Power-Gen: Gearing up for global needs

By STEVE BLANKINSHIP, Associate Editor

ORLANDO, Fla., Nov. 10, 2000à‚–A prolonged period of sustained economic expansion, accelerating deregulation of the electric industry, and more than two decades of modest generating capacity increases have converged to place the power industry on the threshold of unprecedented growth.

To meet U.S. demand, DOE predicts the need for 300 GW of new generation over the next 20 years. That works out to almost 40 percent of today’s 800 GW U .S. capacity. To meet demand worldwide, EPRI projects the need for a new 1,000 MW power plant somewhere in the world every two days between now and the year 2050.

Little wonder that POWER-GEN International 2000 will draw more people than 15,000 professionals from 75 countries to Orlando, Florida November 14-16. The conference will span 72 hours. At the conclusion, the lights will come on -figuratively speaking -as those who will provide the power needed in the future will go forth armed with a better understanding of the challenges that lie ahead and the strategies to meet them.

Fifty-seven sessions spread across 11 subject tracks constitute the core of the POWER-GEN 2000 Conference. Keynoters are Randy Zwirn, president and CEO of Seimens Westinghouse Power Corp., addressing “Growth in Change: Building Business in Turbulent Times,” and Harvey Padewer, group president of energy services for Duke Energy, who will speak about “Recognizing the Value in a Global Market.” Rounding out the keynote session will be Roy Firestone, host of ESPN’s Up Close Prime Time. Called by Pulitzer Prize winner Jim Murray “the best interview I’ve ever seen, period,” the six-time Emmy Award winner will put on a uniquely entertaining one-man show.

Power-Gen International runs Nov. 14-16 in Orlando.
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In its second year after a successful debut in 1999, the Power-Gen Mega-Session features in-depth discussions of critical industry topics from top experts.

Mega-Session I: The Next Generation of Gas Turbine Technology
This year’s sessions looks at the future of generation practices. Speakers and subjects will focus on technology advances and future applications as the gas turbine industry evolves. The session will also feature a discussion of the next generation of gas turbines à‚– a new DOE program with sponsoring companies. Participants will discuss where the industry is headed, how manufacturers are developing technology to address the future generation needs and insights into what forecasted needs are.

Mega-Session II: Power Generation and Critical Infrastructure Security Issues
This panel will discuss the private national initiative underway to improve protection of critical power generation infrastructure from cyber-terrorism and cyber-warfare. Panelists will address protecting control systems, fuel delivery and supply chain in the power generation industry, as well as power grids, both transmission and distribution.

Mega-Session III: Future of Coal Fired Generation
Despite the abundance of domestic coal resources and availability of inexpensive electricity generated from coal, several concurrent events are converging to alterà‚–perhaps dramaticallyà‚–the role coal will play in the future U.S. energy supply. Electric industry restructuring, environmental regulations and public perceptions all have significant impacts on coal-fired generation. This panel will discuss coal’s current role in the U.S. and examine efforts by the power generation industry, coal producers, coal users, legislators and researchers to make coal a more environmentally friendly fuel choice.

Merchant Powerà‚–Beware of NIMBY
To no one’s surprise, issues related to merchant plants will garner a lion’s share of attention at this year’s conference.

In a paper entitled “Winning Public Support for New Merchant Plants,” Dr. Robert Wasserstrom of the Terra Group contends deregulation of the electric industry will make public acceptance of power generation facilities even harder to win because economic competition is transforming the traditional compact among ratepayers, utilities and state regulators. Until recently, says Wasserstrom, this compact guaranteed an equitable balance between the risks of building new facilities and the benefits of improving local service. As more and more projects are tailored to meet the needs of distant customers, however, or to fulfill strategic business objectives in a deregulated marketplace, community opposition has inevitably begun to rise.

Wasserstrom explains that over the past 25 years, public opinion research on energy and environmental issues has shown that unless community members perceive a direct benefit to them, any risk will seem too great. Achieving public acceptance of a proposed facility is best understood in terms of creating value, rather than as a process of scientific or technical education.

Merchant plant development requires rapid gathering of information for strategic planning coupled with the ability to identify project development opportunities. Entergy Power Group’s Roy Jones and Stone & Webster’s Brian Feldmann and Ronald Moe will present a paper on a modeling and forecasting system that integrates established industry models with newly developed linear programming.

The objective was to provide Entergy with a list of market areas within the combined ERCOT and Eastern Interconnect that met their planning criteria and maximized their financial return. Transmission limitations were identified, and although new generation is assumed to be gas-fired, the model factored the feasibility of crude, residual fuel oil and distillate. Escalation factors for bituminous and sub-bituminous coal, lignite and anthracite for each of these regions were also developed. The dates each state will have a fully competitive retail power market were included because until deregulation legislation is implemented, generating plants will be treated through regulated cost recovery for their generation costs.

Because the goal was to pinpoint sub-regions of ERCOT and the EI most profitable for merchant development 2002 to 2005, the model defined areas either short of capacity and transmission constrained, or where new more efficient merchant plants can force the retirement of existing capacity. The model considered ancillary services, emissions costs and capacity market prices. Final ranking was achieved by considering the site scores in the context of Entergy’s regional marketing and project development interests. Jones, Feldman, and Moe believe their approach, methodology, magnitude of scope and level of detail are unmatched by any published study of this type in the history of the merchant plant industry.

Distributed Generationà‚–A Closing Window?
Distributed generation offers attractive possibilities for everyone: reasonably priced, reliable power options for customers; deferred T&D upgrades, reduced line losses and increased grid support for stressed distribution systems; and reduced peaking requirements for utilities. But because there are as many issues as possibilities, DG will draw its share of attention at POWER-GEN 2000.

A paper presented by John Kelly, managing director of energy solutions for the Gas Technology Institute, poses the question of whether or not the window of opportunity is closing on the distributed energy industry.

Kelly notes that some elected officials and regulators have been led to believe that DE/DG will raise the price of electricity for the poor and middle class and reduce system reliability. Yet government studies show electricity supply is out-stripping demand and grid capacity, making DG part of the solution, not a problem. Highly efficient DG systems will not leave the poor holding the bag. On the contrary, DG will help ensure that sufficient supply and distribution system capacity exists to prevent brownouts and blackouts.

Kelly believes the electric industry and policy makers should reconsider their positions, because attitudes prejudicial against DG will benefit neither utilities nor customers. He states that placing even a small portion of the 60,000 MW of new generation permitted to date in deregulating states at strategic customer sites for 9:00 am to 9:00 PM peak power use could help fill the supply gap, improve reliability for key customers, provide an opportunity to use the waste heat, and relieve stress on feeders and substations.

Arthur D. Little consultant Evan Jones will present a paper developed with fellow consultant Frederica Turner entitled “The Uncertain World of D.G.: Developing and Evaluating Strategies Using Real Options.” Their work examines a real options approach to strategic planning for DG. By placing a value on maintaining flexibility, real options allows strategic planning despite the uncertainties regarding technology, size and business opportunities associated with DG. They believe a real options approach provides a framework for understanding what is needed to be positioned for the upside potential while maintaining the flexibility to alter course or exit gracefully if the opportunity does not develop.

Some in the industry believe DG is a set of disruptive technologies that will change how power is delivered, who will deliver it and what customers will expect from their utility provider. If DG is disruptive, it will create large opportunities for cur- rent and aspiring utility providers and equipment suppliers. It is important to develop a DG strategy quickly because there may be significant first-mover advantages. Traditional strategic planning methods using discounted cash flow financial analysis don’t adequately capture the importance and value of flexibility in the face of uncertainty.

E-business in its various and forms pertaining to the energy industry shares center stage with merchant power and distributed generation at POWER-GEN 2000.

Brian King, vice president of Houston- Street Exchange, will be one of several panelists discussing e-trade issues. “One of the largest traded commodities in the world heading into the 21st century still relies on 19th century technology,” says King. “Even as e-business spreads across the globe at an explosive rate, wholesale oil, gas and power traders still use the phone and fax to transact business.”

King will detail how the Internet is starting to bring an unprecedented level of efficiency to the energy industry. He will discuss how the ability to see real-time market information and conduct immediate transactions based on that information is changing how traders buy and sell energy commodities.

Specifically, traders will see increased competition, lower margins and increased drive for cost savings and efficiencies. The good news is they’ll have better information with which to work -information with more depth, breadth and neutrality. The Internet also provides a better and more efficient medium to provide value-added services. He notes that Enron currently conducts 60 percent of its energy trading online. King says the boundaries of companies will also change, and the diplomatic art of managing ad hoc partnerships and alliances will become a key executive skill.

In his paper “Leveraging Internet Marketplaces as a Solution to Create Efficient Marketplaces for Business Surplus,” Mick Barron, vice president of utilities for TradeOut.com says Internet-based marketplaces are creating efficiencies in the highly fragmented $350 billion market for business surplus. Most importantly, the Internet marketplace allows access to a broader range of inventory and assets à‚–creating pricing advantages as suppliers compete in a truer marketplace economy. Barron adds that such Internet trade ends the “the needle in the haystack” myth for surplus assets.

In one case study, Barron compares an energy company’s traditional approach with the Internet approach in selling 40 reels of fiber optic cable. Anticipating a sale price of $800,000, Great River Energy of Elk River, Minnesota used brokers seeking potential buyers on a regional basis. After two years of trying, no buyers were found. Moving to the Internet, the company found a buyer in 14 days who paid more than $1 million for the cable. Barron’s presentation will address selling strategies, identifying the marketplace, logistics of payment and delivery, and contracts.

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For more information on the conference, plus daily updates from the conference floor, visit www.power-eng.com every day this week.

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