If recent energy industry history repeats itself, more than half of today’s proposed natural gas-fired power plants will never be built. High gas prices could help prevent 40,000 to 50,000 MW of new generation from upgrading the nation’s fleet of coal and nuclear electricity generating plants, according to a power plant consultant speaking Wednesday at NGI’s GasMart/Power 2001 in Tampa, FL.

Offering a skeptical alternative view on a discussion of the “Market Share of Merchant and Distributed Power,” Jason Makansi, president of a St. Louis, MO-based electric technology consulting firm Pearl Street Inc., said he was concerned that what he calls the “panacea dilemma” has infected the power industry. Gas-fired generation — both merchant baseload and distributed generation plants — may be caught up in over-inflated expectations that they will be a cure-all for the nation’s energy needs. In the past, coal, nuclear and cogeneration were similarly positioned and each time an initial flurry of project proposals were whittled down by market, political and technological realities.

Countering Makansi’s sobering assessment was fuel cell proponent David Redstone, a lawyer, renewable energy advocate and editor of “Hydrogen and Fuel Cell Investor’ Newsletter.” Redstone said it will still take a “long time before [fuel cells] force major changes in the natural gas industry, but they are going to come incrementally. It is more of a distribution issue than one of supply,” said Redstone, who cited a half-dozen U.S.-based makers of fuel cells that are finding increased interest among distributors and furnace manufacturers in Europe and other overseas markets that could help accelerate the development of commercial products in the United States.

Both Makansi and Redstone think that the distributed power providers — whether utilities, energy service firms or other distributors — need to provide different products for the varying end-use niche markets. Eventually, he thinks the U.S. consumers will embrace hydrogen as an inherently “safe and clean fuel” the same way they overcame initial reluctance to the mass use of gasoline 100 years ago. “I don’t see hydrogen being any different,” he said, noting that more experience with it and optional ways to store it eventually could make hydrogen as common in the future American marketplace as gasoline is today.

“Gas is involved in pretty much all of the new electric generation planned,” Makansi said. “About 50% of that is never going to be built for a variety of reasons. If you go back to the 70s, 80s and 90s in this industry, you find that each period had a panacea solution that…was over-subscribed with projects followed by a wave of power plant project cancellations.

“We saw this with coal-fired power in the late 60s and early 70s, nuclear in the late 70s, and cogeneration and independent power in the 80s, and we think we’ll see this with the latest wave of merchant generation plant proposals. Everything in the generation business for the past 20 years has depended on natural gas prices and forward price curves, and the psychology of the market has changed over the last year, and it going to cripple a lot of the merchant generation plants.”

In addition, what Makansi calls “stealth capacity” from the unrealized productive potential of existing coal and nuclear plants will preclude the need for as much gas-fired capacity as is now envisioned.

“There is a lot of productivity in those assets that hasn’t been unlocked,” said Makansi, stressing that as deregulation progresses and industry consolidation narrows the numbers of plant owners, there will be a lot more productivity wrung out of these large baseload units. Modest 5% or 10% boosts in the nation’s 105 nuclear plants can equate to thousands of added megawatts. (He estimates an added 35,000 to 40,000 MW could be developed from coal plant upgrades and 5,000 to 10,000 more MW from more efficient operation of the nukes.)

What Makansi calls “serious operations and maintenance issues” related to new gas-fired power plants also will tend to dampen the total additions to the nation’s power plant fleet. Early indications of this added economic pressure is found in the Midwest where coal-fired plants operate pretty much at the margin.

“In the last six or seven months, there have been at least 20,000 to 25,000 MW of coal-fired projects announced that have to do with the whole change in psychology of the gas forward price curves. I don’t think the proposed gas plants are going to be built where gas is not operating at the margin.”

In distributed generation technology, and every energy technology, the emphasis tends to be placed on big new parts, and in the fuel stack and in micro-turbines it is the turbine components themselves, but the show-stoppers are almost never the core components. In fuel cells, it is the fuel processors, and in the micro-turbines it is the recuperator devices.

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