By: Brian K. Schimmoller, Managing Editor
POWER-GEN International 2003 promises an unparalleled forum at which attendees can make sense of the ups and downs experienced by the power industry the past few years.The cyclic nature of the power industry has been re-confirmed – in sledgehammer fashion – over the past several years. From the highs of the late 1990s and into 2000 – exemplified by the gas turbine boom, the rush to deregulation, high power prices, and merchant fever – to the lows of the past two years – exemplified by excess capacity, sluggish economic growth, the Enron embarrassment, the merchant sector collapse, and the Blackout of 2003 – the emotional roller coaster ride has taken its toll on the industry.
Several companies – including firms like Mirant, PG&E’s National Energy Group, and NRG Energy, which were lauded as “pace-setters” just a few short years ago – have had to seek bankruptcy protection to cope with the monumental forces of change assaulting the industry. Others are struggling to sell assets, repay debt, and reposition themselves in a business environment that has come full circle from risk-averse to risk-happy to risk-averse again.
At times, it is hard to remember that just 24 months ago, the power generation industry was still in the midst of a historical boom. As the OEMs took orders for gas turbines and as the EPCs dealt with concerns about finding enough qualified labor to build 200 plus GW of new capacity, few would have predicted the rapid freefall that eventually occurred. As night follows day, however, bust follows boom, and industry participants were forced to react to the reality of fewer projects, fewer jobs, less capital outlay, and the general uneasiness that accompanies a market downturn.
Though still in the bust portion of the cycle right now, there are signs of life. Several of the merchant players, including Calpine, appear to have weathered the severe beating they took on Wall Street and in the mainstream press. Various regions are recognizing the need – in the near-term to mid-term – for new generation capacity. ConEd, for example, has stated the need for 3,000 MW of new capacity by 2005. In Indiana, an analysis by the state’s Utility Forecasting Group identified a need for an additional 2,400 MW of generating capacity by 2008.
Overseas activity, though not remarkable, is steady. At the Siemens Westinghouse Technology Application Workshop in late September, Randy Zwirn, president and CEO, acknowledged the significance of the U.S. downturn, but reported stable growth in Europe, parts of Asia and the Middle East, highlighted by a big shift from 60 Hz projects to 50 Hz projects. From 1998-2002, on average, annual orders for all makes of Siemens fossil-fired turbines (gas and steam) totaled 61 GW for 60 Hz applications and 43 GW for 50 Hz applications; from 2003-2008, Siemens projects the world market at 22 GW for 60 Hz machines and 52 GW for 50 Hz machines, on an annual average.
To get the industry back in synch, re-trenchment appears to be the method of choice. Jonathan Gottlieb, a partner at Baker & McKenzie who spoke at the Siemens Westinghouse event, pointed out several elements that will define the industry over the next few years: focus on cash flow; strategy building around physical assets, renewed emphasis on home service territory; abandonment of ambitious growth initiatives; re-integration of merchant assets into the rate base; recognition of energy trading as a burden; and the understanding that while surprises cannot be planned for, they should be expected.
Gottlieb is optimistic the bust is ending. “We’ve hit bottom,” he says. “The question now is how long will the bottom last?” Positive signs are evident. Credit quality is stabilizing, a return to single asset project financing with offtake contracts and credit-worthy purchasers is evident; and companies are cutting debt, reducing capital expenditures, and pinching operating costs. Crossing over from belt-tightening to wallet-opening, however, is a bold but potentially dangerous move in today’s market, and the experience over the past several years is likely to push more companies toward a “go-slow” approach.
Putting these events in context is difficult – but absolutely necessary – in order to take stock of what has happened and develop strategies for what’s to come. Learning from both the good times and the bad times, and getting the industry back in synch, is priority one. The best place to re-establish such synchronization is POWER-GEN International, where 20,000 industry professionals are expected to gather in Las Vegas Dec. 9-11. POWER-GEN offers limitless opportunity to interact with peers facing similar challenges and to interface with the 1,000-plus vendors displaying their products and services.
In the aftermath of the August 14 blackout, and the political wrangling to determine the best course of action for addressing energy issues encompassing generation, transmission, distribution and end-use consumption, the keynote session on Tuesday morning, Dec. 9, promises a unique set of perspectives.
Walter Higgins, Chairman, President and CEO of Sierra Pacific Resources, will share his experience leading a company still dealing with the after-effects and repercussions of the California energy crisis. Sierra Pacific is the parent company of Nevada Power Company and Sierra Pacific Power Company, serving most of Nevada and parts of California.
Walter M. Higgins III, Sierra Pacific Resources
Higgins has been Chairman, President and CEO of Sierra Pacific Resources since August 2000. He was previously Chairman, President and CEO of AGL Resources Inc., the holding company of Atlanta Gas Light. From 1993 through January 1998, Higgins served as Chairman, President and CEO of Sierra Pacific Resources, prior to its July 1999 merger with Nevada Power Company. Previous executive positions include President and COO of Louisville Gas & Electric Co. and Senior Vice President, Generation and Transmission with Portland General Electric.
David M. Walker, Senior Vice President with Bechtel Power Corp., will discuss how one of the world’s largest engineering and construction companies views the power sector, and how it has adapted its processes and strategies to function successfully in ever-changing business climates. Active in every corner of the world, Bechtel provides a uniquely global perspective on market evolution, project development and execution, technological advances, and overall energy planning.
David M. Walker, Bechtel Power Corp.
Walker has 30 years of experience with Bechtel, most of which has been in the power sector. He has held various technical and management positions, including Estimator, Cost Engineer, Field Engineer and Business Development Manager. In 1995, he became the Project Manager for the gas-fired Samalayuca power plant project in Mexico and later served as Deputy Regional Manager for Latin America, where he was responsible for power, telecommunications and civil business lines. Prior to becoming Manager of Bechtel’s Power Execution Unit in August 2002, Walker was the Regional Business Unit Manager for the power business in Europe, Africa, Middle East and Southwest Asia.
Joseph A. Stanislaw, Cambridge Energy Research Associates
Joseph A. Stanislaw, Cambridge Energy Research Associates
Rounding out the keynote session will be Joseph Stanislaw, Co-founder, President and CEO of Cambridge Energy Research Associates, an international advisory and consulting firm focused on the energy industries. Dr. Stanislaw is a recognized authority on energy markets, geopolitics, and corporate strategy, and will provide an insightful analysis of the complex energy industry. He is a respected advisor to governments and senior executives around the world and has defined the “energy company of the 21st century.”
As President, Stanislaw manages CERA’s global operations, including its staff of more than 200 in eleven offices worldwide. Dr. Stanislaw’s latest book, The Commanding Heights: The Battle Between Government and the Marketplace That Is Remaking the Modern World, examines the diminishing role of the state and the growing role of the marketplace and private enterprise in the world economy. This book was coauthored with Daniel Yergin, the Pulitzer Prize–winning Chairman of CERA.
Dr. Stanislaw was a professor and lecturer in economics at Cambridge University and a member of the Energy Research Group in the university’s Cavendish Laboratory and subsequently, Senior Energy Economist at the International Energy Agency in Paris.
Big Topics, Big Sessions
While the entire conference program at POWER-GEN addresses important issues in the power industry, several of the most timely, high-profile topics are reserved for the Mega-Sessions on Thursday morning, Dec. 11. This year, attendees can choose from a lineup of six Mega-Sessions.
The New Market Entrants Mega-Session will discuss how the industry downturn has created opportunities for new players who are able to provide capital, market liquidity and credit support to troubled participants. Featuring speakers from Invenergy, Headwaters MB, Competitive Power Ventures, and Goldman Sachs, the session will examine these companies’ business models, their outlook on power market evolution, and how the industry might change as a result of their participation.
The Global Climate Change Mega-Session takes aim at an issue that could completely re-shape the power industry in the future. Greenhouse gas emissions may have a significant effect on global climate patterns if action is not taken. In addition to the Kyoto Protocol, many countries are taking other steps to address global climate change, including renewable energy requirements, emissions trading programs, and joint implementation projects. This session, featuring panelists recognized as global thought leaders in global climate change and renewable energy, will discuss the status of climate change provisions and what actions are being taken worldwide to address this challenge.
Although gas-fired project development has stagnated, the number of large frame gas turbines entering operation is at a very high level. Maintaining a current awareness of the technological status of the global gas turbine fleet, therefore, is imperative. The ever-popular Large Frame Gas Turbine Mega-Session will examine product line performance, developments in design, commercial issues, and solutions associated with large frame gas turbines. Each of the major large frame gas turbine manufacturers will be represented.
As wind energy technology and economics continue to improve, it is becoming an increasingly competitive source of energy supply. Newer multi-MW turbine models are capturing economies of scale, and on-shore and off-shore project development is expanding around the world. In the Mega-Session titled Wind Energy: A Commercial Reality, panelists will highlight utility experience with wind projects, discuss the drivers behind wind energy’s rapid growth, and outline policy changes needed to accommodate wind energy’s unique features.
Navigating the Distributed Generation Market will explore distributed generation market trends and how the various value chain players approach the DG market. Highlights of key results from a survey addressing DG strategies and trends will be presented, and panel participants representing various segments of the value chain will then present their views on DG and discuss their approach to this market.
Solid fuel combustion-based power plants produce more electricity than all other sources of energy combined, yet continued uncertainties in environmental law and pressure for carbon dioxide reduction have slowed the construction of such plants. Is there a continued role for coal-fueled power? How will solid fuel and natural gas price trends affect plant development and operation? Is nuclear coming back? These and other questions will be debated in the sixth Mega-Session, titled Why Solid Fuel Combustion Technologies?
Silverhawk Power Project. Photo courtesy of Pinnacle West Energy.
On Monday, Dec. 8, POWER-GEN offers two technical plant tours. The first tour will visit two plants: Pinnacle West Energy’s Silverhawk Power Plant and Mirant’s Apex Generating Plant, both located at the Apex Industrial Park about 20 miles northeast of Las Vegas.
The Silverhawk Power Plant is a 570 MW gas-fired combined-cycle facility slated for commercial operation in summer 2004. The plant consists of two Siemens Westinghouse 501F gas turbines, two Alstom heat recovery steam generators, a GE D11 steam turbine, and a Hamon air-cooled condenser. Silverhawk will use SCR and CO technology to meet environmental requirements, and will be a zero discharge facility with multiple ponds for water management. Lockwood Greene is constructing the plant and providing EPC and start-up services. The Southern Nevada Water Authority has an option to buy 25% of the plant’s output.
Mirant’s Apex Generating Plant is an 1,100 MW natural gas-fired facility. Located on 90 acres within the 10,000-acre Apex Industrial Park, the facility is helping to meet the growing electricity needs of Southern Nevada. Phase I of the project, a state-of-the-art 550 MW station, began commercial operation on May 6, 2003. Phase II, another 550 MW station, will begin construction at a later date. Each phase includes two General Electric Frame 7FA gas turbines operating in a combined-cycle mode with two heat recovery steam generators and a steam turbine. Efficient natural gas combustion in the plant’s innovative, dry-low-NOx combustors combined with SCR technology controls NOx emissions to 3.0 parts per million.
The second tour, to the Las Vegas Cogen complex owned by Black Hills Energy, consists of two cogeneration units. Las Vegas Cogen I features a 41 MW General Electric LM6000 PA aeroderivative gas turbine, tied to a 10 MW Dresser Rand steam turbine. Steam extracted from the steam turbine is used to heat water stored in two insulated water storage tanks. The heated water is then used to maintain temperature and humidity levels in an adjacent tomato greenhouse. Las Vegas Cogen II features twin 2×1 combined-cycle units, each consisting of two 45 MW General Electric LM6000 PC gas turbines and one 26 MW, 14-stage Dresser Rand steam turbine. Once-through steam generators provide 95,000 lb/hr of high-pressure steam and 28,000 lb/hr of low-pressure steam.
Car Giveaway — Bittersweet Corvette
The car giveaway at POWER-GEN International never fails to generate a lot of excitement, anticipation, and hope. Attendees gather around the PennWell booth at the end of the show, desperately wishing that their entry form is pulled from the bin, giving them possession of one of the three “finalist keys,” only of one of which will open the car door and identify the winner.
The Car Giveaway at POWER-GEN International 2002 in Orlando provided a special, bittersweet memory. When Don Kerr with Bemis Corp. turned his key and opened the car door to win the Corvette, his joy and happiness were obvious to all. The smile on his face quickly spread to all those around him that day. Sadly, Mr. Kerr suffered a fatal heart attack about a week later. His wife, Betty Jo, sent the following letter recognizing her husband’s thrill at winning the car:
“Don really enjoyed Corvettes and it was the ultimate high for him to have won this one. He drove the car straight through from Florida to Indiana where I met him to have Christmas with our children. He was only able to drive it the following week before he had his heart attack. I know that he would have wanted to go exactly how he went if he had a choice. He was on Cloud Nine after wining the Corvette and he loved his job at Bemis. He was truly a very happy manUThanks for giving my husband the most exciting days of his life.”
POWER-GEN will be giving away a 2004 Corvette this year in Las Vegas. All conference delegates who complete a passport are eligible. The drawing will take place on Thursday, Dec. 11 at 1:30 p.m.