Merchant plants should consider MAIN, other opening markets.
More than 47,000 megawatts of new capacity has been proposed in the United States within the next few years. A few thousand megawatts are proposed in Canada.
The totals are a fraction of the more than 180,000 MW of new capacity projected to be needed in the U.S. and Canada by 2010. Some 50,000 MW of new capacity is needed by 2002.
But the problem with the proposed capacity is that its geographic distribution doesn't match forecast need. In the adjoining table of proposed and projected capacity additions, the proposed merchant plants are compared with RDI's projected cumulative capacity needs through 2002 and 2010. Almost half of the proposed capacity is in NPCC, while NPCC accounts for only 3,467 MW, or 7 percent, of the total need by 2002. The comparison is even more striking when only the NEPOOL subregion--home of most of the proposed capacity is NPCC--is considered. NEPOOL accounts for just 7,823 MW, or 4 percent of the total need by 2010.
Clearly, much of the proposed capacity in NEPOOL won't be built. But a good bit of capacity will have to be built elsewhere, of which only a fraction has been proposed. Conclusion: It's time for developers to turn their attention elsewhere. According to RDI's recently completed Outlook for Power in the U.S. 1998, the following regions will present attractive opportunities for merchant plant development over the next few years:
MAIN. MAIN has an immediate, and large, need for new capacity. Fuel prices are low. Markets are opening quickly in Illinois and Wisconsin.
FRCC. Significant amounts of new capacity are needed in FRCC, beginning immediately. But fuel prices are high. Incumbent utilities are fighting to keep control of capacity additions.
SERC. SERC has both an immediate need for new capacity and the largest need for new capacity over the forecast horizon. But the market isn't yet open in most parts of SERC.
SPP. The need for new capacity is imminent in SPP. The market is opening.
NWPA. The Pacific Northwest and Alberta have an immediate need for new capacity. Alberta markets are open. But the prospects for merchant plants in the Pacific Northwest are uncertain in the short term because of the dominance of the Bonneville Power Administration.
Douglas M. Logan is a principal with Resource Data International Inc.
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