Optimization offers alluring generation strategies

By Pam Boschee, Managing Editor

Prevailing economic uncertainties have affected most, if not all, sectors of U.S. industry. The electric industry is no exception. In fact, merchant power has taken a particularly direct hit due to its reliance on financing-which not so long ago was friendly (and often, downright love-at-first-sight).

Now, borrowed dollars needed to shore up the bottom line are scarce. Many companies are taking a “sit back and wait” approach until financing becomes more favorable.

Regardless of their approaches, companies are turning their attention back to asset management, with emphasis on getting the most out of what they already own. Gaining operational efficiencies within a plant, and increasingly, across a portfolio of plants, can help companies meet stakeholders’ continued demands for earnings.

EL&P discussed the current status of optimization with Curt Lefebvre, president and CEO of NeuCo; Peter Dyson, president and CEO of Modus Operandi; Kevin Sullivan, vice president, Instrumentation & Controls, Siemens Westinghouse Power Corp; and Ralph Genesi, director, Siemens Westinghouse Power Corp.

EL&P: Recent announcements of power plant project cancellations and slashing of capital spending suggest that companies will be looking for ways to increase performance at their existing facilities. How might investment in plant optimization solutions be justified as budgets are drafted under tighter financial constraints?

Click here to enlarge image

Lefebvre: There has been a shift in the priorities of our customers from growing their asset base to extracting the most from their existing assets. With the current market conditions and deregulation, costs and operating efficiencies matter now more than ever. Our customers realize that they need to spend money in order to save money, and optimization solutions are easily justified because their core value proposition is making more intelligent use of existing assets.

Dyson: Return on investment is the number one priority in just about every project we’ve seen lately. Our market research has identified eight trends that will continue to drive opportunities for utilities to increase their profits: 1) federal and state restructuring; 2) independent generation; 3) wholesale trading; 4) pricing volatility; 5) real-time pricing; 6) environmental regulation; 7) IT advances; 8) regional pricing drivers stemming from transmission constraints, reserve margin and the source of generation supply.

In addition to the bottom line ROI we’re seeing from these systems, there is an important cultural change occurring. As utilities go to market, their culture is changing from an inward facing one-the historical cost-plus mentality-to a competitive, market-facing culture. IT solutions that enable collaboration across the enterprise are an important tool in making this culture change a reality.

Click here to enlarge image

Genesi: Power companies that we work with can achieve asset optimization without necessarily impacting their balance sheet, which we know today is critical. We can actually show very tangible solutions and tangible returns on investments at the asset level, which is where the focus is these days.

The approach we are taking is varying because we realize that our customers have to justify each dollar that they spend. We are helping them more in a consultative manner to determine how to reach the return on investment on assets because there is only a potful of money within these organizations and everybody has to fight for it internally.

Whoever has the best business plan is the one who gets it and we are finding ourselves working with the customers to move these dollars, which were previously discretionary, to a priority investment.

EL&P: In what ways have your customers’ inquiries changed?

Lefebvre: We’ve seen a shift in interest from individual point solutions purchased to overcome some immediate unit problem, to system-wide solutions designed to maximize the operating efficiencies of an entire company. The power of optimization is not necessarily how low you can get emissions or heat rates, but rather the ability to manage the tradeoffs in order to maneuver in highly dynamic market conditions. Not surprisingly, purchase decisions have shifted from bottom up to top down.

Click here to enlarge image

Dyson: The three biggest areas of interest we’re seeing are enterprise integration, demand management and power generation management. All three are driven to some extent by the need to operate more efficiently as we move toward a competitive environment. Another common element is the need to analyze and compare the existing processes to the proposed processes and validate the ROI of the proposed changes.

Sullivan: What used to be a rate based mentality has turned into one of asset optimization. There has been a focus on how to improve efficiency, availability, and more importantly, flexibility-the ability to ramp up and ramp down, get down to minimum loads and avoid having to pay a penalty when you have to be off-line. The most interesting focus that we see coming out of some of the enlightened customers is the concept of ‘in-market availability,’ and this really is a change in mindset. The customer is not worried about availability per se, because they can be available, for example, at midnight but that’s not going to get them any revenue. They need to be available at say 6 p.m. with certainty that the units and the megawatts are going to be available as contracted.

We call this ‘in-market availability’ and most of our customers, particularly those that are cross-trading, are saying, ‘give me certainty, give me better in-market availability for the entire fleet.’

EL&P: Are you finding regional differences in that type of interest?

Click here to enlarge image

Sullivan: I don’t know if it is regional as much as varied with the composition of regulated and deregulated [markets]. Definitely, deregulated customers are focused on how to maximize fleet megawatts on the market-how to maximize dollars for each megawatt. The recent change in volatility in the dollar price per MWh has, of course, put a little bit of that on the back burner, but the end game is getting the maximum dollar per MWh, and optimizing the fleet to get there is the key.

EL&P: What kind of time frames are we talking about for ROI?

Lefebvre: Quantifying the ROI for optimization solutions is much easier than for most IT investments because optimization solutions operate in closed-loop. The payback for combustion optimization, for example, is consistently less than one year. Most plants have already invested in continuous emissions monitoring, distributed control systems and performance monitoring systems. Combustion optimization is able to extract an additional $500,000 to $2 million in annual benefits from heat rate, capacity and emissions improvements. These benefits are delivered within 10 to 12 weeks without additional hardware or unit downtime simply by making better use of these assets.

Dyson: It depends. The less that has been done by the utility in fleet or portfolio management, the riper the opportunity is on the power generation side. ROI is very short. With all costs taken together, I’d say a year plus or minus. I think with the demand management side, it varies greatly-ROI is more difficult to measure and probably a bit more extended.

Genesi: They’ve been as quick as six months, but rarely is it more than 12 months. It’s dependent on which area is focused upon for greater ROI yield, such as improving ramp rate, heat rate reduction, minimum load optimization or even automating the startup process.

EL&P: What is the newest development/ technology in process control for coal-fired plants?

Lefebvre: Process control is moving up the food chain, if you will. Advanced process control solutions are now able to improve the performance of equipment, rather than just control the output. Process optimization solutions have gone a step further by relating the performance of each piece of equipment to the performance of the overall unit. Moreover, these solutions can automatically alter the control of the equipment toward optimal aggregate unit performance. The latest developments are in enterprise optimization systems which are able to affect the control of each piece of equipment based upon its impact on the profitability of the plant or even the portfolio of plants.

Dyson: From our perspective, what is important is the opportunity to take a portfolio approach vs. a focus on the operating efficiency of a single plant. Our solutions focus on three areas of collaboration: between plants and marketing; between generation and the customer; and between information systems within a utility. Once you start talking about information systems, you’re back to talking about collaboration between people and business units.

Sullivan: Our OEM knowledge and experience has shown that many coal-fired power plants have a built-in capacity that has not yet been tapped-anything from the design of the condenser to the design of the feedwater pumps. We are able to develop power generation technology and advanced control systems that have captured this knowledge in our IT and DCS platforms and allowed plants to schedule transitions while still keeping the plant within tight operating parameters.

EL&P: Have you seen a difference from the level from which those kinds of decisions are driven?

Sullivan: We have found that at the plant unit level, at the asset level, they are optimizing the megawatts generated, availability and efficiency. But, for example, the ability to provide peak load for a short period of time has never been valued by a plant operator, and the decisions for these kind of smarts are coming out of the fleet or portfolio managers-the people trading the power.

NeuCo Inc. is an optimization software company that helps electric power producers reduce emissions, perform more efficiently and improve reliability.

NeuCo’s CombustionOpt product optimizes tradeoffs between NOx, CO, boiler efficiency, LOI and opacity through closed-loop management of the fuel-air and temperature distributions in the furnace.

Modus Operandi’s customized Power Generation Management (PGM) solutions focus on maximizing profitability and return on investment for a geographically dispersed portfolio of generating assets. PGM can gather, track, present and analyze the information that is critical to optimizing a utility’s operations.

Siemens Westinghouse Power Corp. (SWPC), a single source provider to the power generation industry, is the only remaining OEM in the controls business. SWPC offers a full spectrum of innovative, environmentally friendly, cost-effective products, services and support.

Note: Information was contributed by the companies.

Previous articlePOWERGRID_INTERNATIONAL Volume 7 Issue 2
Next articleLogica releases new enterprise application integration product for utility market

No posts to display