American Bar Association Infrastructure Civil Works Projects for
American Bar Association Infrastructure Civil Works Projects for Lawyers Forum on the Construction Industry POWER GENERATION Presented By: David Crouse Sithe Global Daniel M. Drewry Simmons Vornehm, LLP
Statistics – U. S GENERATED 4, 143 billion kilowatt hours of electricity in 2011 (1. 5 k. W/person) – Sources Generating Electricity – – – Coal Natural Gas Nuclear Hydro Renewable/Other (Solar/Wind ) 41. 6% 25. 5% 19. 1% 7. 8% 6. 0%
U. S. ELECTRIC POWER PRODUCTION 2011 STATISTICS (ROUNDED)
POWER GENERATION TRENDS 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 k. Wh) 4, 143 4, 151 3, 836
POWER GENERATION TRENDS 60, 00 50, 00 40, 00 Coal Natural Gas/Oil 30, 00 Nuclear Hydro Renewable Other 20, 00 10, 00 2002 2004 2006 2008 2010 2012
POWER GENERATION TRENDS Source Coal Nuclear Gas CC Hydro Wind PV Solar Trend decline growth Reason Enviro/Regulatory Price/Efficiency Enviro/Cost Regulatory/subsidy Regulatory/Price
FOSSIL/NUCLEAR ELECTRICITY GENERATION
COAL
COAL PLANT PROCESS (RANKINE CYCLE)
NATURAL GAS COMBINED CYCLE
COMBINED CYCLE (BRAYTON+RANKINE) PROCESS
NUCLEAR
HYDRO
WIND
SOLAR SOURCE: GTM Research and SEIA
BUILDING 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 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? – 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 Type Energy Information Administration, Annual Energy Outlook 2012. June 2012, DOE/EIA-0383(2012).
STEPS IN CONSTRUCTING A POWER 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 & Permits – 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 Generating 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 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 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 (2 x 500) generating plant was estimated to require 898, 200 man hours for design.
Construction – 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 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
Construction 2 x 500 Reference Plant – Mobilization, General Conditions, Demobilization Supervision Misc. Support Startup Temporary Facilities Equipment, Tools & Supplies Total Man-hours 2, 015, 600 1, 222, 000 707, 200 639, 800 0 4, 584, 600 Labor, Mat'l & Equip Cost $163, 851, 000 $82, 055, 000 $69, 029, 000 $82, 761, 000 $124, 437, 000 $522, 133, 000 – Project Duration Approximately 4 years
Site Work
Site Work 2 x 500 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 Site work Man-hours 588, 000 Total Direct Costs $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 Concrete 1, 105, 200 Total Direct Cost $106, 431, 000
Structural Steel
Structural Steel 2 x 500 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 Steel Related Work Man-hours 240, 800 Total Direct Cost $143, 192, 000
Architectural ▪ Then: Design Build, Brick & Mortar, Overbuilt, Cheap Labor, Long Schedules ▪ Now: Fast Track, Prefab Steel, Structurally optimized, Critical Path Schedule
Architectural Work 2 x 500 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 Architectural Work Man-hours 83, 200 Total Direct Cost $114, 687, 000
Generating Equipment ▪ The most expensive and critical aspect of the plant – Long lead – Exotic precision design, delicate – Basis of plant performance production
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. Steam Generators (Boilers) Steam Turbine Generator Air Quality Control Water Treatment Material Handling Rotating Equipment Balance of Plant Total Manhours 2, 742, 800 212, 800 978, 800 116, 600 1, 167, 000 102, 700 91, 200 5, 411, 900 Total Direct Cost $450, 945, 000 $142, 193, 000 $78, 173, 000 $50, 667, 000 $155, 508, 000 $51, 781, 000 $101, 539, 000 $1, 030, 806, 000
Piping Work 2 x 500 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 (P 91) – Typical plant requires about 771, 365 linear feet of pipe. Total Direct Piping Man-hours 1, 699, 100 Cost $194, 343, 000
Electrical and Cabling 2 x 500 Reference Plant ▪ Over 6 million linear feet or over » 1, 110 miles of cable and wire may be used. This much wire would stretch from Denver to Chicago. 1000 miles of cable and wire.
Electrical Work 2 x 500 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. Electrical Man-hours 1, 871, 100 Total Direct Cost $195, 006, 000
Instruments and Controls 2 x 500 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. Controls and Instruments Man-hours 82, 900 Total Direct Cost $23, 517, 000
Power Plant Totals Man-hours Total Direct Costs Site work 588, 000 $115, 117, 000 Concrete 1, 105, 200 $106, 431, 000 240, 800 $143, 192, 000 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 82, 900 $23, 517, 000 Steel Architectural Work Controls and Instruments Miscellaneous Totals $404, 777, 000 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 Power Construction Projects
Owner-Furnished Equipment ▪ Power plants are primarily equipment plus connections and controls. ▪ Equipment costs are the largest single component of construction costs. ▪ Owners often prefer to purchase the major equipment directly. ▪ Owner-Furnished equipment presents unique problems.
Owner-Furnished Equipment ▪ Worst-case scenario for contractor: – Owner furnishes equipment. – Contractor responsible for delays in delivery. – Contractor responsible for inspection of equipment upon arrival. – Contractor responsible for storage of equipment. – Contractor responsible for defects in equipment not discovered in initial inspection.
Owner-Furnished Equipment ▪ More reasonable approach: – Owner furnishes equipment. – Delays are compensable. – Owner and contractor responsible for inspection upon arrival for physical damage. – Owner responsible for storage until project is ready to accept equipment. – Owner responsible for latent defects in equipment.
Owner-Furnished Equipment ▪ Warranties should always be the responsibility of the party furnishing the equipment. – May be complications due to equipment connections. – Best solution: contractor warrants connections, owner warrants equipment ▪ Ditto for manuals, training, spare parts.
Any Questions?
Thank You
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