[BETA] Fortnightly

An analysis of the timing, location, and mix of new capacity additions that may be needed in the future.

It is universally accepted that there is excess generating capacity in most, if not all, regions in the country. Looking forward, several obvious, and interesting, questions arise: (1) When will new capacity be needed? (2) Where will it be needed? and (3) What types of plants will be needed? As any good economist would say, it all depends. We have attempted to address these questions under a range of assumptions regarding future environmental regulations, natural gas prices, and the cost of a new generation of nuclear plants. Depending on how events unfold, the timing, location and mix of new capacity additions could be quite different. To address these questions, we start from our most recent, end of 2003, assessment of announced plans for new generating plants and modifications to existing facilities. We assume that plants reported to be under construction will enter service as scheduled. We have incorporated these plans into our company's proprietary Electric Power Market Model of the United States and Canadian electric grids that consists of 33 interconnected power markets. We projected when, where, and what types of new capacity would be needed in the U.S. and Canada in addition to those units under construction. The analysis also was based on projections of demand growth from the North American Electric Reliability Council (NERC) and future fuel prices, as well as the costs and characteristics of new generating options from the U.S. Department of Energy's Energy Information Administration (EIA), and its .

Not More Than a Gigawatt in the Beginning

So, what does this portend for the future? Simply stated: very slow growth over the next three to five years for new capacity over and above units currently under construction. Our analysis shows, for what we refer to as the Reference Case, that by 2006, less than a gigawatt of additional new capacity would be needed over and above the 81.8 GW under construction and currently expected to be in service by 2006. This additional capacity would be located in three regions: Florida Reliability Coordinating Council (FRCC), Mid-American Interconnected Network (MAIN), and Western Electricity Coordinating Council (WECC) and would consist of a mix of single-cycle combustion turbines and renewable resources. The additions by type, period, and by NERC region are summarized in Tables 1A and 1B, respectively.

After 2006, the need for new capacity picks up, but not significantly until after 2009. From 2007 through 2008, an additional 3.7 GW of new capacity would be needed, and another 10.6 GW by 2009. These needs for additional new capacity are located in all but three of the NERC regions: East Central Area Reliability Coordination Agreement (ECAR), Mid-Continent Area Power Pool (MAPP) and SPP (Southwest Power Pool).

Ater 2009, however, the need for new capacity accelerates-an additional 23.6 GWs will be needed in 2010, another 47.3 GWs by 2013, followed by another 82.6 GWs by 2018. Again, these are the requirements over and above those units currently under construction. These additions are likely