Some in Congress would link customer choice with a portfolio standard. How would that play in a wholesale power market where gas turbines rule the roost?
By Michael C. Brower and Brian Parsons
WHAT KINDS OF POWER PLANTS WILL
get built in a deregulated electric industry? If recent history offers any guide, utilities and independent power companies will succumb to the traditional wisdom and invest in gas-fired combustion turbines and combined-cycle plants. Sound reasons may exist for doing so. The plants are less expensive than conventional steam plants. They put less capital at risk. Combined-cycle units have become very efficient, further reducing the cost. Moreover, natural gas prices are low and seem destined to stay that way for years.
But these attractive characteristics of gas technology should not blind power companies to the value of a diverse base of generating resources. For instance, what happens if gas prices rise unexpectedly? Also, the United States has been inching closer to making binding commitments to reduce greenhouse gas emissions, which could increase costs for owners of all fossil-fuel-burning plants. Lastly, electricity demand may become much more difficult to predict in a competitive market. That could make all large power plants (em even gas plants (em risky investments.