GER4208 Creating Owner’s Competitive Advantage through Contractual Services

GE Power Systems

Creating Owner’sCompetitive AdvantageThrough ContractualServices

Harry G. StollGE Power SystemsSchenectady, NY

GER-4208

g

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2GE Maintenance Cost Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Fired Hours and Starts Are Independent Parameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Combustion System and Turbine Hot Gas Components Are Independent . . . . . . . . . . . . . . . . . 6

Merchant Plant Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Contractual Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8New Technology Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Monitoring and Diagnostics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Plant Performance Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Parts Database. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15New Products Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Creating Owner’s Competitive Advantage Through Contractual Services

GE Power Systems ■ GER-4208 ■ (05/01) i


GE Power Systems ■ GER-4208 ■ (05/01) ii

IntroductionDriven by deregulation, privatization, world-wide competition and significant technologicalprogress, the electric power business hasbecome increasingly competitive over the last10 years. In addition, Operation andMaintenance (O&M) expenditures havebecome a more important cost element becauseof the decrease in the two other major life-cyclecost elements. Project capital costs are nearlyhalf of what they were 10 years ago, and fuelexpenses continue to go down as new technolo-gy drives lower plant heat rates. Because thenewer technology class of gas turbines has high-er levels of maintenance requirements and anassociated concern with new technology uncer-tainty, O&M expenditures are becoming a sig-nificantly larger percentage share of the totalcost of electricity generation, as shown in Figure1. Today, O&M expenditures can comprise 15%to 20% of the total life cycle costs, while equip-ment maintenance costs are approximately10% to 15% of the total life cycle costs.

It is important to note, however, that the O&Mprovider has a significantly larger impact on aproject than its costs; the O&M provider is themajor force in driving high availability and sus-tained performance.

GE’s Contractual Services offers creative, con-tractually fixed price maintenance/ operation/availability/ performance services to create abusiness partnership that gives owners a com-petitive advantage.

Operating a power plant has always been a fair-ly high-risk venture. With the introduction ofnewer technologies, especially in the gas tur-bine environment, the risks can be consider-able. New technology brings with it the expec-tation of better performance and a longer lifeof parts in the machines. If these assumptionsare not met, the anticipated benefits from theproject can quickly be erased. Figure 2 illustratesthe Discounted Cash Flow Rate of Return onEquity (DCRR) potential impacts of plausiblebusiness risk scenarios. The project Pro-Forma


GE Power Systems ■ GER-4208 ■ (05/01) 1

COST OF ELECTRICITY TRENDYEAR 2000 FIRST YEAR $/MWH

0.0

5.0

10.0

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25.0

30.0

35.0

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E TECH1,990

F TECH1,995

F TECH2,000

$/M

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in 2

000$ PLANT

O&M

FUEL

COMPOSITION OF O&M EXPENSES

-0.500

0.500

1.500

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1

$/M

WH

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LABOR & MGMT

Figure 1. Cost of electricity trend

may suggest a respectable 22% DCRR. If annu-al average plant heat rate degrades by 3%, theDCRR decreases to 18%. A 4% output decrease,which could be associated with the heat ratedecrease, leads to the DCRR decreasing to 14%.If the availability decreases by 5%, the DCRRdecreases to 9%. Finally, a 15% increase inmaintenance cost because of parts life shortfallsor repairability issues, for example, leads to ananemic 3% DCRR. While these risk elementsare illustrated on the downside, power plantoperations always have a much larger downsiderisk and a smaller upside opportunity.

Risk ManagementThere are any number of ways to manage therisk associated with owning and operating apower plant. The two ends of the spectrum arethe owner who takes on all risks with no insur-ance and no partners versus the owner whodesires to assign nearly 100% of his risk to otherparties. The former results in the lowest pay-

ment for risk management, but also leaves all ofthe risk with the owner. The latter results in verylow risk to the owner, but at a cost that probablyliquidates all of the potential profits or positivebenefits of the project.

The primary goal of risk management is usuallynot at either end of this spectrum, but some-where in the middle, so that the risk is held bythe party who can best manage it in the mosteconomic manner. The primary goal should beto find the optimum balance of cost, risk andvalue for each plant’s unique set of circum-stances. Figure 3 illustrate a range of risk miti-gation tools.

The traditional approach has been Trans-actional. The plant owner with an outage buysthe parts, repairs and services as the plantrequires. The overall objective is a price focus inwhich lowest price bids are solicited for service,repairs and new replacement parts. The ven-dors have little ownership interest other thanobtaining the contract at the lowest cost.



POWER PLANT OPERATION RISK

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

BASE CASE +3% HR -4% MW -5% AVAIL +15% MAINT

SCENARIO

DC

RR

ON

EQ

UIT

Y

Figure 2. Business risk impact on DCRR profitability

Options for providing increased value to theowner are subordinated. This Transactionalrelationship can be extended into a longer termtransactional arrangement by execution of aMaintenance Agreement, which is typically aprice discounted arrangement in exchange fora multiyear volume commitment.

The Transactional approach, however, suffersfrom the business goals being unaligned. Whenthe owner has a problem, such as parts life notmeeting expectations, the Transactional con-tractor makes a profit, and vice-versa. It is farmore economically productive to have every-one working to the same goal.

The Contractual Service changes the focusfrom minimum price to maximum value byaligning the risk/reward goals. In this relation-ship, GE assumes a range of Pro-Forma respon-sibilities for fixed-price maintenance (LongTerm Service Agreement), fixed-price O&Mand performance guarantees (ContractualPerformance).

Many plant owners are mitigating gas turbineand steam turbine maintenance risks by work-

ing with GE in providing Long Term ServiceAgreements (LTSA), as seen in Figure 4. TheLTSA is a fixed-price maintenance contract overa three-year or longer period for plannedand/or unplanned maintenance, including allparts, repairs and equipment servicing. TheLTSA reduces the risks to the plant owner forfuture price uncertainty, technology changesand component parts life.

Many owners are also viewing the additionalbenefits of working with GE in providing long-term Operation and Maintenance Agreements(O&MAs) in conjunction with the LTSA. TheO&MA is a fixed-price total operation andmaintenance contract over a three-year period,including the equipment LTSA, operatinglabor, routine maintenance, plant manage-ment, plant chemicals and direct materials.The O&MA reduces the risks to the plant ownerfor future total plant price uncertainty, planttechnology changes and equipment life.

Each of these agreements may includeContractual Performance Provisions, whichprovide contractual guarantees for achieving



Figure 3. Risk mitigation tools

Relationship Spectrum…

Transactional

Parts Repair MaintenanceAgreement

Potential for Mutual Gain

Goals Alignment

Risk Sharing

LTSA LTSA/O&M ContractedPerformance

Contractual

Value FocusPrice Focus

the Pro-Forma profitability. ContractualPerformance is a key influence in driving highplant operating output capability, high efficien-cy, high plant reliability and availability. Thesecontractual guarantees squarely place GE in thesame Risk/Reward position as the plant owner,thereby creating a partnership in workingtoward the same business goals.

Risk Management not only can significantlyinfluence the operational performance of thePower Project, but it can be a major factor infinancing a project. Figure 5 illustrates theStandard and Poors financial rating of $286 mil-lion of financing for a STAG209FA merchantpower plant for Sutton Bridge in the UK. Thecredit strength rested with the owner’s ability tomaintain high availability and efficiency. The

LTSA/O&M/Contractual Performance agree-ment “transfers virtually all operating risk to GEIIand away from SBP and its bond holders.”

The Sutton Bridge agreement is only one ofmore than 100 units having ContractualServices Agreements as of January 2000, as illus-trated in Figure 6. These agreements have beenlargely contracted during the last three years.During the next three years, GE estimates thatmore than 700 units will have ContractualServices Agreements.

GE Maintenance Cost FactorsThe Gas Turbine maintenance cost can be 60%or more of the total O&M cost. GE mainte-nance recommendations are based on a



FacilityRisks

Customer Risk

GE Risk

Joint Risk

Legend

Range of Products

RoutineMaintenance

DailyOperations

RoutineMaintenance

Unplanned Maintenance

PlannedMaintenance

PartsLives

Price

BOPMaintenance

DailyOperations


Price

BOPMaintenance

DailyOperations

RoutineMaintenance

BOPMaintenance

PartsLives

Price


PartsLives

DailyOperations

RoutineMaintenance


PartsLives

Price

BOPMaintenance

Specify &Bid

LTSA /O&M

PlannedMaintenance

PlannedMaintenance

LTSA Planned Maintenance

PlannedMaintenance

PlantPerformance

PlantPerformance

PlantPerformance

PlantPerformance

LTSA/O&M/

ContractualPerformance

PlantAvailability

PlantAvailability

PlantAvailability

PlantAvailability

Balancing GE and Customer Risk

s

Figure 4. Range of GE products

detailed analysis of each turbine section and thefactors influencing the metallurgy and mechan-ical reliability of the gas turbine.

There are two key concepts in the GEII mainte-nance recommendation:

1. Fired hours and starts are independentparameters.

2. Combustion system and turbine hot gascomponents are independent.

Each of these concepts will be discussed.

Fired Hours and Starts Are IndependentParameters For example, one key factor in turbine bucketrepair/replace lives is hot gas oxidation of thebucket coatings. Another factor influencing

turbine bucket repair/replacement lives is lowcycle fatigue because of starts and stops. Thesetwo factors are independent and, in fact, act ondifferent physical areas of the bucket. Firedhours also contribute to long-term materialcreep, which also affects repair/replacementlives of the turbine hot gas components. Becausethese two parameters are independent, the GEmaintenance recommendations also treat eachone independently. This independence not onlyhas a firm theoretical basis but is also supportedby the historical performance of the 5000 GE-technology gas turbine units. Using thisapproach, GE is able to schedule less frequentmaintenance inspections than manufacturerswho use the Equivalent Operating Hour (EOH)approach, as shown in Figure 7.



Standard & Poor’s has assigned its “BBB” rating to Sutton Bridge Financing Ltds $ 286 Millionguaranteed secured bonds due 2022 … “Ultimately, SBP’S credit strength will rest with its abilityto maintain a high availability and to produce electricity in the most cost-effective and efficientway possible” … the following strengths offset the risks: … “The assumption of risk was madethrough as Operations & Maintenance Agreement (O&M) whereby it (GE) is responsible for allO&M costs in return for a fixed management fee thus greatly reducing technology risk; Theagreement … transfers virtually all operating risk to GEII and away from SBP and its bondholders”… “S&P considers this strategy to be a credit strength..for a facility that may eventuallybecome a merchant plant. GE now operates [56] CCGT plants with over [9.5] GW capacity, at anaverage availability exceeding 95%, hence, it is probably in a better position than any owner-operator combination or other third-party operator to operate a CCGT ...In fact, GE is the largestthird-party operator in the world… The O&M agreement further removes operations risk byrequiring GEII to warrant that planned outages will last no longer than a certain number ofspecified days and that the maintenance cycle will follow a specified schedule. GEII is alsorequired to warrant that the actual Heat Rate for the power plant shall not exceed the plant’scontractual target Heat Rate. Remedies for failing to meet these objectives will be liquidateddamages paid to SBP.”

Global ProjectFinancing

STANDARD & POOR’S

May 1997

Sutton Bridge Financing LTD.790 MW (2) Frame 9 FA+ CC

Analysts: Peter N. Rigby , New York (1) -208-8241.Arthur Simonson , New York (1) 212-20801991,

Michael Wilkins, London (44) 171-826-3528

Risk Management… Contractual Services

Figure 5. Financial risk assessment: Sutton Bridge

Combustion System and Turbine Hot GasComponents Are Independent The GE technology gas turbine combustionsystem is comprised of relatively thin walledsystems that are influenced differently by firedhours and starts than are the turbine buckets,nozzles and outer shrouds. Consequently, GEmaintenance recommendations for combustioninspections are not fixed in relation to theinspections of the hot gas section of turbine.

Turbine Long Term Service Cost is a functionof many variables, including technology, unitsize, covered scope and contractual flexibility.Figure 8 illustrates typical cost trends for severalGE gas turbine models in a STAG 20x configu-ration.

For the same size unit, the F technology main-tenance cost is higher. For example, the 7EAand 6FA are about the same size, but the 6FAmaintenance cost is about 50% higher. This isbecause of the increased cost of the high tech-nology parts needed to implement the higherfiring temperature F technology units.

There is an economy of size in which doublingunit sizes does not lead to a doubling of main-tenance cost dollars. The economy of size isgreatest for the smaller sizes. The economy ofsize for the 6B to 7EA is approximately a 50%economy of maintenance cost for a doubling ofsize, while the economy for the 7EA to 9EA isonly 15% for a 45% increase in size.

The covered scope is flexible to meet owner



Worldwide Presence

Singaporel Exxon - SingaporeIndonesial P.T. Gresik

O&M/LTSA

Central U.S./Canadal WEPCOl Primary Energy

Portsidel Powersmithl Southern Energy Inc.

Nenahl CU/Amocol Polskyl NRG

Morrisl MCNIC Power

Ada

Southeastern U.S.l Florida P&L Cherokeel Florida Power Corp.

Tiger Bayl GPUI

Lake Pasco

l Tampa Electric Co. (TECO)Polk

l Southern CompanyBarry 6 & 7Daniel 3& 4Gulf Smith

TheodoreOlin

l Southern Energy Inc. Mescl Sonat l West Point Stevens

Western U.S.l Carson l Fort Luptonl Greeleyl GPUI Chino

Camarillo l Kingsburgl Newark Group Ind. Commercel PurEnergy Berkeley

Escondido Goal Line Oper.l Sacramentol Shell Martinezl Sithe

San Diegol Southern Energy Inc.

DeltaPotrero

l Stanford Univ. Cardinal Cogen

Colombial KMRPower

Mamonall Intergen

EMCalil Merilectrical EPM

La Sierra

Guatemala l TECO

AlboradaHonduras l PavanaPanama l Copesa

United Kingdoml Sutton Bridgel Great YarmouthNetherlands l Akzo I & II

Thailand l TriEnergyl Air Products

Pakistan l Quetta

Australial Western Mining Co.

Mt. Keith Leinster Kalgoorlie Kambalda Boodariel BHP Pilbara Newman

Ecuadorl Marathon Santo Domingo Santa Elenal Electroquil

Taiwan l Hsin Tao

Southwestl City of San Antoniol Exxon Baton Rougel Mustangl Southern EnergyInc. Brazosl Tenaska

India l United Phos. Ltd.l IPCL

Germanyl VEO Eisenhuttenstat

Argentinal CMS

La Platal Central Puertol Pluspetrol CT Tucumanl YPF Huincul Chihuidos

Chilel GENER

Renca

l East Coast PowerBayonneCamden

Lindenl EMI

Rumford Tiverton

l GPUI Syracuse U.

l S. Glens Fallsl Carthagel MEG/Champion Paperl Roche Vitaminsl Sithe

IndependenceSterlingBatavia

l Southern Energy Inc.CanalKendallBowline

l TransCanada Ocean State Power

l United Illuminating l U.S. Generating

MASSPOWER Selkirkl Westbrook Power l Yale University

Northeastern U.S.

Saudi Arabial PP9

Venezuelal CMS

Margarita

l Sestol Settimo l Porcaril Celanol Milazzol Boffaloral Colognol Nira Montoral Termolil Sulmona

Senegal Republicl DakarIndial HaldiaTurkeyl Izmit

Mediterranean Electric Generating Services

(MEGS) JVItaly

O&MLTSA

Figure 6. GE Contractual Service Presence

risk/reward tradeoffs. Covered scope caninclude planned maintenance only on the tur-bines, can include planned and unplanned cov-

erage and can include or exclude low risk/highimpact scope, such as turbine rotors and cas-ings.



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Figure 7. MS7001FA hot gas maintenance interval

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GE COMBINED CYCLE MODEL

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Figure 8. Long term service cost trends

Contractual flexibility influences the degree towhich GE can implement productivity improve-ments. Some owners insist that serialized partsmust remain within their fleet of units. Otherowners permit GE to use parts throughout theContractual Services fleet. This flexibility per-mits economies through lower parts invento-ries, allows parts to be used sooner and replacedby new technology parts earlier, and lowersrepair costs by removing parts from criticalrepair cycle times. Other contractual flexibili-ties are present that can similarly lead to pro-ductivity improvements.

Merchant Plant PricingLTSA/O&M pricing is structured to flexiblymeet owner needs. When and how the ownermakes money (such as peak summer sales, off-peak curtailments, maximum summer availabil-ity, frequent start-ups/shutdowns or high-costwinter natural gas) is aligned with theLTSA/O&M pricing. This drives the GEContractual Services behavior to mirror ownerbehavior. In this way, the LTSA contractors andowners have a common interest in which each ismaximizing profitability, both their own andeach others’. Pricing flexibly incorporates$/fired hour and $/MWH basis. Where circum-stances require, pricing can also include a num-ber of provisions, such as On-Peak/Off-Peak$/MWH and Power Augmentation Hours.

Most combined-cycle power plants being con-structed today will operate in a competitivepower market, either today or in the nearfuture. Power plants may be dispatched as abaseload 8000 hour/25 start per year plantwhen initially placed into service. As newertechnology plants are added, however, existingpower plants may be relegated to a cycling role.For example, one O&MA “E” technology com-bined cycle plant that operated for 8000

hours/25 starts during the mid 1990s is nowoperating at 7000 hours/75 starts during thelate 1990s and foresees its future role as a 5000hour/125 start cycling plant. Over a 10- to 20-year period, an “F” technology combined cycleplant may evolve from 8000 hours/25 starts peryear to 5000 hours/150 starts per year. In somecountries and regions of the world, hydroelec-tric plants are a dominant provider of electrici-ty. In this case, during dry water years the com-bined cycle power plant may be base loaded to8000 hours/15 starts, while during wet wateryears the plant may be loaded to 4000hours/150 starts.

The contract pricing range is established in dis-cussions with the owner and may be typicallyvalid for factored starts of 50 to 300 starts peryear and for factored fired hours from 3000 peryear to 8000 factored hours per year, as shownin Figure 9. Because of GE’s maintenance costfactors (see Figure 7), the pricing within theHours Limited Operation Region are essential-ly driven by fired hours, and starts has only avery small influence. For operation in the StartsLimited Operation Region, the pricing is large-ly driven by starts; hours has only a very smallinfluence.

This Merchant Pricing algorithm has beenwidely used in many recent ContractualServices Agreements.

Contractual PerformanceThe objective of Contractual Performance is toalign the operational goals of the owner withGE in a manner that provides business incen-tives to enhance power plant productivity. TheLTSA/O&MA can achieve this by using the lat-est technology replacement parts, implement-ing advanced repair and service technology toassure correct parts fit with minimum leakages,using state-of-the-art preventive maintenance



systems and employing GE technical resourcesto quickly provide technical solutions. In addi-tion, the LTSA/O&MA can make investmentsin new technology to further enhance the plantperformance.

The LTSA, however, does not have control overthe plant’s day-to-day operation; it can only con-trol the performance recovery during theplanned outage events. Thus, the LTSA con-tractor performance incentive is typically basedon performance recovery at the key gas turbineinspections. However, an O&MA has daily con-trol of plant operation and therefore can guar-antee daily performance.

The gas turbine performance degrades fromnew and clean performance because of manyfactors, including compressor fouling,increased leakages and airfoil surface finishchanges. Plant operation can also have a signif-icant impact on the performance degradation.Off-line and on-line compressor water washes,inlet filter replacements, frequency ofstarts/stops and plant chemistry can be majorfactors.

Based on the experience accumulated fromtesting gas turbines and combined cycle plants,GE has constructed Performance DegradationCurves. The Performance Degradation is gen-erally evaluated based on the “as tested” per-formance as the plant is turned over from theEPC contractor to the owner at commercialoperation. Figure 10 illustrates the average GEdata trend after an off-line compressor waterwash and based on daily on-line water wash; oneoff-line wash per month; filter replacementsevery two years; a clean atmospheric operatingenvironment free from significant dust, petrole-um and chemical laden particulates; and lowhumidity. The graph is based on Hot Gas PathInspections at 24,000 hours and MajorInspections at 48,000 hours.

Figure 10 indicates that the average degradationincreases to approximately 5% in power outputand 2.5% in heat rate during the first 24,000hours of operation, typically three years for abaseload plant, at which time a Hot Gas PathInspection would normally be performed. Atthe Major Inspection, buckets, nozzles, shrouds



0

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0 2000 4000 6000 8000 10000

FACTORED HOURS/YEAR

FA

CT

OR

ED

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/YE

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STARTS LIMITEDOPERATION

Figure 9. Merchant pricing application

and packing seals are repaired/replaced, restor-ing some of the performance degradation. Inaddition, the compressor casing is removed,and the compressor blading is cleaned andscoured. The compressor scouring significantlyrestores compressor performance, which has alarge positive influence on the entire gas tur-bine and combined cycle plant degradation.While Figure 10 illustrates average performance,individual units may perform better or poorerthan the average.

While Figure 10 illustrates the GE fleet average,at one large “F” Technology plant with an LTSAthe degradation has been significantly less. Thedegradation is measured in this case relative tothe “new unit design guarantee” and includesthe effects of new unit performance margin.The plant began operation in late 1994, andeach gas turbine has accumulated more than24,000 hours and has had CombustionInspections and one Hot Gas Inspection alongwith planned turbine rotor changeouts. Figure11 presents the gas turbine degradation com-

pared to the design guarantee. These LTSAunits have averaged approximately 2% MW out-put degradation and 1% heat rate degradationduring their first three years of operation. On-line compressor water washes are conductedevery two days, and typically two or three off-line water washes per year are performed. Thecompressors have been scoured during thistime period during hot gas inspections, rotorchangeouts and compressor rub inspections,significantly reducing deterioration.

Another form of Contractual Performance isAvailability and Reliability. The purpose is toprovide business incentives to the LTSA/O&MA to enhance power plant availability. TheLTSA/O&MA can achieve this by minimizingoutage duration by project managing the out-ages with high-quality outage service manage-ment, good spare parts availability, specializedlabor skill and quality, and specialized tooling,and employing best practices from the GE fleet.Reliability is enhanced by high-quality stafftraining, advanced preventive management sys-



SIMPLE CYCLE PERFORMANCE DEGRADATION: FOLLOWING OFF-LINE WASH

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% L

OS

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GT OUTPUT

GT EFFICIENCY

HG MIHG

Figure 10. GE Performance degradation curve

tems, parts inventory and GEII fleet feedback.The LTSA site director and O&MA plant man-agement are key resources in driving high avail-ability.

Figure 12 presents several availability statisticsfor baseload 7EA and 7FA gas turbines andcombined-cycle power plants, as collected byStrategic Power Systems, Inc. Presented is thegas turbine Forced Outage Factor, whichincludes only the immediate shutdowns of theunit prior to the next weekend, per theIEEE/ANSI and North-American ElectricReliability Council definitions. Also shown isthe total gas turbine Unplanned Outage Factor,which includes the immediate forced shut-downs plus the unplanned shutdowns that weredeferrable past the next weekend. The total gasturbine unavailability is also shown, whichincludes unplanned plus the planned inspec-tions. Finally, the Total Combined CycleUnavailability is shown, including unavailabilitydue to the gas turbine, heat recovery steam gen-erator, steam turbine-generator and all plantauxiliaries.

The GEII MS7000E/EA gas turbine, introducedto the marketplace in the early 1980s as an evo-lutionary product of the Frame 7 Series, hasbecome an industry leader in reliability andavailability. The 7F was introduced in 1989 andis still in a maturing reliability phase. Also, the7FA is a different frame size and design than the7EA, as is the availability performance. Forexample, a Combustion Inspection on a 7EAunit requires about four days, while the larger7F unit requires about seven days.

The baseload 7EA gas turbines have been aver-aging 95%+ availability with 98%+ reliability,and the combined-cycle plants have been aver-aging 94%+ availability. The 7F gas turbineshave been averaging 93% availability with96.5% reliability, and the combined cycle plantshave averaged 91% availability.

The availability at one GE LTSA “F” technologypower plant has been 94%+ during the last five-year period, several points better than the GEFleet Average. The composition of the unavail-ability causes is shown in Figure 13. Planned out-ages accounted for 60% of the unavailable time,



LTSA EXAMPLE: GT DEGRADATIONMEASURED AFTER OFF-LINE WASH

-2

-1

0

1

2

3

0 5000 10000 15000 20000 25000

OPERATING HOURS

% D

EG

RA

DA

TIO

N

HEAT RATE

MW

Figure 11. “F” Technology performance degradation example

with gas turbine unplanned outages contribut-ing 20% of the unavailable time.

High Availability performance of the plant dur-ing the Summer Peak Demand Period providessignificantly greater value to the plant ownerthan availability during the Spring/ Autumnlow demand periods. As a result, theContractual Performance Availability Guar-antee is structured to provide significant disin-centive for unavailability during these PeakPeriods.

With many plants operating in a merchant mar-ket environment, the sales price can have largeswings. Figure 14 illustrates the trend for theCalPx market during last year. Power rates canpeak above $100/MWH for several hundreds ofhours per year. For many owners, being avail-able on-line to serve this opportunity is essen-tial.

The hourly Spark Spread is generally of greaterinterest to the owner than is the Energy SalesRate of Figure 14. The hourly Spark Spread is



GAS TURBINE AND COMBINED CYCLE PLANT UNAVAILABILITY

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9.00

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GT FORCED GT UNPLANNED TOTAL GTUNAVAILABILITY

TOTAL STAGPLANT

UNAVAILABILITY

% U

NA

VA

ILA

BIL

ITY

7EA 7FA

Figure 12. Fleet availability performance

AVAILABILITY PERFORMANCE F TECHNOLOGY PLANT WITH LTSA

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% O

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E F

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PLANNED

STEAM BOPUNPLANNED

ST-G UNPLANNED

HRSG UNPLANNED

GT UNPLANNED

Figure 13. One example LTSA plant availability performance

the net Operating Profit from operating theplant and is equal to the Revenue from PowerSales less the cost of variable fuel less the cost ofvariable maintenance.

One measure that Merchant Plant owners havefound useful is the Economics WeightedAvailability. The Economics WeightedAvailability is defined as the average hourlyAvailability weighted by the hourly OperatingProfit. This measure evaluates the true eco-nomic value of availability to the owner. TheContractual Performance Availability Guar-antee is focused toward maximizing theEconomics Weighted Availability.

The Economics Weighted Availability can bemaximized in several ways by deferring as muchunplanned maintenance to periods of lowSpark Spread, such as weekends and off-seasonmonths, and by utilizing around-the-clockmaintenance work, the most productive serviceteams and technology tooling to reduce the out-age time duration, and advanced technologyparts that increase the time between outages.

New Technology Tools Contractual Services has placed GEII in a newbusiness with a rapidly growing number of unitsunder LTSA/O&MA contract. As a result, a newemphasis is being placed on developing newtechnology tools to support this business. Thenew technology tools are aimed at improvingreliability and availability, extending parts livesand enhancing plant performance.

Monitoring and DiagnosticsThe introduction of newer high performancetechnologies and the desire for very high relia-bility and availability has led GEII to use the lat-est information technologies and installMonitoring and Diagnostic (M&D) Systems onits O&M and LTSA plants for GE’s use inimproving performance. Figure 15 illustrates theM&D concept.

The GEII M&D system is a diagnostic tool thatcontinuously monitors the internal perform-ance of the turbine to check for performance



Figure 14. California Power Exchange energy sales rate distribution

$/M

W

anomalies. The M&D system has access to thehundreds of turbine instrumentation sensors,such as turbine exhaust temperatures, wheelspace temperatures, bearing vibrations, fuelflow and power output. The On-Site Monitor,which compares actual unit performance withbaseline predictions, provides the first level ofanomaly detection and notification. The On-Site Monitor communicates to the engineers atthe GE Power Answer Center, which is staffed24 hours per day, seven days per week. Locatedin Atlanta, GA., the Power Answer Centerreviews the overall turbine data on a daily peri-odic basis and considers all anomaly events.Experience has shown that small anomalies maybe detected several days before the anomalybecomes large enough to cause a trip of theunit.

Figure 16 illustrates an example of how the M&Dsystem detects combustion system side sealleaks. The exhaust thermocouples show amarked cold spot in the area where a side sealmay have fallen out. After the side seal falls out,compressor discharge air can enter into the firststage turbine nozzle segment and lead to a cool-er gas turbine temperature.

Plant Performance Monitoring

The GE Plant Performance Monitor System isan on-line power plant management softwaretool designed to assist the Contractual Servicesteam in maximizing plant performance andowner operating income.

The system’s primary duty is to daily comparethe current plant performance with the base-



On-Line PowerAnswer Center

ServiceSpecialist

Expert Systems & Data Bases" Customer Site

Monitored DataTrending

" O&M History" Problem-Solution

" EquipmentConfiguration

" Fleet Performance" Parts Catalog" Service

Procedures

• Equipment health assessment• Diagnosis - root cause justification• Prognosis - parts and service

requirements• Service recommendations• Field service coordination

Operator

OSMOn-Site Monitor

• Anomaly detection• Initial diagnostics• Operations history

tracking

FieldService Engineer

• Equipment healthassessment

• On-site testing &repair

• Service logistics

#

#

CommunicationNetwork

✔ Increased equipment availability

✔ Enhanced equipment performance

✔ Increased quality and responsiveness ofservice

✔ Lower and more predictable O&M costs

Life-Cycle CustomerEquipment Service

Figure 15. GEII M&D system

line plant, generally the new and clean plantperformance at the guaranteed conditions. Thesoftware reads the plant Distributed ControlSystem (DCS) parameters based on the currentoperating environmental parameters, includingambient temperature, pressure, humidity andsteam to process, and performs an analysis,which predicts how the plant would be operat-ing at baseline conditions. The system contraststhe corrected actual plant performance to base-line performance and provides information onif, how much and in what way the plant is devi-ating from baseline performance. Informationfrom this comparison leads to corrective actionsthat can save up to hundreds of thousands ofdollars per year. Figure 17 illustrates a typicalCompressor Wash Monitoring to determine themost economic date to conduct the next off-line Water Wash.

Parts DatabaseWith an increasing number of units underContractual Services contract, keeping track ofthe hundreds of parts in each unit is both a sig-nificant responsibility and a significant oppor-tunity for sharing parts among the fleet ofLTSA/O&M units. In response, GEII is popu-lating a Parts Database, which keeps track ofeach serialized hot gas and combustion systempart in the gas turbine. Each part has its expo-sure characteristics tracked as it moves fromone operating year to the next, including inser-tion date, fired hours, starts, trips, fuels, currentunit name and part location within the unit.Also attached to each part is a data base pointerto the shop inspection and repair reports.Figure 18 illustrates a part condition repairreport for a combustion liner.



CHARACTERISTICS OF BROKEN SIDE SEALS: 9FA DLN 2

-40

-30

-20

-10

0

10

20

30

TTXD_1

TTXD_3

TTXD_5

TTXD_7

TTXD_9

TTXD_11

TTXD_13

TTXD_15

TTXD_17

TTXD_19

TTXD_21

TTXD_23

TTXD_25

TTXD_27

TTXD_29

TTXD_31

EXHAUST THERM OCOUPLE

TT

XD

_n

- T

TX

M

BROKEN SIDE SEALS

NORMAL PATTERN

Cold spot develops after the side

seal falls out

Figure 16. M&D system example

New Products IntroductionMany new product development programs areaimed at supporting the Contractual Servicesbusiness including advanced extendor combus-tion systems to eliminate one or more combus-tion inspections, novel ways to clean the com-pressor and reduce performance degradation,new Non-Destructive inspection methods toextend parts life, and improved rejuvenationprocedures to extend parts life.

ConclusionsOperation and Maintenance expenditures cancomprise 15% to 20% of the total life cyclecosts.

There is a growing trend of many plant opera-tors to help control turbine maintenance and

plant operational expenses by having a LongTerm Service Agreement and/or Operationand Maintenance Agreement with the OriginalEquipment Manufacturer. The OEM is in aunique position to best manage the technologyuncertainties and associated cost risks. Not allLTSAs/O&MAs are alike, however, and it isimportant to have a full understanding of theagreement scope.

The LTSA is a fixed-price maintenance contractover a three-year or longer period for plannedand/or unplanned maintenance, including allparts, repairs and servicing of the equipment.The LTSA reduces the risks to the plant ownerfor future price uncertainty, technologychanges and component parts life.

The O&MA is a fixed-price total Operation and



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ACTUALCOMPRESSEFFCY

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Figure 17. Compressor wash optimization

Area Condition Severity Measurement Units Action Repair ShopBody Cracked Light 1 in Repaired HoustonTBC Coating Coating Loss Moderate Replaced HoustonSpring Seal Wear Moderate Replaced HoustonBody Bulge Light Repaired HoustonCrossFire TubeCollar #1 Wear Light Repaired HoustonCrossFire TubeCollar #2 Wear Light Repaired Houston

Date: DWG# Action Turbine # Position Hours Starts Etrips

5/22/97 108E4249G001 Refurbished 296300 2 15831 94 35

Figure 18. Shop repair condition report on a combustion liner

Maintenance contract over a three-year period,including the equipment LTSA, operatinglabor, routine maintenance, plant manage-ment, plant chemicals and direct materials. TheO&MA reduces the risks to the plant owner forfuture total plant price uncertainty, plant tech-nology changes and equipment life.

Each of these agreements may includeContractual Performance Provisions, whichprovide contractual guarantees for achievingthe Pro-Forma profitability. ContractualPerformance is a key influence in driving highplant operating output capability, high efficien-cy, high plant reliability and availability. Thesecontractual guarantees squarely place GE in thesame Risk/Reward position as the plant owner,thereby creating a partnership that is working

toward the same business goals.

Contractual Services has a large emphasis ondeveloping new technology tools to support thisbusiness. The new technology tools are aimedat improving reliability and availability, extend-ing parts lives and enhancing plant perform-ance.

In conclusion, Contractual Services is bringingthese products and service to owners to changethe focus from minimum price to maximumvalue by aligning the risk/reward goals. GE’sContractual Services offers creative, contractu-ally fixed price maintenance/ operation/ avail-ability/ performance services to fuel this busi-ness partnership and create owners competitiveadvantage.



List of FiguresFigure 1. Cost of electricity trend

Figure 2. Business risk impact on DCRR profitability

Figure 3. Risk mitigation tools

Figure 4. Range of GE products

Figure 5. Financial risk assessment: Sutton Bridge

Figure 6. GE Contractual Service Presence

Figure 7. MS7001FA hot gas maintenance interval

Figure 8. Long term service cost trends

Figure 9. Merchant pricing application

Figure 10. GE performance degradation curve

Figure 11. “F” Technology performance degradation example

Figure 12. Fleet availability performance

Figure 13. One example LTSA plant availability performance

Figure 14. California Power Exchange energy sales rate distribution

Figure 15. GEII M&D system

Figure 16. M&D system example

Figure 17. Compressor wash optimization

Figure 18. Shop repair condition report on a combustion liner



GER4208 Creating Owner’s Competitive Advantage through Contractual Services

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