Issue 9 and Volume 103.


More Consumption, More Production, More Imports and More Emissions

The U.S. Energy Information Administration has released its Annual Energy Outlook 1998, with projections through 2020. Using the National Energy Modeling System, EIA predicts the near-term energy future will include more consumption, production, imports and emissions. Real prices for electricity, on the other hand, are expected to decline. Prices for petroleum and natural gas are expected to climb slightly with coal falling slightly.

EIA projects U.S. total energy consumption to reach 120 quadrillion Btu in 2020, a 27 percent jump from 1997 figures (see figure). Per-capita consumption is expected to remain stable.

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More energy consumption translates into more energy production. Rising petroleum demand will be met predominantly by imports, which should rise from 54 percent in 1997 to 71 percent in 2020. Domestic natural gas production is seen jumping 1.6 percent annually to meet most of the growing demand for this fuel. Likewise domestic coal production should grow to meet rising demand. Growth in production of energy from renewable sources is seen at less than 1 percent annually, while nuclear power output is expected to decline significantly.

In a 50-year historical overview, EIA notes that between 1949 and 1998, the population of the United States expanded 82 percent and the amount of electricity sold by utilities grew 1,200 percent. Per-capita average consumption of electricity was six times higher in 1998 than in 1949.

By sector, residential was the largest with 1,124 billion kWh, followed by industrial with 1,047 billion kWh, and commercial with 949 billion kWh. Other consumption accounted for another 100 billion kWh.

The full report is available on-line at www.eia.doe.gov/emeu/aer.


The $250 billion global private power business, which didn’t even exist 10 years ago, is on a new growth track despite two years of economic and political turmoil in Asia and other regions, according to a new study, “Global Power Horizons,” from Cambridge Energy Research Associates (CERA).

The new power industry appeared to be headed for a major setback when economic contagion hit emerging markets, previously the main arena for development. But, unexpectedly strong growth in North America, growing opportunities in Europe and ongoing privatizations in Latin America are countering the decline. In addition, utility divestitures in the United States and ongoing industry consolidation led to a strong year in mergers and acquisitions.

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“The very firms that led the independent power producer (IPP) revolution and established the bases of the business have so thoroughly mutated through mergers, acquisitions and diversification that pure IPP firms remain in existence only in niche markets,” the report states. “The picture in 1999 is of an industry centered on the management of portfolios of assets that are increasingly built via acquisitions rather than solely through development efforts that have traditionally defined the business.”

The report notes that private power investment opportunities will continue to expand as countries dismantle regulated monopolies in favor of competition and private investment, but warns, “the greatest challenge for the new global power company is developing an ability to respond and adapt to changes in the wide array of local markets that collectively represent the long-term growth of the industry.”


Duke Energy North America has started construction of two 640 MW natural gas-fired merchant peaking power plants. The Ohio plant, dubbed Madison Generating Station, and the Indiana plant, Vermillion Generating Station, are expected to begin commercial operation next summer.

American National Power Inc. has broken ground on its 589 MW gas-fired merchant plant in Blackstone, Mass. ABB Power Generation Inc. is building the facility, expected to enter commercial service in the summer of 2001.

Equistar Chemicals LP has chosen Reliant Energy to develop a 750 MW gas-fired cogeneration plant to be sited adjacent to the Equistar Channelview Complex in Texas. Commercial operation is scheduled for late 2001.

Dynegy Inc. has announced plans to build a 155 MW natural gas-fired generating plant near Lake Charles, La. Pending regulatory approval, construction of Calcasieu Generation Project should begin soon.

Great River Energy is planning to build a 445 MW natural gas-fired, simple-cycle peaking plant near Pleasant Valley, Minn., with construction to begin in the second quarter of 2000.

ONEOK Inc. is planning to enter the electricity business by building a $90 million generating plant northwest of Edmond, Okla. The 300 MW natural gas-fired facility is expected to enter service in mid-2001.

Primary Energy Inc. and BP Amoco have signed an agreement to develop and construct a 525 MW gas-fired cogeneration facility at BP Amoco’s Whiting Refinery in Indiana. Construction will begin this year and end in 2001.

Panda Energy International is planning to build a 1,000 MW generating plant in Eastern Pennsylvania.


By Brian K. Schimmoller, Managing Editor

The Siemens Westinghouse merger, and the resulting business strategies the merged company has adopted, provide some interesting insight into the forces impacting the power generation industry-and the future these forces will create.

Historical reserve margins on the order of 15 percent are not expected to survive. At Siemens Westinghouse’s Product Application Workshop in May, Craig Weeks, Americas Division president, stated that he anticipates the nationwide reserve margin to stabilize around 10 percent in the next five to 10 years, as markets (and transmission lines) open and as electricity traders become comfortable with cross-country transactions. Somewhat surprisingly, peaking generation is not really the predominate growth sector in the U.S. market. For Siemens Westinghouse, combined-cycle gas turbine applications accounted for nearly twice as many orders in 1998 as simple-cycle applications. This indicates that the broader forces of deregulation and open competition are spurring growth, as developers recognize more opportunities to capitalize on load growth and aging capacity than on peaking demand. Siemens Westinghouse predicts a 14 GW annual demand for new capacity over the next five years.

Four key factors, blatantly obvious to all by now, are driving the renewed U.S. market: rational economically minded buyers; thermal efficiency and environmental performance; reliability and availability; and improved cycle times. The common theme underlying each of these factors is a drive to lower costs. Buyers, in an effort to keep costs to a minimum and maximize profit potential, will opt for equipment and systems that offer the highest thermal efficiency, the best environmental performance, the highest reliability and availability, and the shortest outage times. This model is being repeated around the United States.

To achieve these objectives, skilled after-market service will be increasingly important, particularly for newer and planned plants based on advanced gas turbine technology. The explosive growth in the combustion turbine market will double service demands in five years, according to Tom Christopher, Siemens Westinghouse’s general manager for operating plant service. Moreover, service peaks, in terms of manpower requirements, are intensifying, particularly in the spring and fall (Figure 1), resulting in skilled craft labor shortages in certain parts of the country. North Carolina power plants, for example, are flying in as much as 60 percent of the work force to accommodate outage schedules.

Figure 1
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There is an interesting discrepancy between scheduled outage days and incurred outage days. While plants are planning for fewer outage days in order to minimize lost generation opportunities, unplanned/emergency outages are accounting for a larger portion of outage time (Figure 2). This places even more stress on a stretched work force and may hamper economic success.

A customized service portfolio is one approach to optimize plant availability and reliability. A combination of maintenance and performance tools are configured for a given unit depending on its capacity factor and cash flow. A plant with low capacity factor and minimal cash flow, for example, might opt for a customized parts program, thereby avoiding costly inventory expenses. A high capacity factor plant with sufficient capital, on the other hand, might choose a “parts just-in-case” approach, along with a plan to augment power production and take advantage of revenue opportunities. In the middle, an intermediate capacity factor facility might desire a “parts just-in-time” strategy and investigate low-capital options for heat rate improvements and power “stretching.”

Figure 2
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Service intervals are also being stretched to maximize plant availability. Outage intervals for advanced gas turbines are being extended from 8,000 hours to 12,000 hours or more.

In short, plant operators will be asking a lot of their power generation equipment in the years to come. More starts, extended operating cycles, rapid turndown. Such stresses emphasize the criticality of service and maintenance functions. Operations and maintenance have always been linked, but now, more than ever, operational success is determined by maintenance performance. Without an effective maintenance program, operating costs will increase, perhaps only by a fraction of a mill/kWh, but this can be enough to keep a unit off the grid and render it uneconomic.


By Pam Boschee, Electric Light & Power News Editor

Winds blustering across the rugged terrain of western North Dakota are welcome near the small community of Richardton. Two wind turbines standing tall above wheat fields surrounding the Sacred Heart Monastery turn into the westerly winds and bring a smile to the face of a woman standing nearby. Sister Paula Larson, prioress of the monastery, is of the opinion that this small-scale green energy project may be the nascent stage of a potentially large, MW-scale wind farm.

National statistics for wind energy potential support her opinion. North Dakota tops the charts in wind energy potential-and the monastery is located in the midst of the top-ranked areas for wind within North Dakota. According to Department of Energy studies, North Dakota alone has enough potential energy from wind to supply 36 percent of the 1990 electricity consumption of the entire lower 48 states. However, as of May 1999, the American Wind Energy Association listed total installed wind capacity in the state as only 0.39 MW.

Sr. Paula said future development depends on economics, which in turn depend on the eventual outcome of industry restructuring.

The Silver Eagle turbine at Sacred Heart Monastery, Richardton, ND, is located in the midst of the top-ranked wind areas within North Dakota.
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The Sisters of the Order of Saint Benedict first considered the possibility of wind turbines about 15 years ago when Sr. Bernadette, a biochemist, introduced the idea. Although the Sisters dropped the idea at that time, Sr. Bernadette remained interested and eventually became involved with the Dakota Resource Council, an organization formed in 1978 to protect North Dakota’s land, air, water, rural communities and agricultural economy. Her continued championing of the idea led to a search for wind turbines in 1995.

The Sisters considered the wind project because they already had three options available for heat-coal, natural gas and fuel oil. “With electricity, we thought, ‘do we need to be totally dependent on one source?'” said Sr. Paula. “And we didn’t need a $10,000 study to tell us the wind blows. We just went out there.”

The used Silver Eagle 100 kW turbines were purchased in 1996 in Livingston, Mont. With an initial purchase cost of $120,000, and “after a year or more of stress and strain working out all the difficulties with installation, the negotiations with the rural electric cooperative (REC), and our own internal problems, the turbines were up and operating on June 16, 1997,” wrote Sr. Paula in the first annual report in 1998.

The wind turbines’ first-year performance was successful. “I was fully prepared to say these would be a flop. The utility said it wouldn’t work. In my mind, I thought, ‘If it works in other parts of the world, why not here?'” said Sr. Paula.

The wind turbines were set at 62.5 kW each, providing a total generating capacity of 125 kW, which is also the maximum load requirement for the main building. The building contains the residence for 25 Sisters and the Spirituality Center, a facility available for spirituality workshops or organizational/professional retreats, accommodating up to 2,500 people between September and May each year.

The turbines generate electricity at 480 V, which is transmitted via underground wire to a step-up transformer at a utility pole. The resulting 12.5 kV power is then transmitted via the distribution REC’s wires to a step-down transformer in the monastery building.

After one year of operation (minus 150 days of no wind or maintenance), the wind turbines produced 132,130 kWh of the 355,990 kWh required by the Sisters. The avoided cost of this electricity, had it been purchased from the distribution REC at 8.754 cents per kWh, was about $11,600.

When discussing the payback for excess electricity generated by the wind turbines, Sr. Paula highlighted one of the economic realities that often mars the feasibility of such projects.

She said, “If MDU, NSP or Otter Tail (investor-owned utilities) were our provider, we could use net metering.” The distribution REC’s policy is “use it or lose it.”

Upper Missouri G&T Electric Co-op, Sidney, Mont., the generation and transmission co-op that supplies the distribution REC, paid 1.14 cents per kWh to the monastery for the excess 47,280 kWh, for a total compensation of about $540. Overall savings, therefore, amounted to about $12,000 in the first year of operation.

The only significant operational problem was weather-related. Sleeting ice sometimes caused the wind sensor located atop the turbine head to freeze up, preventing the turbine heads from turning into the wind.

When asked about bird kill resulting from the rotating turbine blades, Sr. Paula said, “There hasn’t been one single bird dead. We have more birds killed by hitting our windows.” Sr. Paula noted an additional benefit-observing that the 21 llamas on the monastery’s land tend to sit under the turbines in the summer, she said, “I’m thinking we installed fans for them.”

Future plans for larger wind turbines-and perhaps the establishment of a wind farm-depend on “if the state of North Dakota becomes more feasible, with payback more feasible.” Currently, the state is not aggressively pursuing deregulation. An electric utilities committee was established and continues its discussion of tax implications of restructuring and electric rates of investor-owned and cooperative utilities.


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According to the records of the Edison Electric Institute, there have been 70 merger and acquisition efforts involving U.S. investor-owned utilities since 1992. Of these, 34 have been completed, 12 have been withdrawn, and 24 are pending (see table).

In other merger and acquisition news of late:

ABB Alstom Power, created through the merger of ABB and Alstom, officially began operation only three months after the merger plans were made public. ABB Alstom employs 58,000 people in more than 100 countries. The group has 105 turnkey projects under construction.

KN Energy Inc. and Kinder Morgan Inc. have signed a merger agreement, with the transaction expected to close in the fourth quarter of 1999. The combined company will be known as Kinder Morgan Inc. Under the agreement, KN Energy will issue approximately 41.5 million shares of stock in return for all outstanding shares of Kinder Morgan, and Kinder Morgan has cancelled a planned stock offering. KN Energy has abandoned its attempt to merge with Sempra Energy.

NedWind, purchased by NEG Micon A/S in October 1998, has changed its name to NEG Micon Holland bv as part of an ongoing corporate integration process.


CMS Generation Co. has announced commercial operation of the 160 MW first phase of the Dearborn Industrial Generation plant, under construction on the site of the Rouge Steel Co. and Ford Motor Co. complex in Michigan. The second phase is scheduled to begin operation in the spring, with full operation of the entire 710 MW facility expected in 2001.

Entergy Nuclear has officially added Pilgrim Station to its fleet, marking the close of the first successful nuclear plant sale in the nation. Boston Edison and Entergy closed the historic deal less than eight months after the companies agreed to transfer ownership. Entergy is paying $81 million for the 670 MW BWR, its fuel and the 1,600-acre site. Boston Edison will fund the $471 million decommissioning trust.

Enron has broken ground on a 40-story office tower to expand its headquarters in downtown Houston. Enron expects to boost its Houston workforce by 1,200 to 1,800 employees by the time the 1.2 million square-foot building is completed late in 2001.

The Salem Harbor 4 oil-fired power plant in Massachusetts has been closed indefinitely following a July fire in the plant. PG&E Generating purchased the Salem Harbor facility, rated at more than 700 MW, from New England Electric System in the fall of 1998.

PacifiCorp has signed an agreement to sell its California electric service area to Nor-Cal Electric Authority. Nor-Cal is a joint power authority created last year by the city of Yreka and Del Norte County. The sale must be approved by FERC before it can be finalized.

The New York Public Service Commission has approved the Consolidated Edison sale of 1,855 MW of capacity to Orion Power Holdings for $550 million. FERC has not yet approved the sale. Con Edison agreed in 1997 to sell its New York City fossil generating capacity in three bundles. The other two bundles, sold to KeySpan Energy and NRG Energy, are complete.

KeySpan Energy is seeking regulatory approvals to upgrade its 2,168 MW Ravenswood plant in Queens, possibly by adding a 250 MW gas-fired cogeneration unit.

The circuit court upheld the Public Service Commission approval of Alliant Energy Corp.’s 525 MW RockGen power plant in Wisconsin. Opponents are expected to appeal.

ABB Alstom Power has taken the contract to upgrade two GT11D gas turbines at Beluga power plant near Anchorage, Alaska, for Chugach Electric Association Inc.

Niagara Mohawk Power Corp. has agreed to sell the 32 MW Glen Park hydroelectric facility near Watertown to Northbrook Energy LLC for $22.5 million.

S&S Energy Products received an order from Allegheny Energy Inc. to supply two GE LM6000 aeroderivative gas turbine-generator sets, each rated at 44 MW for use in simple-cycle mode at Springdale Power Station.

FERC has approved the transfer of licenses for 12 Montana Power Co. hydroelectric projects to PP&L Global Inc.

Elwood Energy generating facility, co-owned by Dominion Resources Inc. and Peoples Energy Corp., has entered commercial operation and is providing peaking capacity to two major energy clients. The four-turbine, 600 MW plant is providing 300 MW each to Commonwealth Edison Co. and Engage Energy US.


Robert Howell has been named Duke Energy Services Group executive vice president of mergers and acquisitions.

Richard D. Kinder, Kinder Morgan Inc. chairman and CEO, will retain his titles following the merger of KN Energy Inc. and Kinder Morgan.

Joseph J. Wambold has been elected a Southern California Edison vice president in the nuclear organization.

Allegheny Energy Inc. has announced appointment of three presidents: Paul M. Barbas, AYP Capital Inc; Jay S. Pifer, Allegheny Power; and Peter J. Skrgic, Allegheny Energy Supply.

ABB Alstom has announced several managing director appointments: John Gaskell, gas turbines; Bernard Lemoine, steam power plants; Leif Nilsson, industrial turbines; Mike Barrett, boilers; Bertrand de Saint Julien, hydropower; Walter Granicher, customer service; and Franz Killer, manufacturing.

Roy Thilly, Wisconsin Public Power Inc. CEO, has been named American Public Power Association president.

S. Marce Fuller has been named Southern Energy Inc. president and CEO.

Peter B. Evans has been appointed Catalytica Combustion Systems Inc. senior vice president, business development.

Gerald Luterman has been elected KeySpan Energy senior vice president and CFO.