solar photovoltaic (PV) alone accounted for 60% of all additions in renewable capacity in 2021. However, in solar farms reliant on PV technology, the source of many technical disputes can be traced not just to their PV panels, modules and mounting systems, but to what might be taken for a lower-risk, lower-tech area – the electrical installation. Cabling, inverters, switchgear and transformers form a complex web that requires the forensic expertise of an electrical expert – rather than a specialist experienced in solar technology per se – to navigate. Problems arise in the design of these electrical installations, as well as in the quality of components and how the systems are assembled on site.

Wind farm demand

Our specialists are also in high demand due to the global proliferation of on- and offshore wind farms.

Transformer failures can occur in any power plant, given they need to export electricity, often over long distances. Many disputes involving wind farms turn on the findings of transformer failure investigations. Forensic dismantling may be required to reach an expert opinion, but chemical analysis of transformer oil is often a very good indicator of underlying problems.

Another focal point for issues leading to disputes in wind turbines is the performance or failures associated with the gearbox and bearings. HKA’s specialists – including tribologists expert in the science of friction, lubrication and wear – are often involved in resolving disputes over wind turbine failures.

Offshore wind – which is expected to more than triple globally in the five years to 2026 – raises additional risks associated with a hostile environment, and the engineering challenges familiar to experts with experience in the oil and gas industry. The saline environment can compromise integrity and operation, and increase maintenance requirements. Corrosion may occur on towers, steel reinforcement in foundations and other components. Subsea cabling and topside connections in a dynamic environment present further challenges for successful long-term operation.

Lessons to be learned

What lessons can we draw from our experience investigating technical problems in power plants and associated energy infrastructure?

There is no question that each segment of the expanding and fast-developing energy generation industry – and every power project – brings its own risks and challenges. And the impact of technical failures and other triggers for claims and disputes is colossal. Even small deviations in energy output can have a significant impact on revenue over the life of a power plant. Design or construction failings also lead to enforced outages, erode reliability, and push up maintenance costs.

To be successful, modern, complex energy projects depend on a range of expertise from conception through construction to operation. . Availing of expert advice early in their life cycle can anticipate and mitigate problems, whether they are associated with specific technical issues, more general risk monitoring, programme controls or procurement. Equally, when failures or disputes do occur, drawing on the technical expertise of the most appropriately qualified specialist from a bank of forensic experts will put the parties involved in a much stronger position to understand the underlying cause of failure and to assess the strengths and weaknesses of their contractual position.

New and emerging technologies are being deployed in power projects. However, more often than not, resolving the uncertainties around disputed operational performance and reliability requires expertise in core engineering disciplines and complementary specialisms – from metallurgy, welding, tribology and high-voltage systems to hydrodynamics, seismology and digital modelling. Knowledge gained from careers spanning manufacturing, utilities management and hands-on design, construction and operation of energy facilities also affords insights to forensic investigators not available to experts from an academic or research-focused background.

Along with shortages of skills and resources, and the rapid transition happening worldwide, the energy sector’s mix of new entrants and companies established in other fields adds another challenging dynamic in a burgeoning market. As the construction and engineering industry strives to meet this global demand, project outcomes will continue to hinge on fundamental technical expertise.

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