SPECIAL REPORT: Acute levels of uncertainty pervade the industry – Combined Cycle Journal

SPECIAL REPORT: Acute levels of uncertainty pervade the industry

We’re supposed to embrace change, but let’s face it, change is unavoidable. It occurs with every passing moment, even if you can’t sense it. So let’s talk about rates of change. In the gas-fired power industry, rates of change may be approaching chaotic effects.

That’s the conclusion from 18 one-on-one half-hour interviews conducted over a two-day period, more than half with users directly responsible for plants and equipment, the balance with representatives of vendors large and small—but not including the OEMs.

When you consider the common themes in isolation, most simply confirm the trends you read and talk about every day. But the composite sketch of the industry as these themes converge is troubling at best. Perhaps the appropriate mental image is of a frog in a pot of water gradually heated to boiling.

Everything, these days, seems to be JIT—just in time—whether people, parts, money, or operating hours. As one user put it, “plants are run day to day.”

Ground rules for the interviews were no attribution, no names, and no companies mentioned, so everyone could speak freely. Each conversation began with some version of, “what’s happening out there that’s troubling and making your life more difficult, what’s happening that is exciting and making life easier, and what’s innovative that might make a good on-the-record follow-up article?”

While much of this may seem melodramatic and dire, keep in mind that the electric power industry has weathered similar periods in the past while maintaining superior levels of reliability and more than reasonable prices to ratepayers for such a critical commodity. Yet, forewarned is fore-armed.

Storm chasing. One overriding consequence from the themes which emerged is that a perfect storm may be brewing with the convergence of:

    • Aging gas turbines and combined-cycle plant equipment.
    • Acute shortages in skilled labor.
    • OEMs in financial turmoil are buying jobs.
    • Unpredictable operating tempos resulting from growing renewable energy in the markets.
    • Shrinking O&M budgets.
    • Frequent ownership changes of plant assets.
    • Continuing staff reductions.
    • Supply chain consolidation.

After all, when a person responsible for one of the largest gas-turbine fleets in the country says, with an eerie calm, that they are “very cash-strapped,” and “we’re going to take reliability risks, might even live with a crash, since we have plenty of capacity to back up the loss of output. . .,” the eyes of the interviewer, an industry veteran, lit up. This asset manager also noted that when management insists on putting back in a “really bad HP steam rotor,” it sets a poor precedent for the next questionable decision.

Another GT asset manager noted that wind and solar are “consuming” his organization, that there has been a total emphasis shift in the company. A multi-billion-dollar wind construction program is taking up all of the organizational oxygen. The utility is “close to shutting down a 1980s-vintage coal plant because of wind.” So, it’s no longer the older, smaller coal units under severe threat. Even a state like North Carolina is expected to add up to 6000 MW of solar PV over the next five years, according to one interviewee.

And based on recent news accounts, even recent-vintage combined-cycle plants in some areas of the country, California and Texas notably, are being shuttered. The “nuclear renaissance,” a term coined 15 years ago, now appears to have become a slow march to the grave.

What’s left? Must-run renewables (highly subsidized) and must-follow gas.

Old rotors, deep cycling. But here’s the deeper issue with this scenario, another common theme among the interviewees: As a fleet, the F-class rotors are coming to end-of-life right when “GE is going lean,” owner/operators and suppliers are starved for revenue, the first wave of more efficient and more flexible H- and J-class machines are coming into operation, growth in renewable projects continues unabated, and skilled workers are scarce. Thus, F machines, which took the industry by storm in the 1997-2003 period and not necessarily designed for cycling, much less deep cycling, are headed for even harsher operating tempos.

One owner/operator likened it to “the Wild West” and noted that “there will have to be a change in thinking to manage this fleet.” He referred to a recent presentation describing how an F-class rotor was “rebuilt from scratch” in a Houston repair facility. A major third-party services vendor mentioned “brown plant solutions, something between a repair and an OEM replacement—there’s a lot of 7FA.03 hardware out there!” Perhaps another example of this change in thinking is replacement hardware, such as for combustion systems, with more turndown capability.

One plant manager reported that a zero-hour replacement rotor “didn’t run right, but we just lived with it.” And because turbines are being operated in ways never intended in the original design, breakdowns are “non-standard.”

Of course, it’s not just the rotors which are affected. One repair-firm rep quipped, “starting and stopping 25- to 30-year-old units up to 300 times a year is hell on a generator.”

What price outages? Outages and outage planning proved to be the most prevalent topic among both vendors and users. It makes sense as most of the perfect-storm elements noted above bear down during outage periods.

On the front end, plants with few staff members, and owners with little in the way of corporate resources, have little time or inclination for proper outage planning. So-called “last-minute” outages are common, while one vendor noted that while plant owners may have “scheduled” the outage, they don’t necessarily “book” the outage.

Plants chasing ancillary-services market opportunities may hurry an outage together only after the last possible dollar is earned during the peak operating periods. One non-rotating-equipment services vendor noted, “money is only released at the last minute.”

On the back end of these outages, users complain that “work quality is less than desirable” and, to work within constantly shrinking O&M budgets and outage scheduling constraints, “everybody is rushing, which isn’t conducive to good outcomes; that’s too bad, because performance going forward is directly tied to the outage going well.” One user also noted that “there are a lot of serial No. 1 major repair/replacement solutions out there.” Another consequence of outages that proceed more like elementary-school fire drills is that overtime charges escalate for both plant staff and services firms.

The rule of thumb these days, according to one repair-firm rep, is an “opportunistic outage,” one that isn’t planned or forced, but taken when the plant is done making money that season. One plant manager from the Northeast with a nominal 500-MW plant said they take one one-week outage annually. A Midwest plant manager reported his spring outage was two days.

Where are my people? The shortage of skilled and experienced workers was another topic which cut across most of the interviews. Fewer and fewer people are coming into the trades these days, despite training programs utilities and others have initiated with colleges and schools in their regions around the country. Plants are enticing good people away from other nearby plants. Two service companies reported that every single employee was committed during the past spring outage season.

However, this past outage season may be an anomaly. One rep from a mechanical contracting firm noted that a major owner/operator forecasting an unusually hot summer was “getting work done now to run hard in the summer.” Unless this owner was viewing results of a whiz-bang proprietary weather model, others owners were undoubtedly planning similarly.

To give a sense of the depth and breadth of comments on the staffing topic, consider these quotes from the interviews:

    • “Insurance companies and authorized inspectors show up who have no clue what an HRSG does.”
    • “We’re replacing skilled inspectors with robots to reduce costs at a time when starts/stops [on rotors] are going up exponentially.”
    • “Thirty percent of our non-hourly staff was let go; what’s going to fall through the cracks?”
    • “The only thing inhibiting business growth is finding the right people to hire.”
    • “People showing up to sell us stuff, and people designing powerplant products, have never even been in a powerplant.”
    • “Work just keeps piling up with only 27 people at the plant.”
    • “As coal-plant capacity factors decline, resources are constantly shifting from station to station.”
    • “We’re at the bleeding edge of staffing.”
    • “Labor doing the work is typically not achieving the quality needed.”
    • “Knowledge retention is still a top issue in our organization.”
    • “Contractors are not following procedures for weld repair of P91 components in HRSGs.”

Where are my parts? “Parts on the shelf are cash,” said one plant engineer, and of course, no upstanding financial engineer is going to let cash sit at a plant. “Our people are constantly looking for parts,” he continued. An assistant plant manager stated that her group is “creating depth” through user-group interactions.

Big dogs eat first. General Electric (GE) came up numerous times in these interviews. The power-industry behemoth has been making headlines with its financial woes. It’s arch competitor, Siemens, released a statement, literally while these interviews were underway, that the company would be temporarily shutting down its Gas and Power Division. The concerns can be summarized by saying that the more the OEMs’ new-unit business suffers (and new orders of gas turbines are down substantially), the more they buy repair and replacement jobs, squeezing out the third-party service firms.

One utility guy said “smaller vendors are hurting from GE’s aggressive pricing.” A services-firm rep noted “OEMs are buying jobs.” A plant manager lamented, “GE isn’t doing us any favors; we can’t get a schedule for a major outage that begins mid-September.” A plant engineer observed that “GE isn’t giving their people the right tools and training so that they can use the ‘GE systems and processes’ and the people who know these systems and processes are gone.” Finally, this from large repair-services firm: “We like GE when they’re busy with their new-build, not so much when they are not.”

Disruptions, in fact, are occurring all across the supply chain and the root cause appears to be—what else?—money. SCR suppliers reportedly are under-designing catalysts and employing formulations that “don’t cut it.” Prominent independent repair and service firms have been acquired by big-dog firms, cutting competition. An owner/operator rep reported that his firm has negotiated broad agreements with suppliers like Siemens and MHI to perform scheduled outage work across its facilities.

Appetite for fuel. If you can’t get fuel in, you can’t get electricity out. Fuel supply issues came up only a few times. It’s well known that the country is awash in natural gas available at historically low prices, but like other resources, it isn’t optimally distributed. Manager of one plant “at the end of the pipeline,” said gas transportation isn’t keeping up with supply. “We’re not in control of our fuel,” he said, adding that other plants are facing the same thing. A GT asset manager anticipated that the arrival of the larger combined-cycle blocks based on H and J machines will compound gas infrastructure issues.

Regulatory sinkholes. Several of the user representatives identified NERC and FERC regulations as more than a nuisance, more like a cost and resource sink all unto itself. At one large owner/operator, “two corporate departments work on this, and I’ve got one engineer working on NERC-CIPs exclusively.” One plant superintendent noted that NERC issues are “costly and we have no NERC/FERC expertise on the plant staff.” Another plant manager, after stating that nothing really keeps him up at night, said that “NERC is out of control, the regs seem to be ever-changing and never-ending!”

The big data (r)evolution. Given the noise level around “internet of things, industrial internet, big data, the cloud,” and so on, you might expect data-driven solutions to have some prominence in these discussions. They didn’t, or at least not comparable to the noise levels, but that doesn’t mean it didn’t come up.

“We’re relying on IT more than OT [operations technology],” said one plant manager, “but the consequence is that these IT systems are more complex.” A representative of a filter company said his firm was developing predictive services and remote monitoring to help customers optimize filter replacements and cleaning cycles. An owner/operator said they were relying more and more on a simulator to keep operators fresh and trained. “They tend to forget,” he said. And many are retiring.

“Everything on peaking units is getting automated,” still another said.

Centralized M&D centers were mentioned in passing, although it seems those utilities who pioneered this concept are relying on them less and less, while several non-utility owner/operators are just now getting theirs built. One of the goals of such centers is to redistribute specialized expertise and leverage it across a fleet. Another utility rep mentioned a program to apply so-called smart M&D and advanced sensor technologies widely at the plants.

Frog legs, anyone? Though many of the conversations veered towards vent sessions on what’s wrong with the industry, there were bright signs that the industry, as it always has, is coping and adapting.

For starters, many service firms reported they are busy, overloaded even, and anticipate more growth ahead. That beats the opposite scenario. In an environment where OEMs are reportedly cutting corners and users have little choice but to operate in reactive mode, firms which can develop and propose solutions, respond quickly, and keep plants running are highly prized.

One parts supplier noted his firm isn’t “having problems with unpredictable outage scheduling and work,” while a rep from a large repair firm said he had lost a few jobs to the OEM, but once the customers realize that the estimated first cost won’t look anything like the final, it probably won’t happen again.

A rep from a large third-party services firm says technologies are being brought to market that complement renewable energy and make older gas turbines more flexible. In addition, new manufacturing, fabrication, and casting equipment and methods will continue to drive costs out of aftermarket services.

A plant manager said, “We’re doing what is required with as few people as possible.” One asset management director waxed enthusiastically about a “risk app” they are developing with both a major OEM and insurance firm. Similarly, a plant manager spoke proudly of a risk-reduction program in partnership with their insurer, as well as a reliability centered maintenance (RCM) initiative to engage other users in developing failure modes and effects analysis (FMEA) for 7F machines and D11 steam turbines.

Finally, a repair services firm rep said, “unexpected customer outages don’t bother us, we figure out a way to get it done.” That attitude, frankly, underpinned all of the conversations in some way: “Whatever they throw at us, we’ll figure it out.”

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