Squeezing Juice from Plants

Asset optimization is a favored utility strategy in an economic downturn.

Generation plant construction has gone down with the economy. "Our project finance pipeline is as dry as I have seen it," says energy analyst Jerry Pfeffer of Skadden, Arps, Slate, Meagher & Flom, speaking at a recent energy conference in New Orleans. He predicts it will take at least a year or two until new construction starts up again in any significant manner.

That downturn can be attributed to any number of factors, from the cyclical nature of business, to the fallout from Enron, to accounting practices. So instead of building new generating plants, companies are turning toward asset optimization to squeeze dollars and megawatts from already existing power plants.

Taking aim at this trend, Fortnightly turned to some top experts to find out how to get the most from power plants.

According to Christopher Grier, a director at Navigant Consulting, the best way now to improve the bottom line is to increase capacity and energy from existing plants. "It's just so much less expensive than building a new plant, plus you don't have all the issues surrounding siting and permitting," Grier says.

He has worked on coal plants in the Northeast and Midwest and found the same drivers of value kept showing up over and over again. Those drivers are somewhat basic-minimization of fuel costs, heat rates, and forced outage rates.