Study Shows Booming Merchant Power Plant Development
Of the 36,600 MW of new electric generating capacity under
construction or planned in the U.S., more than 93% will be fueled
by natural gas, according to a new analysis by Boulder, CO-based
Resource Data International (RDI). And of the projects identified,
about 90% do not yet have gas supply contracts.
"Ten merchant plants representing some 1,500 MW of capacity
[are] up and running across the U.S., another six plants with 1,900
MW of capacity [are] under construction. And 78 plants with a
combined capacity of 33,200 MW [are] proposed," RDI noted. The next
three years likely will be peak construction years for merchant
plants. By year-end, as many as eight plants with a combined
generating capacity of 1,033 MW may be built, RDI said. "That
number doubles to 17 plants with 4,026 MW of capacity in 1999, 17
plants with 9,600 MW of capacity in 2000 and 15 plants with 8,200
MW of capacity in 2001," RDI added.
The likelihood, however, is that not all of the proposed
merchant generating plants will be built. Because merchant plant
development is "driven almost entirely by market economics, even
subtle regional price changes may be enough to prevent some plants
from going forward. In this sense, merchant plant developers are
not unlike commercial real estate developers who announce a new
building, look for tenants to lease space, and take a handful of
signed leases (capacity commitments) to a lender for construction
financing. If for some reason the pool of available tenants
dwindles or if market economics turn south, the project stops until
conditions improve," RDI noted.
Over half of the planned capacity is targeted for northeastern
states, represented by the Northeast Power Coordinating Council
(NPCC), a power pool. Of the 97 merchant power plants under
development or construction, the NPCC is home to about 38 of the
units. Total current and proposed merchant capacity the NPCC is
18,750 MW, with Massachusetts the most active state with 11
projects representing 6,800 MW of capacity. Maine follows with 11
projects representing 3,700 MW; Connecticut has six of the
projects, representing 3,500 MW; and New Hampshire has four,
totaling 1,950 MW.
RDI attributed the attractiveness of the Northeast to three
factors: "First, the region's generating capacity is largely
oil-fired and aging. Second, the region is opening to competition
more rapidly than any other part of the country outside of
California. And third, the region has severe transmission
constraints which have led to relatively high electricity prices."
The NPCC is followed by Western States Coordinating Council
(WSCC), where 23 announced projects totaling 7,600 MW are underway.
Within the WSCC, California is the most active with nine projects
representing 3,950 MW. The next most active region is the Electric
Reliability Council of Texas (ERCOT) with 12 announced merchant
plants and almost 5,700 MW.
The remaining proposed capacity is scattered outside NPCC, WSCC
and ERCOT: the Southeastern Electric Reliability Council has some
1,240 MW of planned merchant capacity; East Central Area
Reliability Coordinating Agreement 616 MW; Mid-Atlantic Area
Council 518 MW; Florida Electric Power Coordinating Group 500 MW;
Mid-Continent Area Power Pool 363 MW; and Mid-America
Interconnected Network 200 MW. Only the Southwest Power Pool has no
merchant plant capacity planned between now and the end of 2001,