Gavin McCollam: I would just say in my opinion it’s a very exciting time to be to be in the industry. I remember the times when in the mid-90s nothing was happening and it kind of flipped pretty quickly and now it’s hard to keep up. But there’s nothing that engineers like better than to build things. And so it’s a really exciting time to be an engineer and it’s a very exciting time to be in the power industry for sure.
Tamra Reynolds: That’s Gavin McCollam, the chief operating officer with Basin Electric, a generation and transmission cooperative based in North Dakota. It’s owned by 139 member co-ops across nine states, serving 3 million consumers. The cooperative’s mission is to provide reliable, affordable power, products, and services to sustain the quality of life for its member-owners across rural America.
But in an age where electricity demand is growing at a faster rate than it takes to stand up a new power plant, how are they getting the job done? I’m Tamra Reynolds, a managing director at CoBank and as always, I’m joined by my colleague, Teri Viswanath, CoBank’s energy economist. Hey Teri.
Teri Viswanath: Hello. Tamra, Jeff Johnston and I spoke at the G&T Accounting and Finance Conference in Ohio last month on how utilities can understand and manage the risk associated with data centers. Gavin and George Ransom — he’s a strategic planning expert at Burns & Mac — they both gave a really impressive talk about the next power plant new-build cycle, what’s it going to look like, what does it mean. And Basin’s perspective on developing that power supply. It was really a dynamic discussion and I wanted to capture some of the highlights o that conversation on this podcast.
Reynolds: You know Teri, this topic is really timely. Earlier this month the U.S. Department of Energy released its Resource Adequacy Report highlighting that an additional 100 gigawatts of new supply is needed by 2030 to meet the growing demand. But what are practical steps that electric co-ops can take to shore up supply? That is exactly the conversation that you had with Gavin as our listeners will hear.
Viswanath: I thought what was really interesting about the conversation you had with the G&T Accounting and Finance you actually started the conversation looking at existing generation. I’d like to hear your perspective on why you thought it was important to start our conversation there.
McCollam: Some of us have been around long enough to remember kind of the 80s and 90s, even kind of into the early 2000s, when everything was about efficiency. Almost every plant was running base load and “heat rate was king.” So you did everything you possibly could to get every ounce of electricity out of every pound of coal or gas that you put in. It was all about efficiency.
Then in the early teens and such, it became about viability. How viable were your plants? Could you get them into the market so they were called on. Could you make the plant ramp rates different or better? Could you run the plant at a lower minimum to get called into the market? So it was all about viability. How viable could your plant be.
And then you know in the in the last I’d say five years — post-COVID for sure — loads are increasing more and more across the across the U.S., plants are being closed. So there is not much excess power available in the markets. So it has quickly pivoted to “how reliable can our existing plants be.” We need to make sure we do everything we can to keep them reliable, spend as much money as we can sensibly to keep them running. It’s been kind of an interesting progression over the years from efficiency to viability to now reliability.
Viswanath: You focus in on forced outages, right? And taking a look at how we can minimize those forced outages, the unplanned outages. And I think which is fascinating is in my mind, I love that you said five years ago because in my mind in 2020 something really interesting happened, which is I think it was March, Friday the 13th, right? March 13th that the world seemed to stop. But from an engineering perspective, from a plant operator perspective, man, that is just a cycle when we start to taper into our spring maintenance season. And so all of a sudden and you tend to work in a tight environment, you know plans kind of got scuttled for that. You know that it seems like we might be still in that cycle of making up, making sure that we do the work we need to do to keep these plants operating.
McCollam: Yeah, you’re exactly, you’re exactly right, Teri. I mean we were, we were not alone in that time frame when 2020 came and COVID came we had, we had outages scheduled that we that we skipped, you know we said we can’t have 800 workers coming to the facility. And so a lot of us in the industry did that very same thing. And so then when 2021 and 2022 come along and everybody’s, you know, trying to kind of catch up on on things. So what we’re currently doing, we’re taking a look at our outage cycles, how long, how long between outages. We used to be pretty consistent about three years. This is the coal plants I’m talking about now — about three years between outages. We went through a period of time when they weren’t called upon as much and they weren’t getting called into the market as much. So we extended those out in some cases to every four years. So we are revisiting that decision. In fact we’ve decided on a few of our coal plants to go back to the three-year cycle to improve overall reliability, keeping in mind that it takes at least an outage cycle or two almost before you kind of see the fruits of your labor. You know it doesn’t instantly turn around. So that’s one thing that we’ve done.
We’re taking a really close look at our critical spares, how much inventory we have for items that we call like single points of failure. Now it’s a little tighter supply chain everywhere you go, and so we’re looking at those sorts of items, identifying them, developing a program to make sure we have more of those on hand.
We’re looking at one of the one of the things that brought us down more often in the past probably four or five years are tube leaks. This is at our coal plants. So we’re looking very, very closely at tube leaks, how they’re trending. To identify the causes of each tube leak and how we can, how we can prevent them from happening.
We’re looking at acoustic monitoring so we can identify a tube leak kind of at the early stages and then we can kind of plan to bring it down and fix it.
We’ve been doing a lot of benchmarking. A few years ago, I started a program where we just go out and visit our co-op peers. Kind of share some best practices with each other and that’s been pretty beneficial.
And the last thing that I think is maybe worth mentioning is, is we are starting a formal reliability department. We have several coal plants and a big, pretty big gas fleet out in the in our service territory and we have little pockets of expertise on reliability and depending on how energetic one person is, they might run off and develop something that’s really great. We want to centralize that, want to share best practices across our fleet and utilize best practices from our peers to set up a program that systematically tracks reliability and unearths areas where we can improve it.
Viswanath: What was fun to see is that you had this terrific slide that shared the work, collective work that Basin has been involved in with regard to developing gas generation projects, so the execution pathway over the past two decades and then kind of brought the audience up to speed on two projects in particular, Pioneer and Bison. Your Pioneer Generation Station is commissioning now, I think you mentioned.
McCollam: It’s kind of like two projects going on at the same time, on one side of the site there is a six-pack of 819 MW reciprocating engines. That plant went operational in April. On the north side of the facility there is 2F class Siemens gas turbines. One of them was commissioned in June and one of them is going to be commissioned in August. So, we are deep in the throes of commissioning and start up for that particular project as we speak.
Viswanath: That’s exciting. And breaking ground, I think on Bison, is that correct?
McCollam: Yeah, breaking ground on Bison in hopefully, probably in August, September, October time frame where we can start breaking ground and doing the initial grading, we won’t be able to do piling or anything permanent, so to speak, until we get the air permits or that’ll probably be January of next year.
Viswanath: So, I was part of that merchant build out in the late 90s and 2000s with the gas-fired generation, and this is probably a different world. I’d like to just have you sort of “big picture” how the world is different in terms of developing today, since you have that perspective and that would be really helpful. And then some of the ways in which you’re trying to work through the challenges you have today. So how is the world different?
McCollam: I can speak from the Basin perspective. We weren’t too involved in the original gas bubble of the late 90s and early 2000s. Our loads at that time were fairly steady. We didn’t have a lot of growth. So we didn’t get to partake in that fun necessarily.
We did begin to see our loads grow in the early 2000s, however, kind of starting in kind of eastern South Dakota area — where we put Groton a couple LMS 100s. In fact, we were the launch customer for GE’s LMS100s for the Groton generation site. So that was in the in the early 2000s and then the Bakken area of North Dakota, western North Dakota really started to grow dramatically in the early 2010s, when we started building out in that that area of the state and even in eastern Montana. So we were fairly consistently building power plants from the year 2005 up until today.
It’s changed a lot in the time it takes to get anything done. We put a lot of small units up as quickly as we could get them put up, we could build a project in a couple of years like a simple cycle LM 6000 we could set up, you know, 18 months, two years. So, the biggest change between that build out and today, well, there’s two big changes. One of them is obviously cost that the cost of all the equipment is going up dramatically. And the other is time. It takes an awful lot more time for the long lead time items, the turbines, the transformers, even breakers, all that equipment that you could usually count on, maybe an 18-month lead time, you could plan for that. Now it’s three, four, five years, who knows? And so, it certainly causes you to move a move a lot quicker on the front end of developing projects in order to meet a timeline.
Viswanath: I’m going to guess that for those organizations that have not developed or not in that constant development cycle, they might find themselves even more on their heels rather than their toes in terms of getting off the blocks and getting on to development.
McCollam: Yeah, I would say so. We’ve been fortunate to have good partners over the years. We’ve worked with all the engineering firms. We worked a lot with Burns & McDonnell recently. We’ve worked with Sargent & Lundy in the past and those sorts of entities are very good to work with.
Viswanath: It was a very generous conversation that you had with the G&T audience and part of it was just offering this: Making sure you choose the right collaborative partner to work with. It’s going to help you get where you need to go. But also you talked a little bit about, you know, cost containment, right? It’s really easy for these big projects to all of a sudden, the cost to begin to spiral. Could you talk to our audience a little bit about those tips?
McCollam: You know the past 15 years or so, inflation rate was a little more well known. You could look at a past project and you could say, “OK, the gas turbine cost was X amount three years ago. That means it’s going to cost X plus certain percent this year.” So you could almost take any project and work your way through an estimate just on history and you kind of know what the cost to build something, you kind of know what the equipment cost and you could apply an escalation rate and get to where you are today.
We discovered that that wasn’t possible on these two recent projects, the market was really ramping up quickly. The cost of everything was going a lot higher, a lot faster than anybody realized. The labor force was being drained, so to speak, post COVID. Everybody was building everything. So it was it was not only hard to find equipment, it was hard to find labor.
So what we did was — to our management and our board’s credit — we ended up going out for bids for all the long lead time equipment very, very early and that got us a price that we could rely on. We had bids in hand, so to speak. So we even before we knew what the entire project was going to cost on both for Pioneer and for Bison, we went out for bids on a lot of equipment. The board authorized funds to do that even before we knew how much the whole project was going to cost. We did give them a range that the project would cost, you know, between point A and point B. And we think this is where it’s going to land, but we won’t know until we go out for bids and we do a lot of engineering to get some pricing on even labor and construction.
It was a different way of doing things for us. It certainly required a lot of trust from our board to start buying equipment even before we knew what the total price was going to be. But it set us up to have a reliable cost for the project when we finally got authorization for the entire project.
Case in point is Pioneer, the budget that was authorized was about $805 million, and we are coming in probably at about $795 million so about $10 million under. And in it we had a solid, solid estimate, solid project and stuck to the plan and it looks like it’s going to come in right on the button. So that’s so that’s a good thing.
Viswanath: I like the idea of identifying those major costs, component costs and going after getting those nailed down. You also mentioned labor. I would imagine in your area of the world, so part of it is you do have oil and gas activity occurring in the Bakken and that’s amazing and it it’s going to lead for growth for Basin, but it also would seem to be a problem in terms of a hard scramble for that technical labor. So from the labor front, any tips there?
McCollam: I think the only tip I have is to take what you thought you knew about the labor force and throw it out the window. And spend a lot of time with talking to firms you know, basically knocking on doors. We basically had to prove our project to firms. You know, it used to be in the old days you’d put out an RFP and you’d get a bunch of takers, and now you put out an RFP and maybe you’ll get one and maybe you’ll get none.
And then you have to rethink and basically go have to go out to these firms and sell our project. That we can incent your firm and your workers to come work for our project, whether it’s per diem or whether it’s a certain contracting strategy or certain hours. You know, maybe it’s 10s, maybe it’s seven 12s or you know, whatever, whatever the flavor of the day is that will entice workers to come work on your project. You have to kind of be flexible on how you arrange that and how you set that up.
Viswanath: That’s an interesting problem to have and especially in this time with multiple opportunities in the marketplace, so figuring out how your project can stand out.
Another area I think which is important is once we build these projects, making sure that the transmission is walking along in lockstep with the development occurring.
McCollam: It always seems to kind of go kind of like a seesaw almost. I mean, you build a lot of generation and then you build a lot of transmission, then you build more generation, then more transmission kind of seems to kind of ebb and flow back and forth.
In our case, with the Bakken exploding as quickly as it did, we were building generation as fast as we humanly could. And then the congestion starts to occur and so then you know that that makes itself visible in the transmission models. And then the model will tell you to build some transmission.
So in our case, during that 2005 to 2015, 2016, 2017 time frame, we were building on this generation and then we built a pretty large transmission line to serve the area, a 345 line. There was still a lot of congestion in the area and then the models showed that we needed to build some more 345. So we added that in the past couple years in the Badlands of North Dakota. And then we are currently working on a 345 line to basically go around, if you’re familiar with North Dakota geography, goes around the north side of Lake Sakakawea Reservoir and the Missouri River. That you have the transmission in place when the generation is online. It takes a lot of a lot of planning and sometimes some good luck to get that all to work to timing to work out right. In our case, we’re going to be tying in Bison in 2029, the first unit. And that will be good timing because we’ll have this 345 loop complete by the end of next year.
Viswanath: What are your thoughts about the future with regard to the generation you’re building today?
McCollam: I feel good about the generation we’re building today. One thing that we did with Bison that we hadn’t done in many years was we are building at scale. I feel good about that project, I feel good about the process that we went through to identify the location and the need for that project. And we have a good — I’ll use the term reference plant — we are using that design for Bison for our thoughts for the future. If we want more megawatts, you know, in three or four years after Bison, if we need 1500, we’ll just cut and paste Bison. So we’re utilizing the work that we’ve done now for the future.
Viswanath: You know what’s really exciting to me is that you talked about this mindset that Bison kind of represents. We got really excited for a moment with modular design, the idea that we can kind of develop in a warehouse some standardization and just continue to manufacture power plants. But it starts with a shift in mindset, and the mindset idea that if we have a framework of what we can really execute modularity in our mindset about coming out with a Bison that can be replicated multiple times. We can be efficient, we can be agile. That’s exciting to me.
Reynolds: Teri, I was particularly interested in this last part of your conversation. Gavin talked about this intentional focus on using planning aspects of the Bison project that could be replicated for other future projects. That’s interesting.
Viswanath: It really is. And we’re looking for ways to create a factory-approach to delivering power plants that can be quickly and efficiently brought to market. Another interesting part of our discussion was the idea of nailing down those big purchases as quickly and affordably as possible and giving the development teams some flexibility on their approach to sourcing.
Reynolds: Well, this conversation will not be the last time we discuss power supply. I do hope all of you have enjoyed this conversation and will join us again next month as we sit down with CoBank’s Jeff Johnston, hearing his insights on electric cooperative broadband project valuations, and what the competitive landscape looks like today.
Viswanath: That is going to be a really great conversation, and I hope all of you will join us then. Bye for now.
