By Craig M. Hurlbert, Turbine Air Systems
It seems odd that the power business-one that is behaving more like a commodity business as ever-maturing trading markets for both power and gas continue to evolve-is not more obsessed with maximizing the value of power plant assets by increasing project Net Present Value (NPV). What could be standing in the way of adding low-cost generation to power plants, ultimately providing a lower $/kW unit costs for each new power project? Why haven’t all debt and equity participants demanded that plants be built to maximize shareholder value?
The answer to these questions may be found by looking into the history of the gas turbine business, where other compelling value propositions have taken time to reach a broad scale. Take a closer look at the combined cycle concept. In the early days of gas turbines-back when the industry was primarily using coal, hydro and nuclear as the generation methods of choice-a few gas turbines were introduced into the mix as quick and easy additions in times of crisis. Most were installed as simple cycle units.
As the economic and environmental winds began blowing against coal, hydro, and nuclear, gas turbines were looked at more seriously as the answer to meet new capacity needs. This did not happen overnight. The addition of Heat Recovery Steam Generators (HRSG) increased the total plant efficiencies and generated the critical heat for cogeneration applications. This equipment changed the operational mode of gas turbines from peaking to base load applications, where efficiencies and total output were more important.
Now enter the independent power production (IPP) business in the mid-1980s. Industrial gas turbines fit the new IPP business model very well. Maximizing efficiency and lowering the unit $/kW was critical to maximizing IPP project valuations. As a result, combined cycle gas turbine projects became the generation method of choice. The niche began to evolve and develop. Today, this is a mature market.
With that illustration in place, I propose that the next big idea whose time has come is gas turbine inlet air cooling with mechanical chillers. Many will say this concept has been out there for many years and is nothing new. While this may appear true at first glance, this doesn’t take into account second-generation designs with excellent economics, reliability, and safety features.
What is not clear is why this proven technology has not been applied on a broader scale. After all, inlet cooling applications for green-field projects vary between $100-175/kW, and for existing sites from $200- 250/kW. Compare that to $400-$600/kW for new generation sources. When the highest project capacity factors and revenues occur during summer months, why are we not adding the most reliable, most predictable, and lowest incremental-cost capacity? Why are we not looking to get the lowest blended $/kW we can-by maximizing the entire cycle?
Some will say they have used evaporative cooling/fogging and that it is the lowest first cost vs. mechanical inlet chilling. While the first-cost argument may be true, in the majority of cases fogging is not maximizing the project NPV and, ultimately, shareholder value.
The mechanical inlet chilling industry has made significant improvements that equate to real value for customers. Systems have evolved from being “stick built” in the field, to an operator-friendly system: pre-engineered, assembled in a factory, and shipped to the site with minimal field work required-an OEM concept, that is complete with service offerings that can shift operational and maintenance risk away from owners.
Many owners have discovered that mechanical inlet cooling is one way to enhance the value of their existing and green-field assets by lowering the blended $/kW. Even in today’s market, where owners are wondering how much their power plants will run, and where additional capital expenditures are tough to acquire, some owners are thinking ahead.
Hurlbert, President and Chief Operating Officer of Turbine Air Systems, can be reached at 713-877-8700. Hurlbert recently joined Turbine Air Systems from P2 energy. Prior to P2 Energy, he was President and CEO of The PIC Energy Group. For more information, visit www.turbineairsystems.com.