Industry publication, December 2001

NYC 9/11 Public Portal Document

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POWERPLANTS FOLLOW URBAN LOAD CENTERS

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57' O -J On.-r Capacity (Mw) Q) 1.01111 mO owr o O 300 to 999 O 50 to 299

spokesman. O' Online Year □ 2001 Developer NRG □ 2002 Energy, Minneapolis, □ 2003 also agrees with projections of a plant V o, □ 2004 B 2005 construction slowdown. Officials ' Primary Fuel believe only about 147,000 Mw of new □ Coal ! I capacity will be added in the U.S. by 2005. But NRG o Source; POWERmap, HEWBan O Natural Gas a Oil is sticking to its own plan to develop some 28,000 Mw \/ by then. Officials say they believe they can move ahead O Wind 57 Other with such a large amount of new capacity because they are operating in several separate regions. Smith Barney, reserve margins had already begun inching up by 2000. By mid-2001, the rapid construction of new capacity cou­ COLLISION pled wi± slow growth caused a decline in forward energy prices. A sustained 3% annual growth in U.S. electricity demand He now expects many developers to cut back project plans based through the 1990s collided with a virtual standstill in new pow- on negative commodity drivers, with the new “down cycle” bot- erplant construction through the mid-1990s, squeezing the elec- toming out in 2003 when a more balanced market will emerge. tricity industry’s overall capacity reserve margin from about 20% in 1990 to about 7% in 2000. In response, a small army of proj- FUEL CONSTRAINTS ect developers descended on practically every location in the Christopher Ellinghaus, senior analyst with Williams Capital U.S. where a gas pipeline came close to a power transmission Group, New York City, argues that it would be virtually impossi- line. State environmental and regulatory agencies were hit with ble to install 400,000 Mw of new merchant capacity in the U.S. a barrage of air and water permit applications, causing some anytime soon. He claims that 90% of the proposed plants use states, including Tennessee and Kentucky, to call “time out” and gas and there simply isn’t enough of a supply to fuel them all. reassess their permitting procedures for powerplants. Ellinghaus notes that fueling an extra 300,000 Mw of gas-fired But California, desperate for new power sources, began turn- capacity would require an addition of 14 Tcf to gas supplies by ing around permits in a few months. Officials in many other 2005, an increase of more than 50%. At best, the gas industry is states, determined to avoid California’s mistakes, welcomed new expected to increase supplies 1 to 3% annually in the coming plants. Georgia, for example, put a limit on utility purchases of years. He expects capacity additions of 46,000 Mw in 2001 and out-of-state power to force more plant construction at home and between 36,000 Mw and 53,000 Mw in 2002 based on plants now Louisiana approved new tax incentives for merchant plants. in construction and in advanced development Thereafter, he According to the Electric Power Supply Association, a Wash- expects the gas constraints will limit further additions to about ington, D.C.-based lobbying group for the independent power 20,000 Mw annually through 2005. industry, there were at least 524 merchant projects—322,700 Coal-fired projects have been proposed in several regions in Mw of capacity—either in construction or in development in the the last two years precisely as a hedge against over-reliance on U.S. as of late 2001. The NEWGen data base of RDI, like ENR and gas. The problem with coal is that the permitting and con- Power a unit of the McGraw-Hill Cos., lists 473,000 Mw of new struction process is much longer than for gas. Projects initiated capacity in construction or development, but says that about in 2001 are not expected to come on line before 2005 at best. 60,000 Mw of this has been canceled or put on hold. The rate Coal also presents more air-quality and “not-in-my-backyard” of cancellations and suspensions is now outpacing new project objections than gas, and most “clean coal” technologies are still announcements, RDI reports. According to Ray Niles, senior market analyst for Salomon in the demonstration stage. Nuclear got a boost from the Bush administration’s energy I| Powerplant Construction*?

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