“What we have is basically a two-lane road, and the marketers and everyone else want to use it as a six-lane highway,” Edward Tirello, analyst for Deutsche Banc Alex. Brown, said describing the U.S. power grid. “But someone is going to have to spend a enormous amount of money to [make it happen], and no one is spending any money right now.”

In the short-term, for instance, many old generating plants that were pushed hard last year won’t be able to survive another summer of excess operations. And about half of the nation’s existing generating plants will have to be replaced in the next 10 years. Beyond that there are enormous infrastructure challenges facing the restructuring electricity industry, Tirello told a GasMart/Power 2001 audience. “There are a tremendous amount of bottlenecks.”

The key question is how quickly can the current transmission system be changed? “It likely will not change quickly enough to avoid some collapses in the [grid] systems,” Tirello said. “The system is way over-taxed, and it is getting more over-taxed everyday. What we have seen with the formations of the RTOs and ISOs is just a precursor; it can’t really function that way either.”

Noting he has little sympathy for California’s current energy woes, Tirello said 10 years ago state officials intentionally stopped building new power plants in favor of letting them be built in surrounding states to serve the California market. Now that California suddenly needs to build a lot of new power plants, the California Energy Commission “doesn’t know what to do.” California faces a complex set of regulatory, financial, market, political and ultimately weather issues. “There are a tremendous number of things involved here,” Tirello said. “I assume suing God will be the next step (in California).”

Not all the future power plants are going to be natural-gas fired, said Tirello, citing the recent announcement by a Wisconsin utility that it was building two new baseload coal-fired plants, and a belief that both coal and nuclear will make comebacks in the power production sector. Tirello said that there are many available power plant sites at existing coal-fired and nuclear plants where only some of the originally intended units were built. Eventually the market will turn to baseload construction and natural gas is too expensive to fill that role.

“You can’t do everything with gas; I don’t care what the industry says about how much gas there is — it isn’t there.You need the pipes to move it and the infrastructure in place, and I don’t see that either.”

“I also think that gas prices are going to stay high, and at the higher prices the economics of the gas power plants changes. At two-dollar gas, electricity is $35 a megawatt, which is a pretty good price, but with four-dollar gas, power is at $80.”

In response to a question, Tirello endorsed distributed generation as a “great concept” that is available now. However, he questioned “where it goes first?” Fuel cells and micro-turbines are going to be increasingly attractive to businesses in California and other states trying to increase their reliability and quality of power. He also pointed out that business have thousands of MW tied up in on-site back-up generation units, which could be put into regular operation if they could be tied into the grid.

He said every major commercial building has some form of standby generation and increasingly they will try to “synchronize” them with the grid. He estimates that there are 100,000 MW of standby generation “just sitting idle.”

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