The 18,300 MW of new gas-fired power plants planned in the Northeast will be the litmus test of the gas-fired merchant power plant structure in the U.S., Resource Data International (RDI) of Boulder, CO, suggested in a new analysis.

RDI found over 12,000 MW of new merchant power plant capacity in the planning stages and another 4,300 MW to be added to sites recently acquired in highly competitive auction processes. For example, the FPL Group, recently won an auction for 1,185 MW of capacity from Central Maine Power, and said it plans to add 1,500 MW of new capacity. Sithe Energy, won an auction for approximately 2,000 MW of Boston Edison capacity, and quickly announced plans to add 2,800 MW of capacity.

And more auctions are set for the months ahead, turning existing base load facilities into merchant power plants. New York State Electric & Gas (NYSEG) is restructuring by selling-off later this year its seven major fossil plants, a total of 2,346 MW. And Oswego, NY, will sell its 2,180 MW Oswego Steam Station, currently operated by Niagara Mohawk Power (NiMo). Under a plan crafted by Fortistar Capital of White Plains, N.Y., the oil-fired station will be repowered as a 300-MW coal-fired plant, with the ability to co-fire with natural gas up to 650 MW. Oswego is requiring a potential buyer to agree to operate the project as a merchant plant. And NiMo, while crafting plans to sell its oil-fired, 400-MW Albany Steam Station, is also completing the regulatory requirements to replace the Albany oil-fired units with gas-fired combined-cycle plants, and expand the capacity to 720 MW.

Currently, the Northeast “is a particularly attractive market for merchant plant development,” said RDI, because older “gas- and oil-fired steam units dominate the current generating mix, which results in high market prices.” The older units are very inefficient, prompting RDI to conclude “a developer may be able to build and operate a new combined-cycle plant for less than the production costs of an existing steam unit” in the high-cost electricity markets of the Northeast.

RDI warned, “adding too much (new capacity) could drive market prices down in the region and lead to financial difficulties for developers.”

New combined-cycle units have total costs, including capital recovery, in the $30/MWh to $40/MWh range, while variable costs are in the $15/MWh to $25/MWh range, based on regional gas costs. By comparison, typical efficient steam power stations in the Northeast have total costs of between $40/MWh and $44/MWh, frequently higher, RDI said.

“If all proposed merchant plants are built, the market price will probably be below the $30/MWh to $40/MWh threshold needed for new plants to be economic,” RDI noted.

RDI characterized current Northeast power markets as like those of the United Kingdom a few years ago, “when competition sparked construction of new merchant plants and the shutdown of older plants. Such a scenario could also be the template for other U.S. markets as they open to competition, particularly those not dominated by coal-fired capacity, such as California, Texas, Louisiana, Florida and the Pennsylvania, New Jersey, Maryland (PJM) power pool.”

In alphabetical order, the following companies recently announced plans for merchant power plants in the Northeast: American National Power, a unit of National Power Plc, 550 MW in Bellingham, MA, 550 MW in Blackstone, MA, and 600 MW in Gorham, ME; Duke Power, 520 MW in Bridgeport, CT;

El Paso Energy & Power Development, 274 MW in Agawam, MA; Energy Management, Inc., 170 MW in Dartmouth, MA, 350 MW in Harrison, ME, 265 MW in Rumford, ME and 169 MW in Dighton, MA; an Energy Management, Inc. and Calpine Corp. joint venture for 265 MW in Riverton, RI, and 169 MW in Dighton, MA. International Power Partners, 300 MW in Westbrook, ME; Polsky Energy, 150 MW in Jay, ME; Power Development Corp., 540 MW and 460 MW in undisclosed sites in Connecticut and 272 MW in Westfield, MA; US Generating Co., 400 MW in Charlton, MA; FPL Group, 1,500 MW at acquired Central Maine Power sites; and, Sithe Energy, 2,800 MW at acquired Boston Edison sites.

Since RDI did its compilation, several more Northeast projects were announced., a total of 2,045 MW more. Reston, VA-based Columbia Electric Corp. (CEC), the newly-restructured power company of gas pipeline Columbia Energy Group, announced plans to develop a total of 2,000 MW of gas-fired projects in the Northeast within the next few years, and Pennsylvania Enterprises, Inc. (PEI) of Wilkes-Barre, PA. announced it was moving into the Northeast power market with a 25-MW, anthracite culm-fired, cogeneration plant in nearby Archibald, PA. The plant is being converted from anthracite culm-fired unit initially to natural gas, then to methane gas-fired from a nearby landfill. PEI has plans to expand the 25 MW unit to 70 MW.

Theo Mullen

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