POWER GENERATIONPOWER GENERATIONPOWER GENERATIONPOWER GENERATION

American Bar AssociationAmerican Bar Association

Forum on the Construction IndustryForum on the Construction Industry

American Bar AssociationAmerican Bar Association

Forum on the Construction IndustryForum on the Construction Industry

Presented By:Presented By:Donna HobbsDonna Hobbs

Bechtel Power CorpBechtel Power Corp

J. Bradford McIlvainJ. Bradford McIlvainArcher & Greiner PCArcher & Greiner PC

InfrastructureCivil Works Projects for Lawyers

StatisticsStatistics

– U.S GENERATED 4,143 billion kilowatt hours of electricity in 2011 (1.5kW/person)

– Sources Generating Electricity– Coal 41.6%

– Natural Gas 25.5%

– Nuclear 19.1%

– Hydro 7.8%

– Renewable/Other (Solar/Wind ) 6.0%

U.S. ELECTRIC POWER U.S. ELECTRIC POWER PRODUCTION 2011PRODUCTION 2011

2011 STATISTICS (ROUNDED)2011 STATISTICS (ROUNDED)

POWER GENERATION POWER GENERATION TRENDSTRENDS

2011 2010 2000

Coal 41.6% 44.5% 51.3%

Natural Gas/Oil 25.5% 24.1% 18.9%

Nuclear 19.1% 19.4% 19.7%

Hydro 7.8% 6.1% 6.8%

Renewable Other 6.0% 5.9% 3.4%

Total Generated (billion kWh) 4,143 4,151 3,836

POWER GENERATION POWER GENERATION TRENDSTRENDS

POWER GENERATION TRENDSPOWER GENERATION TRENDS

Source Trend ReasonCoal decline EnviroNuclear decline Enviro/RegulatoryGas CC growth Price/EfficiencyHydro decline Enviro/CostWind growth Regulatory/subsidyPV Solar growth Regulatory/Price

FOSSIL/NUCLEAR FOSSIL/NUCLEAR ELECTRICITY GENERATIONELECTRICITY GENERATION

COALCOAL

COAL PLANT PROCESS (RANKINE COAL PLANT PROCESS (RANKINE CYCLE)CYCLE)

NATURAL GAS COMBINED NATURAL GAS COMBINED CYCLECYCLE

COMBINED CYCLE COMBINED CYCLE (BRAYTON+RANKINE) PROCESS(BRAYTON+RANKINE) PROCESS

NUCLEARNUCLEAR

HYDROHYDRO

WINDWIND

SOLARSOLAR

SOURCE: GTM Research and SEIAM Research and SEIA

BUILDING THE PLANTBUILDING THE PLANT

Developing, designing, purchasing, constructing, and starting up a large power generation facility is a complex, risky business that involves the management of thousands of interface points and requires extensive planning and coordination.

Development ConsiderationsDevelopment Considerations

– Pro Forma comparing cost to revenue for the facility life cycle

• Life cycle of a plant is about 40 years

• Revenue Stream from generation will last 40 years (projected demand)

• Current cost is as much $ 1.7 million per megawatt

What to Build?What to Build?

– Considerations• Site Location & Space Considerations

• Fuel Source and projected cost/availability

• Water Source and projected cost/availability

• Schedule & Cost

• Environmental &Regulatory Concerns

• Public/Social Considerations

Levelized MWh Cost by TypeLevelized MWh Cost by Type

Energy Information Administration, Annual Energy Outlook 2012. June 2012, DOE/EIA-0383(2012).

STEPS IN CONSTRUCTING A STEPS IN CONSTRUCTING A POWER PLANTPOWER PLANT

– Regulatory Approval and Permits– Design/Purchase of Generating Equipment– Design of Fuel Delivery System– Electrical Transmission Considerations– Design of the Facility– Construction– Startup, Commissioning & Testing– Operation & Maintenance

Regulatory Approval & Regulatory Approval & PermitsPermits

– Vary by State & locality– EPA & Regulatory Considerations

• Air Pollution (Sox, Nox, Particulates, Carbon)• Grey water treatment• Ground Water• Wet lands• Other (Noise, aesthetics, social benefits, etc.)_

Design and Pre Purchase of Design and Pre Purchase of Generating EquipmentGenerating Equipment

– Major Equipment is Designed & Manufactured by OEM Vendors (Boiler, Steam Turbine, Combustion Turbine, AQCS)

– Equipment can take years to Design and Manufacture long lead deliverables

– Equipment is often assigned to EPC Contractor– Performance guarantees, delivery lead times,

constructability, warranties and long term maintenance agreements are critical purchase considerations

Power TransmissionPower Transmission

– Age (technology of transmission system)– Capacity / Constraints of Transmission System– If New Transmission is required. How long to

Build (Right of Ways)?– Other (Interconnect studies, VAR support)

Facility DesignFacility Design– Power generating facilities are huge complex projects that

demand extensive experience and coordination from the designer, builder and OEM vendors.

– Previous era plants were constructed as “Design-Build” where all aspects of the design and procurement were completed before construction began.

– Today contracts are often awarded on an EPC (Engineer, Procure, Construct) basis with a “fast track” schedule where construction often begins before all systems are designed. This reduces cost (IDC) but can add risk.

– A Reference Plant, a 1,000 MW (2x500) generating plant was estimated to require 898,200 man hours for design.

ConstructionConstruction– Schedule (CPM)

• EPC Contractor develops Baseline Schedule

• EPC Contractor provides Periodic/regular schedule updates identifying problems and projecting final completion

– Budget (LSTK, Cost Plus, Gmax)• EPC Contractor develops Baseline Budget

• EPC Contractor provides Periodic/Regular Budget revisions identifying contract changes and projecting final project cost.

Construction RisksConstruction Risks• Differing Site/Design Conditions• Labor dispute/Productivity• Design/Manufacturing Errors & Omissions • Quality Assurance/Quality Control• Regulatory Approvals• Safety/Injuries• Shipping/Storage Damage/Loss• Commissioning errors• Performance Shortfalls

ConstructionConstruction2x500 Reference Plant2x500 Reference Plant

– Mobilization, General Conditions, Demobilization

– Project Duration Approximately 4 years

  Man-hours  Labor, Mat'l &

Equip CostSupervision 2,015,600 $163,851,000Misc. Support 1,222,000 $82,055,000Startup 707,200 $69,029,000Temporary Facilities 639,800 $82,761,000Equipment, Tools & Supplies 0   $124,437,000Total 4,584,600 $522,133,000

Site Work

Site WorkSite Work2x500 Reference Plant2x500 Reference Plant

– Site Work includes:• Clear and Grub

• Site and Building Excavation

• Sewer, Water and Storm Sewer

• Streets, Sidewalks and Landscape

• Stormwater Retention

– Cost can vary by location Man-hours

Total Direct Costs

Site work 588,000 $115,117,000

Civil Work

▪

Civil Work

– Civil Work Includes• Building & Equipment Foundations

• Building Structural Concrete

– 1,000 MW reference plant requires over 130,000 cy. – Trades involved : ironworkers, carpenters, cement

masons, laborers, operators, electricians.

Man-hours Total Direct

Cost

Concrete 1,105,200 $106,431,000

Structural SteelStructural Steel

Structural SteelStructural Steel2x500 Reference Plant2x500 Reference Plant

– Structural Steel Work Includes• All Building Structural Systems

– Most Work is performed By Iron Workers– Major Equipment (cranes etc.) is required– Typical 100 MW plant requires about 25,000 tons

Man-hours Total Direct

CostSteel Related Work 240,800 $143,192,000

ArchitecturalArchitectural▪ Then:

Design Build, Brick & Mortar, Overbuilt, Cheap Labor, Long Schedules

▪ Now:Fast Track, Prefab Steel, Structurally optimized, Critical Path Schedule

Architectural WorkArchitectural Work2x500 Reference Plant2x500 Reference Plant

– Architectural work includes all interior and exterior architectural elements.

– Work is performed by carpenters, drywallers, painters, floor installers, plumbers, HVAC installers and electricians

Man-hours Total Direct

CostArchitectural Work 83,200 $114,687,000

Generating EquipmentGenerating Equipment

▪ The most expensive and critical aspect of the plant– Long lead

– Exotic precision design, delicate

– Basis of plant performance production

Major Equipment Major Equipment – Major Generating Equipment

• May be Pre-purchased by Owner

• Designed & Manufactured by Vendor (OEM)

• & Assigned to EPC Contractor

– Work is performed by pipefitters, steamfitters, millwrights, electricians.

Manhours Total Direct CostSteam Generators (Boilers) 2,742,800 $450,945,000Steam Turbine Generator 212,800 $142,193,000Air Quality Control 978,800 $78,173,000Water Treatment 116,600 $50,667,000Material Handling 1,167,000 $155,508,000Rotating Equipment 102,700 $51,781,000Balance of Plant 91,200 $101,539,000Total 5,411,900 $1,030,806,000

Piping WorkPiping Work2x500 Reference Plant2x500 Reference Plant

– Piping Work Includes• Water, Steam, Fuel and Exhaust Piping

– Work is performed by Pipefitters, Steamfitters and Plumbers

– Advanced metallurgy requires specialty welding skills and procedures (P91)

– Typical plant requires about 771,365 linear feet of pipe.

Man-hours Total Direct

CostPiping 1,699,100 $194,343,000

Electrical and CablingElectrical and Cabling2x500 Reference Plant2x500 Reference Plant

▪ Over 6 million linear feet or over»

1000 miles of cable and wire.

1,110 miles of cable and wire

may be used.

This much wire would stretch from

Denver to Chicago.

Electrical WorkElectrical Work2x500 Reference Plant2x500 Reference Plant

– Electrical and Cabling work includes• Internal Plant wiring

• Internal Power Distribution Cabling & Supports

• Exterior Transmission interface

• Control Wiring

– Work is performed by Electricians and Linemen– Typical plant requires over 6 million lineal feet of

cable and wire.

Man-hours Total Direct

CostElectrical 1,871,100 $195,006,000

Instruments and ControlsInstruments and Controls2x500 Reference Plant2x500 Reference Plant

– Work includes all control system installation for mechanical and electrical systems.

– Distributed Control Systems (DCS) is the brain and nervious system of the power plant.

– Work is performed by specialized control technicians, electricians, HVAC and plumbers.

Man-hours Total Direct CostControls and Instruments 82,900 $23,517,000

Power Plant TotalsPower Plant Totals

Man-hours Total Direct Costs

Site work 588,000 $115,117,000

Concrete 1,105,200 $106,431,000

Steel 240,800 $143,192,000

Architectural Work 83,200 $114,687,000

Equipment 5,411,900 $1,030,806,000

Piping 1,699,100 $194,343,000

Electrical 1,871,100 $195,006,000

Controls and Instruments 82,900 $23,517,000

Miscellaneous $404,777,000

Totals 11,082,200 $2,327,876,000

Coal, Nuclear, Gas

– U.S. Coal plants are aging and though fuel source is plentiful, environmental concerns will hinder future growth of coal plants in the U.S. “Clean coal” technologies are complex, expensive and inefficient.

– U.S. Nuclear plants are aging and regulatory and complexity will hinder future growth of Nuclear plants in the U.S.

– Natural gas combined cycle plants are very efficient, flexible and cost effective to build. With the advent of advanced gas recovery techniques (Fracking) the U.S. is poised to have a new resurgence of combined cycle plant construction in the U.S.

Hydro, Wind, Solar

– Hydro capacity is not likely to increase in U.S. Large dams will not be built in the U.S. in the near future due to environmental, regulatory and cost constraints.

– Wind technology is well developed but over all costs are still higher than fossil plants and this source is largely subsidized.

– Solar technology is still developing and is largely subsidized but PV panel costs are falling fast and both utility and distributed (rooftop) scale implementations are promising

– Storage/availability remains a significant issue for wind and to lesser degree solar

Legal Issues Presented by Legal Issues Presented by Power Construction Power Construction

ProjectsProjects

Owner-Furnished EquipmentOwner-Furnished Equipment

▪ Power plants are primarily equipment plus Power plants are primarily equipment plus connections and controls.connections and controls.

▪ Equipment costs are the largest single Equipment costs are the largest single component of construction costs.component of construction costs.

▪ Owners often prefer to purchase the major Owners often prefer to purchase the major equipment directly.equipment directly.

▪ Owner-Furnished equipment presents unique Owner-Furnished equipment presents unique problems.problems.

Owner-Furnished EquipmentOwner-Furnished Equipment

▪ Worst-case scenario for contractor:Worst-case scenario for contractor:– Owner furnishes equipment.Owner furnishes equipment.– Contractor responsible for delays in delivery.Contractor responsible for delays in delivery.– Contractor responsible for inspection of Contractor responsible for inspection of

equipment upon arrival.equipment upon arrival.– Contractor responsible for storage of equipment.Contractor responsible for storage of equipment.– Contractor responsible for defects in equipment Contractor responsible for defects in equipment

not discovered in initial inspection.not discovered in initial inspection.

Owner-Furnished EquipmentOwner-Furnished Equipment

▪ More reasonable approach:More reasonable approach:– Owner furnishes equipment.Owner furnishes equipment.– Delays are compensable.Delays are compensable.– Owner and contractor responsible for inspection Owner and contractor responsible for inspection

upon arrival for physical damage.upon arrival for physical damage.– Owner responsible for storage until project is Owner responsible for storage until project is

ready to accept equipment.ready to accept equipment.– Owner responsible for latent defects in equipment.Owner responsible for latent defects in equipment.

Owner-Furnished EquipmentOwner-Furnished Equipment

▪ Warranties should always be the Warranties should always be the responsibility of the party furnishing the responsibility of the party furnishing the equipment.equipment.– May be complications due to equipment May be complications due to equipment

connections.connections.– Best solution: contractor warrants connections, Best solution: contractor warrants connections,

owner warrants equipmentowner warrants equipment

▪ Ditto for manuals, training, spare parts.Ditto for manuals, training, spare parts.

Any Questions?

Thank YouThank You