Steep environmental costs mean coal-fired power's competitive edge will drop by half.
A mid increasing pressures to reduce costs, the competitive positions and profitability of U.S. coal...
and 21.6 percent (49,627 gWh) of the regions electric output. The list includes 20 coal-fired steam units, 3 nuclear plants and 3 small gas-fired facilities (em seven of these generating plants recorded capacity factors of over 60 percent in 1995. This capacity is operating today because utilities are capable of recovering all of their costs from their existing ratepayers. Unless the utilities are able to significantly reduce operating costs or restructure fuel contracts, it is likely that the reserve margin in the region will shrink more rapidly than forecasted and opportunities may be created for new merchant power plants.
Other regions identified with capacity at risk include the Arizona/New Mexico (30.6 percent), Florida (18.4 percent), Northeast Power Pool (16.7 percent) and the New York Power Pool (15.8 percent).
Coal and nuclear plants account for more than 87 percent of the capacity at risk nationally. The majority of at risk plants are coal-fired - 56 percent. However, the plants with the highest on-going costs tend to be nuclear. Ten nuclear plants would need to generate nearly $100/kW-yr from capacity markets just to recover their on-going costs.
Though capacity is considered at risk in some regions based on projected market conditions, the opportunity to develop new projects depends more readily on a combination of existing high cost capacity, thin reserve margins and the availability of competitively priced fuel. Whatever the final shape of the electric industry, it is paramount that generators compete on the basis of on-going costs. t
Kent Knutson is senior vice president and Chris Seiple a senior consultant at Resource Data International, Inc. an energy industry consulting and information management firm specializing in market and competitor analysis.
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