Benchmarks

Strange bedfellows may provide a new supply option.

Justifiable concerns associated with high natural gas prices have led analysts to consider the implications for new capacity development over the next decade. Expectations regarding the continued dominance of natural gas-fired units have begun to change. For example, in its , the U.S. Energy Information Administration (EIA) expects 112 GW of new coal-fired generating capacity to be constructed between 2003 and 2025-a 51 percent increase over EIA's 2003 forecast. Despite the recent lapse of the production tax credit, wind power also is a strong candidate to displace future gas-fired investments. According to Platts Research & Consulting's , the domestic wind energy portfolio has the potential to grow from 6.2 GW to more than 25 GW by 2010.

The low cost of both coal and wind make them well positioned to play a role in supplanting gas. However, the development of these resources may proceed in an unexpected manner. That is because most of the nation's high-quality coal and wind resources are co-located in remote regions such as the Upper Great Plains and the Rocky Mountains. These typically transmission-constrained locations are far from load centers. This opens the door to the possibility of developing new transmission capacity to deliver both resources to the market simultaneously. New transmission investments associated with combined coal-wind development can be made economically feasible by the high utilization rates associated with the delivery of baseload coal, and socially palatable by the delivery of emissions-free wind energy. Indeed, joint development may be the key to unlocking the nation's vast untapped coal and wind resources.

Further, our research indicates that coal and wind could be co-dispatched to deliver a bundled non-intermittent energy product to the market. To do this, coal plants must be able to dispatch inversely in response to variations in wind farm output. Based on a series of interviews with coal-fired power plant equipment suppliers and operators, we estimate that new coal plants have the ability to adjust output by 1.5 to 3 percent of their rated capacity per minute without experiencing efficiency degradation or cost increases. This means that a new 500-MW coal plant will have the ability to ramp at a rate of 5 to 15 MW per minute. How does this compare to expected variations in wind farm output? Our analysis of minute-to-minute output for two large wind farms in the Midwest indicates that 97 percent of all wind speed variations are clustered around 1 percent of rated wind farm capacity. This means that the output from a 100-MW wind farm can be expected to vary by 1 MW or less 97 percent of the time. Given this analysis, it appears that a new 500-MW coal-fired plant with a 5- to 15-MW/minute ramp rate can match variations of wind-farm output the vast majority of the time. If the goal is to deliver a non-intermittent bundled energy product to market, then the key in joint coal-wind development will lie in sizing the wind farm relative to the coal plant to ensure wind output variations do not exceed coal