Ian McLeod: Emergency management

Energy Source & Distribution talks to Ergon Energy CEO, Ian McLeod about distribution management through rainfall, cyclones and floods.

The employees of Queensland distributor and retailer, Ergon Energy are looking forward to a well-deserved rest. With a network covering 97 per cent of the state, Ergon has seen incessant rainfall, rising floods and powerful cyclones batter its power lines and substations throughout the 2010/2011 summer. Most recently, Cyclone Yasi struck central Queensland in February, putting more than 200,000 people off line across an area from Cairns down to the Whitsundays.

Energy Source & Distribution spoke to Mr McLeod in late February as reconstruction was still underway following the cyclone.

“At this point in time we’ve got most of the customers back on, except for those in the hardest hit area in the eye of the cyclone. So we’re down to, from memory, 6000 customers this morning still off supply and we’ve got around 1000 field staff on the ground,” Mr McLeod said.

Mr McLeod became Ergon’s acting CEO in 2007 before being appointed permanently in 2008. The 48-year-old was with Ergon when Cyclone Larry hit in 2005/2006, preparing him for the work ahead. While Cyclone Larry had been the costliest tropical cyclone to ever impact Australia, Yasi’s effect has proven even costlier in terms of its size, breadth of the damage and impact on the community.

“We looked at our plans as the cyclone was coming in. Initially they were forecast as fairly high surges initially in Townsville and then up in Cairns. We proactively kept across an executive disaster committee,” he said.

“Our plans were changing as it came in. In terms of what we did with the network, at one stage when the storm surges were going to be very high and get into the CBD, we were going to shut the system down in those areas, but as the cyclone came closer the timing of the crossing changed and the location. The storm surges changed in height. We actually let the protection system ride it out. So the system was live going into the cyclone and it responded to the events out there.”

There was minimal damage to Ergon’s live assets and substations, but with Queensland’s large area and its “long, skinny lines” exposed to natural conditions, the network saw extensive power line damage from flying vegetation.

“The big issue for us is that Queensland went through the wettest September on record, followed by the wettest December on record, followed by cyclones… so we’ve had massive trees going over because the ground is so wet. The three events – record rainfalls, the floods and then cyclones – did a lot of damage to the vegetation around, in particular, northern Queensland. And it’s a hard thing to deal with. You’ve got such large trees out there going across roads, hitting power lines and you can’t really deal with that, its too expensive,” he says.

“We lost transmission supply down into Tully and Ingham and those areas initially. There (were) two towers lost on the Powerlink side. In terms of the poles and wires, quite a lot of damage mainly caused by flying trees falling, flying vegetation, roofs, those sorts of things. Actual asset failure, you know, was reasonably low from what I’ve seen to date.”

Mr McLeod says Ergon substations were spared from flood damage through intelligent design decisions.

“(During) the floods, many of our substations are the highest point in town. You can go to Emerald and it was probably the only dry spot. We certainly plan for 100-year flood levels when we certainly put in new zone substations etc. And obviously older subs like Emerald showed that was the case in the past too.

“That’s generally the case, but Dalby, down in southwest (Queensland), that substation went slightly under (but) didn’t cause too many issues. But generally, substation assets were well protected from the floods and cyclones. They’re fairly robust structures and they’re in areas that are low risk and they’re well constructed. So the biggest issue is losing sub transmission supply and transmission supply to those.”

Comparing Yasi’s recovery performance to Cyclone Larry, Larry had around 90,000 customers off at the event, while Yasi saw more than 200,000. Having deploying their resources very early for Yasi, after the first week Ergon was only just above the cyclone Larry figures of the customers out.

“A lot of our senior managers in the incident response team in north Queensland (have) very well defined governance structure over the top in terms of the incidence response. (We) broke the areas down into, initially, five response zones and they’ve done very well. As I’ve said we are very proud of the effort,” Mr Mcleod said.

Mr McLeod said his team had handled the recent emergencies well and he is “very proud” of their response to in-coming cyclones.

“Our team has been going since Christmas when (Cyclone) Tasha crossed the coast at Cairns and we had floods before that as well. So look, they’ve very much been going for two months working. They all need a holiday. They’ve certainly worked hard but at the same time they’re managing risk and fatigue and they have backups.”

Ergon has invested into cyclone area reliability enhancement (CARE) over the years. The investment has gone into key infrastructure and community sites, such as hospitals, elderly retirement villages, water treatment and sewage. The investment has paid off, Mr McLeod says.

“While we might lose some transmission supply, we get generators on. We get up to 200 generators out there. We are able to get generators onto the underground networks etc. to get them up reasonably quickly. So that’s been helpful,” he said.

Ergon is now focused on being a high-performance organisation, implementing smart-grid technologies and integrating technology in a way that will provide information to Ergon staff, helping them make better decisions. They have a number of “exciting” projects happening at the moment.

“We’ve signed an agreement with Google to do work with us on projects on data capture of our assets and those sorts of things and make that data available to (a) broader market,” he said.

“We’ll be storing the data on their systems and providing access to external customers, but it’s probably something in about three months time I’ll probably be able to talk in detail about. I think what we’re doing in asset management will be a quantum step forward if we achieve what we mean to achieve in asset management in the distribution industry.”

In 2010 Ergon Energy asked for around $9 billion across opex and capex from the Australian Energy Regulator and received an outcome of around $7.5 billion. Mr McLeod said it is becoming increasingly difficult to predict the amount needed to maintain the network.

“People have (now) got to think in different ways. You know, it’s been very easy for planners in the past to really understand where the network was going. A few years back it would have been very easy to forecast forward loads etc. based on inputs.

“Now there’s so much changing, you’ve got carbon taxes, you’ve got renewables, you’ve got various targets to meet, you’ve got more informed customers, they’re more capable. So you really do need to work closely with your customers to understand them and their load patterns. I’d like to know what all our big customers are doing in terms of energy conservation, demand management, what does that all mean for the network. Is that a substation I don’t have to build? Can we invest in the reduction of demand rather then increase in capacity? So everyone in Ergon has to think a different way.”

Mr McLeod said distributors need to place themselves in the shoes of their customers, but also had to be positioned as thought leaders in the field.

“Iv’e said many times before that the industry is going through a paradigm shift. I see the network as being the fabric pulling a whole lot of other things together, whether it be generation, renewables, battery storage, the traditional role of taking bulk supply into customers, whether customers want to be a passive player or whether want to be actively involved. What you’ve got is a network that’s enabling all those things to happen.

“So, the other things I see is, you try to change the business from what was historically a monopoly to what’s now competing in a lot of places – depending on if you’re a distributor or a distributor retailer – but competing for different energy sources or enabling different energy sources. So people do have choice. Our customers are being empowered and that cultural change journey and that paradigm shift in the way people think is quite challenging and I guess it’s a very interesting period in the distribution industry. It’s a great time to be involved in it.”

Despite an electrical background, Mr McLeod said that even five years ago he would not have expected to become CEO of a distribution company.

“The opportunity occurred and it’s an opportunity I decided to have a go at and I’m very lucky to be able to do it,” he says.

“I certainly feel that I’m a part of that story and had a role to do and trying to get the cost of these networks down, trying to get utilisation up and using the appropriate technologies to do that and trying to be more efficient in asset management using new technologies, trying to make better decisions on investments,” he said.

“I think they’re all challenges for us and I think I’m certainly right in the middle of all that at the moment and it makes life interesting.”


 

Interstate assistance

Natural disasters have a way of connecting distributors together. In the days leading up to Cyclone Yasi, Ergon Energy CEO, Ian McLeod wrote to interstate network CEOs asking for their support.

“It looked like, at that stage, almost certain it was going to hit and we got a very good response from the industry. We had people deployed up to Rockhampton at that stage there and getting their inductions, so ready to go once the cyclone crossed the coast,” Mr McLeod says.

“We always rely on Energex to assist us and we did the same for them and their Brisbane floods. In the Yasi event, certainly, we’ve had people come up here from interstate before to assist, but in this case we’ve deployed quite a large amount of resources from Country Energy and Energy Australia, Integral Energy and Jemena, you know the list goes on and on. So the response has been very good.

“I guess what’s been a little bit different to where Energex was with the flood response, the people who have come up from over the border have been able to do most of the construction work.”

One of the issues moving employees interstate is differing licensing requirements and safety regulations. Most of the Queensland work has involved reconstructing lines, fixing polarities and final connections, not operating the network.

“So utilisation has been good but there’s probably some further improvements we can make there as an industry as we go forward, particularly with these events seemingly become more commonplace,” Mr McLeod said.

Natural disasters have a way of connecting distributors together. In the days leading up to Cyclone Yasi, Ergon Energy CEO, Ian McLeod wrote to interstate network CEOs asking for their support.

“It looked like, at that stage, almost certain it was going to hit and we got a very good response from the industry. We had people deployed up to Rockhampton at that stage there and getting their inductions, so ready to go once the cyclone crossed the coast,” Mr McLeod says.

“We always rely on Energex to assist us and we did the same for them and their Brisbane floods. In the Yasi event, certainly, we’ve had people come up here from interstate before to assist, but in this case we’ve deployed quite a large amount of resources from Country Energy and Energy Australia, Integral Energy and Jemena, you know the list goes on and on. So the response has been very good.

“I guess what’s been a little bit different to where Energex was with the flood response, the people who have come up from over the border have been able to do most of the construction work.”

One of the issues moving employees interstate is differing licensing requirements and safety regulations. Most of the Queensland work has involved reconstructing lines, fixing polarities and final connections, not operating the network.

“So utilisation has been good but there’s probably some further improvements we can make there as an industry as we go forward, particularly with these events seemingly become more commonplace,” Mr McLeod said.


 

Leading towards industry stability

As an Energy Supply Association of Australia director, Ian McLeod has a broad perspective of power generation, distribution, transmission and retail issues.

“It’s a role understanding what are the key challenges for the industry, things like what we’re doing about carbon, what’s our policy, what’s our position on those things, the transmission networks, the grids and policy development around things like smart grids,” Mr McLeod says.

“We certainly spent most of our time on carbon policy and what does that mean for the industry and what our position is and working to put our position to government and where it needs to go, what it’s doing, how it influences investment, what’s the right outcome for Australia. So certainly a lot of time in that space.”

Lack of certainty has been a frustration for the big players, Mr McLeod said.

“From my perspective as a distributor… markets are unstable in terms of retail prices out into the future, so we need some sort of stability to know where electricity prices are going.

“From generation of course it’s an investment issue, asset value issue, which all gets back to the security of the whole electricity grid. And it needs to be resolved. It certainly can’t go on for much longer.

“From my perspective, (rising prices) is what putting a price on carbon is all about. The public became more educated towards the end of the last prime minister’s time and that certainly caused some issues. But it’s a fact. You put a price on carbon you add to cost, then it has to be paid for.

“If companies can’t get the appropriate return on the investment they make and they are expected to pay for it, then simply not going to make the investment and they’ll go out of business etc. So it is the community that has to pay and its ones of those value questions. Are you prepared to pay a cost on this? And I guess a lot of the community found when they become educated on the issue and there was going to become a cost the opinion started to change.”