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The Generation Glut: When Will It End?

An analysis of the timing, location, and mix of new capacity additions that may be needed in the future.
Fortnightly Magazine - April 2004

to include most of those plants currently under development but not under construction.

So it is not until 2010 and later that we should expect to see significant needs for new capacity beyond what is currently under construction. We can see from Tables 1A and 1B that by 2008 or 2009 most of the capacity recently constructed will have been absorbed by demand growth and that significant amounts of new capacity will be required thereafter.

By 2013, we see a need for additional capacity in all but the MAPP region, but after 2013 additional new capacity will be needed in that region as well.

By 2018, nearly two-thirds of the additions summarized in Table 1A would be combined-cycle plants. Additions of coal-fired plants and combustion turbines would be about the same, but significantly less than the requirements for combined-cycle capacity. The remaining capacity would be a small amount of renewable resources.

Several caveats are in order. We divide the United States and Canada into 33 separate markets connected by a transmission grid. Given modeled transmission constraints, inter-market energy and capacity transactions can be made on economic grounds. Within each of these regions, we assume there are no transmission constraints like those among the 33 regions. In reality, there often are local (intra-regional) transmission constraints. Thus, in some regions, there may well be the need for capacity over and above what we are projecting because of the local constraints. In the long term, the local additions would replace regional additions that otherwise would be projected by our proprietary model.

Moreover, in some cases local, regional, or state politics will play a role in determining when, where, and what type of plants will be built, and this will not be captured in our analysis. But this is only the beginning of the story.

Environmental Regulations and Supply in the Mix

Any number of factors could affect the prognosis for when, where and what types of new capacity will be needed beyond plants currently under construction. Up to this point, we have assumed there would be no changes in environmental regulations governing power plants. But Congress is considering several proposals. Also, there is debate over the long-term price of natural gas that inevitably occurs when there is a sustained increase in gas prices. Finally, the administration and others currently are pressing for a new generation of nuclear plants. In this section, we discuss how new environmental regulations, higher long-term gas prices, and a new generation of nuclear plants would affect the timing, mix, and location of additional generating capacity.

We considered two sets of proposed environmental regulations. The first is the administration's proposed Clear Skies Act (CSA), and the second is the Carper Bill (Carper), S. 843, introduced by Sen Thomas R. Carper, R-Del. The Carper proposal would impose more stringent regulations than the CSA proposal for SO 2, NO X and mercury. In addition, the Carper proposal would cap carbon emissions from power plants. Table 2 summarizes the provisions in the two proposals.

Should either of these proposals become law, the major effects