Winds of Change Blow Electric Company to Underground Cable Provider
The winds of change have been blowing at Consulting Engineers Group (CEG) for five years.
The winds of change have been blowing at Consulting Engineers Group (CEG) for five years. And ironically, these winds have brought…wind.
CEG is a wholly-owned subsidiary of Dakota Electric Association, a provider of high-quality, high-tech transmission and distribution engineering to the utility market. CEG has turned its attention to the growing wind power market in the past five years–more particularly, designing and building wind farms.
"It is far and away our biggest area of growth," said Vince Granquist, a vice president and senior project engineer with the Farmington, Minn. based firm. "At this point, it is probably over 75 percent of the company's focus."
But Why Wind Farms?
"I happened to see a wind turbine was planned for Carleton College, a private, liberal arts college in Northfield, Minn.," Granquist said. "I live in Northfield and know all these people. Once we became interested in that project, it snowballed as we talked to other people building small, wind-related projects in southwestern Minnesota."
Once CEG began its wind farm journey, it gained valuable expertise that only could be acquired through firsthand experience. A key find of CEG engineers was that designing and installing collection systems, including the 35-kV cable portion and the substations and transmission line work that accompanies it, is one of the most critical aspects of a wind farm project. To support this function, CEG purchased hundreds of thousands of feet of 35-kV underground cable. Although the cable is a critical system component, it is a standard utility product used to connect the turbines, both to each other and back to the substation.
Because this cable is viewed as a commodity, there are many reputable suppliers capable of providing a reliable product. Regardless of whether the end product is a cutting-edge wind farm or a traditional electric facility, the standard utility cable will do the job. But how does a company determine which supplier is best? One thing Granquist knows for certain: While pricing is important, it is by no means a make-or-break purchasing parameter.
"Certainly, companies are always looking for the best possible price to lower total project cost," Granquist said. "For a typical 100-MW wind farm, there can be about $1 million worth of underground cable, so the pricing difference between two suppliers can be noticeable."
"On the other hand," Granquist said, "for a 100-MW wind farm, there's going to be about $8 million in total electrical work, so the decision is not entirely price-sensitive. The level of service matters much more than another tenth of a cent reduction in product price."
When CEG was relatively satisfied with its cable supplier in 2005, Granquist became familiar with Hendrix, a medium-voltage (MV) underground cable business based in Milford, N.H. Hendrix's local representative, Chuck Healy of Minneapolis-based ElectroTech Inc., began talking with CEG and asked that they listen to what Hendrix had to offer. Thinking that Hendrix might be a good fit for CEG, Granquist agreed. After all, Hendrix had offered competitive pricing for CEG's wind farm applications, as well as management for all the delivery and scheduling issues.
Discussions with Hendrix left CEG pleased with the quality and pricing of Hendrix's 35 kV cable. What's more, Hendrix was excited about the prospect of having another wind farm customer. The first purchase order from CEG came in June 2006.
While the relationship between the two companies smoothly moved forward, Granquist soon learned what truly separates a good vendor from a great vendor. The difference lies in the value-added services offered by the vendor to back up the product, as well as the unique delivery requirements of the wind farm industry.
During the second year of the relationship, Hendrix introduced two additional services to CEG that sealed Hendrix's status as a valued CEG partner: Bill and hold and capacity planning.
Bill and hold, quite simply, is a means of adjusting for the uncertainty in project lead times vs. cable lead times. "Hendrix builds the cable based on the scheduling needs of a given project. The company then holds the cable on-site, free-of-charge, for an agreed time frame. This program has provided CEG with the certainty of cable availability combined with the flexibility to react to unplanned events," Granquist said.
This option gives CEG the ability to work within its clients' production schedules, which are often erratic, by providing what is essentially just-in-time delivery of the cable to the jobsite when the time is right–not just in terms of actual installation but ensuring someone is at the site to take delivery.
"Cable manufacturing will consume a fixed amount of plant production time from when you issue a purchase order," Granquist said. "You usually issue a purchase order with a notice to proceed contract, but without necessarily having everything nailed down as to when work will begin at the site. It becomes necessary to have the cable ordered with the distinct possibility that, even though the cable is ready, the site won't be available until the following month. In some cases, the delay might be as much as two months."
The typical process would call for the vendor to manufacture the cable and deliver it to the job site, despite the fact the site might be unprepared and be nothing but a cornfield. This would require companies such as CEG to make alternative storage arrangements. It also means locating someone with equipment capable of unloading and moving thousands of pounds of cable. In this case, the cable could sit for a month or more at the job site with no one to watch it, exposing it to damage or theft.
"Delivering the cable directly to CEG in Farmington would be a possibility, but it would have to be moved a second time to the job site. Few people want to pick up and handle cable twice, incurring further cost," Granquist said.
Capacity planning is another service that provides CEG with a greater measure of control over the sometimes uncontrollable scheduling of wind farm projects. This option provides CEG with access to the Hendrix production schedule on a regular basis, allowing CEG to modify items and quantities to respond to multiple wind projects in development.
"If I suspect a few projects are likely to be released over the course of the summer and fall, I can work out what I think might be the basic cable order, even if the projects aren't definite," Granquist said. "I can say to Hendrix, 'From a capacity planning point of view, plan on taking up a couple of slots in late July to deliver cable to me in early August, and I will confirm it on June 1.' That way, Hendrix can have an idea of what CEG needs for possible production. In the event one of those slots doesn't work out, we have at least established a fish-or-cut-bait date so it doesn't become an economic problem for Hendrix".
"Essentially, we needed a procedure to address the fact that we know we're going to do something, but frankly, until people stop moving turbines and tell us to go ahead, we don't know exactly what. A vendor, therefore, with flexibility in terms of how we fit things through their system and get it out the other side is extremely useful."
These two programs, along with the consistent quality of the cable and the ability to produce specific lengths–with virtually no overage costs–have helped Hendrix and CEG forge a mutually beneficial partnership. Hendrix's knowledge of the wind farm market and the challenges faced on the job site is an advantage that cannot be overstated.
"Most of the firms that supplied primary cable to the electric utilities now supply it to the wind farm industry as well," Granquist said. "But it helps that Hendrix has been doing it long enough that we can have shorter, more productive conversations. We no longer have to work through the same issues over and over again. They know how the wind power industry works in terms of cable requirements that are unique to an industry whose projects are out in the middle of nowhere and released on a variable schedule. That's pretty handy to have."
In the end, CEG and Hendrix have both gained insight into each other's world. CEG has learned about cable manufacturing, and Hendrix has become more knowledgeable about wind power project management. Through this close-knit relationship, both companies have crafted a unique approach to serving the wind power market.