TOP PLANTS
ELECTRONICALLY REPRINTED FROM SEPTEMBER 2015
Panda Temple I and Panda
Sherman Combined Cycle Plants,
Texas
Owner/operator: Panda Power Funds
Courtesy: Siemens
A market desperate for new capacity. A highly challenging financing environment. A
grid with rapidly expanding intermittent wind generation. ERCOT needed solutions.
Panda Power Funds, Siemens, and Bechtel teamed up to make it happen with a pair
of highly responsive combined cycle plants.
Thomas W. Overton, JD
I
n the early 2010s, the Electric Reliability Council of Texas (ERCOT) was staring down the barrel of dangerously low
reserve margins, a combination of growing
demand and an energy-only wholesale market that was having serious problems adequately incentivizing new generation. In a
well-known incident in the summer of 2011,
ERCOT was forced to cut power to a number
of large industrial users and bring two retired
plants out of mothballs to avoid rolling blackouts at the height of a heat wave.
More bad news came in early 2012, when
an ERCOT report warned that the state’s reserve margin—then hovering around 13%—
could drop into negative territory in as little
as a decade, and would fall under 7% by
2015. And even that narrow margin was an
improvement from a winter 2011 assessment
that pegged it at under 4%.
The difficult environment for financing
new plants was a hot topic of debate during
this period. With the falling price of natural gas depressing power prices, traditional
generating firms loudly complained that
financing a new plant was simply too difficult, arguing that returns in the existing
market were not competitive with other investments. Many believed the solution was
implementing some type of capacity market,
a proposal others considered borderline heresy (see “Challenges Facing Power Generators in ERCOT” in the August 2013 issue and
“Texas and the Capacity Market Debate” in
the February 2014 issue). The Public Utilities
Commission of Texas, which opposed such a
move, instead voted in late 2012 to raise the
caps on wholesale prices from $3,000/MWh
to $9,000/MWh starting in 2015.
What a difference a few years makes.
ERCOT said in its Summer 2015 Seasonal
Assessment of Resource Adequacy that its
reserve margin this summer would be around
12.5%—still tight, but substantially higher
than what had been predicted in 2012. Some
of that improvement is due to lower-thanexpected demand growth, but the extra generating capacity now available is in large part
due to just two plants that added more than
1.5 GW of generation to ERCOT. Dallasbased private equity firm and independent
power producer Panda Power Funds got the
two plants up and running in only two years
and did it in a financing environment that
more risk-averse established firms continue
to struggle with.
High-Power, High-Speed Plants
On the outside, the nearly identical Panda
Temple I (Figure 1) and Panda Sherman
(shown in the header photo) plants, the first
about an hour northeast of Austin and the other about an hour north of Dallas, are typical
combined cycle power plants. What makes
them special is what goes on inside and how
they got where they are.
The two 758-MW, 2 x 1 projects are highperformance Siemens Flex-Plant 30 facilities
able to start faster and ramp faster than earlier
designs, while maintaining strict emissions
compliance and high efficiency. The gas turbines can begin generating electricity in 10
minutes, can reach 60% load (220 MW) in 20
minutes, and hit full load within 30 minutes,
with the plant reaching full combined cycle
power production in under 60 minutes.
At the heart of the multi-shaft plants are
two Siemens SGT6-5000F gas turbines, each
of which feeds an NEM USA Benson heavy
duct-fired heat recovery steam generator, with
the steam powering a Siemens SST6-5000
steam turbine. Siemens also supplied the generators, instrumentation, and control system.
The gas turbines are equipped with Siemens’ Shaping Power feature, which enables
faster ramping without negatively affecting
turbine life expectancy. The design extends
the operating range of the turbine by combining a larger compressor with multiple rows of
variable compressor airfoils. From the baseload design point, the turbine can quickly
ramp down by closing the variable airfoils
and quickly ramp up by using the additional
mass flow through the oversized compressor.
The design incorporates two other key features. First, the oversized compressor adds
generation in excess of the baseload power,
even when ambient temperatures are high—a
key concern in Texas, where summer temperatures regularly top 100F. Second, significant
amounts of power can be quickly and predictably ramped up and down to respond to
intermittent renewable generation—also very
important in the wind-heavy ERCOT market,
which manages more wind generation than
any other independent system operator. The
response time is enhanced because the bottoming cycle is already warm and the steam
TOP PLANTS
1.Power-packed. The fast-responding 758-MW Temple 1 combined cycle plant northeast
of Austin has helped ease the power crunch on the ERCOT grid. A sister plant, Temple II, came
online at the same site this past summer. Courtesy: Siemens
POWER POINTS
Winning Attributes
Critical capacity that was
financed by a unique approach in
unfavorable market conditions
Completed ahead of schedule,
on budget, with no lost-time
accidents
Zero-liquid discharge plant in a
water-constrained region
turbine will automatically follow the gas
turbine. The result is a quick-responding gas
turbine that then produces a fast-responding
combined cycle.
Both plants are equipped with cooling
towers using treated reclaimed water and operate on a zero-liquid-discharge basis. That
limited impact on local water supplies is appreciated in a region that has struggled with
periodic droughts.
Show Me the Money
To develop the two plants, Panda formed a
consortium with Siemens and Bechtel, with
Siemens supplying the power island components and Bechtel acting as the engineering,
procurement, and construction contractor.
Temple I broke ground in September 2012,
with Sherman following that November. Both
plants were completed on budget and months
ahead of schedule, reaching commercial operation together in July 2014. Together, the
projects supported about 1,500 construction
jobs, and both were completed without losttime accidents.
But building the plants may have been the
easy part, because getting the financing in
place proved to be so challenging that Panda
had to set out in an unusual direction to get
it done.
The company was unable to secure power
purchase agreements for either plant, in large
part because of the state of the ERCOT market. Frustrated in its drive to secure conventional financing, Panda took the unusual step
of creating a hedge for the banks backing the
deal. Known as a “revenue put,” the method
functions as insurance for investors on the
plants’ future revenue by setting a floor on
the projects’ gross margins, with Panda holding the bag if income were to fall short.
It was a risky—and expensive—move, but
Panda prides itself on astute risk management. The firm was convinced enough about
the projects’ viability to take the chance. “In
this situation, the reward of being a first mover in a market hungry for new power more
than compensated for the cost involved in
getting the projects financed,” Bill Pentak,
Panda’s vice president of investor relations
and public affairs, told POWER.
When the deals closed and the projects
were announced, Panda President and Senior Partner Todd W. Carter had some choice
words about the experience. “It has been an
uphill battle, in a very difficult financial market, to get this project off the drawing board
and onto the ground. The financing market
that was tough as nails two months ago is
starting to show signs of movement in our direction. While it was still a long, hard march
to closing, calls were coming in to us from
many different quarters to be a part of this
project.”
The deal, having secured financing for two
major plants in a highly unfavorable environment, was widely regarded as a coup in the
finance community. Still, as Carter told the
Houston Chronicle at the time, “This is not
the way to build future power projects.”
Moving On
The difficulties in financing the two plants
were not enough to deter Panda from launching a second plant at the Temple site. Panda
Temple II, a sister to the other two plants,
began construction in 2013 and entered commercial operations this past summer. Panda is
also pushing forward with several other combined cycle plants in the Marcellus region.
Panda Temple I and Panda Sherman are an
illustration that creative thinking and problem-solving still thrive in the power sector. ■
—Thomas W. Overton, JD is a POWER
associate editor.
Posted with permission from September 2015. POWER, Access Intelligence. Copyright 2015. All rights reserved.
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