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Keep Your Eye on the South

The Southeast again is the battleground for fuels, technology, and market structure.

Fortnightly Magazine - July 2007

One sure sign of recovery in boom-and-bust power-generation markets is the renewed growth in the planning and construction of power plants. Active efforts are underway in generation development in the Southeast markets in spite of the high levels of generating reserve margins. With its traditional utility-dominated market structure and a preference for baseload generation, the Southeast is the battleground for the next round of power-generation development. Power-project development almost always is driven by optimists, and in the Southeast there are champions for coal, nuclear power, natural-gas combined-cycle, and even some interest in renewables developing in Florida. The Southeast thus is an interesting laboratory for testing whether the traditional integrated utility environment can produce least-cost, best-fit solutions faster, better, and cheaper than merchant-energy competitors. It also will be a challenge for regulators to balance the need for reliable, diversified fuel and power mix with the earnings-growth ambitions of these large-scale proponents.

Global Energy’s Spring 2007 Southeast Power & Fuels Market forecast identified 13,742 MW of power generation capacity likely to begin operation by 2012. Between 2000 and 2010, around 81,000 MW of new capacity will have entered the Southeast markets. This represents a significant amount of new generation for the Southeast system with an annual peak load of 236,376 MW expected in 2007. Much of this new generation is natural-gas-fired generation that has been constructed in the vicinity of load centers ( see Figure 1 for a detailed view ).

Over 23,000 MW of this generating capacity is located in Florida, over 11,500 MW in Georgia, and over 8,900 MW in Mississippi. Much of the rest of the new generation is located near major population centers across the Southeast. This high level of generating capacity additions has increased the potential for transmission congestion in the Southeast. The wave of new additions has increased transmission flows in areas not considered in previous transmission plans. This has resulted in an increased reliance on transmission loading relief (TLR) measures during the past few years. In the SERC Reliability Corp. (SERC) region, 238 TLRs were called in 2004, 428 in 2005, and 399 in 2006.

Gas-price and supply volatility continues to encourage Southeast utilities to pursue the development of coal-fired generators. However, growing environmental concerns, specifically relating to greenhouse-gas (GHG) emissions, may inhibit the progress of the cheaper pulverized coal technology. Beyond the current plant-development activity and well into the future, Global Energy has reviewed resource buildout and has made several adjustments. In our Spring 2007 forecast, we include over 13,000 MW of long-term generic coal-fired capacity that will be added in the latter half of the forecast period. 1 In addition, we assume new nuclear entry and new integrated coal gasification combined-cycle (IGCC) entry of around 5,000 MW and 500 MW, respectively, in the Spring 2007 forecast. Most of the remainder of the resource additions is gas-fired.

Against this resource-planning backdrop, planning-reserve margins continue to be high