In recent years, our industry has seen a significant increase in investment dollars. Load growth, anticipation of mandatory, more stringent reliability standards and new generators seeking interconnections are keeping engineers at Entergy and other utilities hard at work. We also are seeing engineering firms working at near-maximum capacity to design and build new facilities. At the same time, utility maintenance engineers are trying to extract the maximum value from existing facilities.

Serving as chairman of the Electric Power Apparatus Committee (EPAC) of the Association of Edison Illuminating Companies (AEIC) provides me the opportunity to network with AEIC member utilities. At the same time, EPAC maintains a close working relationship with 26 of the electric equipment and material suppliers and manufacturers who represent major market players serving our industry. This collaborative effort helps us maintain a strategic technical-business focus. We track technology innovation and market trends while maintaining a dialog with these important vendors. Our EPAC members have collected data that shows the constraints we face as we continue to construct and maintain our power grid.

AGING TRANSFORMERS AND BREAKERS

By the year 2010, about 75% of our industry's large transformer fleet will be more than 40 years old. We face a similar situation with circuit breakers, about 60% of which are more than three decades old.

When we consider that typical age-related failures begin to accelerate after 40 years, we can only conclude that much of our fleet is at risk of increasing failures, which will affect costs as well as our ability to deliver reliable service. Of the several types of aging units, generator step-up transformers on our lowest-cost base-load units are most at risk because of their almost continuous operation near maximum loading. While this is cause for concern, EPAC member utilities are using fleet-management tools and techniques that — when tailored to specific-aged transformers — monitor key vital signs enabling us to take action when appropriate, thereby lowering the risk of failures, and in many cases, prolonging the service life of these vital and expensive assets.

Even with such prudent management of these assets, equipment does reach the end of its useful life. Whether we are building new facilities or replacing existing equipment, there is going to be a growing need for new lines, transformers and breakers. So, what are we facing in terms of prices and delivery?

HIGHER MATERIALS COSTS, LONGER LEAD TIMES

We have seen prices for copper rise by a factor greater than five over a five-year period. We are seeing similar patterns in other key commodities, including aluminum up by 187% and steel up 200% over five years. These cost trends are driving equipment prices up by as much as 90% for power transformers, 60% for steel structures, and 20% for transmission line conductor over the past two years.

CONSIDER VENDOR ALLIANCES

Utilities planning major transmission facilities construction over the next few years would do well to consider establishing an alliance with a major equipment vendor. Right now, the spot market on medium-power transformers can be as long as 42 weeks from order to delivery. For large extra-high-voltage (EHV) auto transformers, expect delivery lead times up to 58 weeks or more. Lead times for high-voltage and EHV circuit breakers on the spot market are presently up to 28 weeks. A solid alliance may yield a reduction of 30% to 40% in these lead times, as well as the flexibility to swap delivery slots around with the vendor to better manage the overall portfolio schedule.

Another important benefit of an alliance relationship includes the ability to work with the vendor to incorporate specific technology improvements into the product line that you want to see. If you're a small purchaser, consider getting into a partnership with other purchasers of similar size or even outsourcing your substation project on a turnkey basis to a major consulting firm, who will have these kinds of alliances and partnerships in place.

Utilities are challenged to find the resources and the manpower needed to rebuild aging and overstressed grid components. The difficulties we face can be more easily addressed by collaborating with one another, by working through our associations such as AEIC, and by working closely with our vendor partners.

Douglas Mader is director of technology delivery and business unit CIO for Entergy Services Inc. His areas of special expertise include power-system engineering, planning and electromagnetic transients simulation and insulation coordination.
dmader@entergy.com