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Trends

Fortnightly Magazine - April 15 1997

units (em at one-third the cost of building a new plant. Improved availability factors and forced outage rates at existing plants also will provide an additional source of new capacity.

Another source of "new capacity" is likely to come from changing customer demand profiles. In many regions of the country, as much as 10 percent of the capacity in the system is needed during only 1 percent of the hours in the year. In the past, customers paid based upon the average cost of serving their demand. As real-time pricing technology becomes more widespread, the high cost of a utility's inventory will be reflected during these peak hours. This increase in prices may reduce demand during the peak demand hours. Such a change could delay some of the need for new generating capacity.

Because the total uprate potential and changes in demand profiles are limited, there will be a new breed of merchant plants that will need to be developed. Merchant power plants are built without the security of long-term power sales contracts. The primary obstacle to developing these new plants is securing financing for the projects. However, project developers have shown that the financing obstacles can be overcome with innovative financing strategies. RDI has identified more than 25 new merchant plants (em totaling about 5,500 MW of capacity (em that are either under development or already in operation in the U.S. RDI estimates that at least another 5,000 to 10,000 MW are being developed but have not yet been publicly announced. Most of this development activity is concentrated in the Northeast U.S. and the Western U.S. t

Christopher Seiple is principal of the Power Consulting group at Resource Data Internationa Inc. an energy industry consulting and information management firm specializing in fuels and electricity market analysis.

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