In 2009, unconventional shale gas emerged as the dominant driver in North American natural gas markets. Rapid increases in shale gas production and shale-driven upward revisions to the U.S....
Keep Your Eye on the South
The Southeast again is the battleground for fuels, technology, and market structure.
of its heavy reliance on gas-fired generation. Extreme volatility in natural-gas and fuel-oil markets has exposed Florida to electric-power supply and price risks. With 74 percent of its generating capacity mix fired by natural gas and fuel oil, Florida is ready for a shift to a balanced fuel mix. The Florida PSC called for the development of more renewable generation and initiated rules to help renewable generators enter into long-term contracts for power with electric utilities. The FPSC also encouraged increasing the supply of solid fuel generation such as nuclear and clean-coal technologies.
Little Enthusiasm for Renewable Energy in the Southeast
Meanwhile, renewable energy has taken a backseat in the Southeast to more traditional generation options. Many states have established targets for renewable supply sources—Renewable Portfolio Standards (RPS). But so far the Southeastern states have made little progress toward the promotion of renewable-portfolio goals, except for Florida, where the PSC has taken steps to expand the opportunities for alternative sources of electricity. Also, a controversial 50-percent RPS target is being proposed by lawmakers in Florida. Renewable energy initiatives in the Southeast are difficult to achieve because of several factors that include relatively poor wind regimes present in the region and the regulated vertically integrated utility nature of the markets.
Currently, approximately 526 MW of renewable capacity in the Southeast either are under construction or may begin construction in the near future. Beyond the next few years, we expect that renewable supply will be built at about the same rate as has been recently added in the Southeast. Global Energy has forecast that developers would build another 6,550 MW of renewable generating capacity between 2010 and 2031. Even with these assumed additions, renewable capacity including hydroelectric resources only will meet 3 to 4 percent of the Southeast energy needs by the end of the forecast period.
Transmission, siting, and environmental issues facing renewable, nuclear, and coal technologies mean that natural gas-fired generation continues to be the technology of choice, as reflected by the fact that about 69 percent of the generic long-term capacity additions is gas-fired. Abundant natural-gas storage and the construction of the LNG plant in Baja Mexico seem to be ameliorating concerns about natural-gas prices. Further, gas-turbine technology is seeing improvements in efficiency. The Frame 6 CCCT technology with its improved heat rate is being demonstrated. The recent commercialization of the MS100 gas turbine has focused the market on the realization that an operationally flexible, easy to construct, 100-MW simple-cycle unit can have a heat rate of 8,600 Btu/kWh. These units are particularly attractive in meeting local reliability concerns and may be an alternative to transmission lines that are not popular.
RTO? Who Needs an RTO!
The Southeast stands out as the only Eastern regional electricity market that remains committed to a traditional power-industry structure where vertically integrated utilities provide bundled generation, transmission, and distribution services. The market structure has stabilized in the Southeast as all proposals for regional transmission organization (RTO) formation were put to sleep. With retail rates among the cheapest in the nation, Southeastern states have little incentive