FEDERAL TRIANGLE: A Healthy Electric Power Sector
You would think that California politicians have sense enough to admit that state government botched electric power deregulation. But vanity and pandering to uninformed citizens will not change "feel good" politics into electricity to light homes or turn the motors of industry. Electric power supply nationwide is in a dynamic and healthy condition, but in California there is a self-inflicted, generating capacity shortage of 5500 megawatts (MW) or 5.5 gigawatts (GW).
Power problems are estimated to cost U.S. companies $29 billion annually. Based on the 1978 Public Utility Regulatory Policies Act and the Energy Policy Act of 1992, the Federal Energy Regulatory Commission began the process of removing impediments to wholesale trade. Half the states have passed regulations to restructure the electric power sector and by the end of last year, 16% of generating capacity had been sold to unregulated companies. Regulated utilities were forced to maintain a 25-30% capacity margin that has now been trimmed in the deregulated environment to 15.6% nationwide. Over the next three years, planned capacity should grow by 27.1 GW and expected demand by 15.8 GW with national generating capacity reaching 870 GW and demand expected to be 709.6 GW.
Electricity prices in 1999 averaged 4.43 cents per kilowatt-hour for industrial users while residential and commercial users paid 8.16 and 7.26 cents, respectively; the national average retail price was 6.66 cents. The Department of Energy projects prices generally to fall to 6.0 cents by 2020. This is expected to occur during a period of total industrial energy demand increases of 1% per year and reach 43.4 quads (quadrillion Btu) by 2020 with the electricity demand growing faster at 1.8% annually. The trend over the past decade will continue and accelerate whereby nonutility generating capacity will increase; in 1991 it was only 6% and by the start of 2000 was 20%. Currently, more than 500 nonutility companies are electrical-power marketers with sales concentrated among 50 or fewer companies. Latest data indicates over 400 million megawatt- hours being sold by these independents. Reliable power (99+% availability) is disrupted primarily by weather (70% of the time) and is distributed by 155,000 miles of high-voltage lines nationwide. During the 1990s, 9,658 miles of transmission lines were added and 5,461 miles of new lines will complement the infrastructure by 2004.
A major trend in the power sector is in "distributed generation" where large, capital intensive, central utilities are replaced by smaller (<50 MW) plants located near load centers, greatly reducing distribution infrastructure costs. As of 1999, the amount of industrial supply from nonutility generators operating these smaller plants was 22% and by 2020 will be only 23%, indicating that essentially all replacement and new capacity will be provided by distributed generation. Days of the dinosaur-like, inefficient, fossil fuel-fired, central stations are nearing an end. For many industrial niche market uses, microturbines and fuel cells are predicted to become increasingly cost effective prime movers; already the $1500 per kilowatt capital cost barrier has fallen and is viewed by many to fall between $500 and $1000 by 2020. DOE estimates that 13 GW of distributed generation will be added by 2020, plus 1 GW of fuel- cell generation (up to 15 GW by 2010 according to Allied Business Intelligence, Oyster Bay, N.Y.). There will be a net of 1310 new power plants constructed at an assumed average size of 300 MW supplying 393 GW of capacity. Total electricity sales in 2020 should be between 4450 and 4,503 billion kilowatt hours.
However, as the electric power sector changes, reliable gas turbines remain the mainstay for new generating capacity. By 2007, 305 GW of gas turbine-based plants will be in operation with five companies dominating and the top ten plant developers accounting for 45% of capacity. The largest developer of turbine plants is Calpine, which will be the largest electricity generator in North America by 2005. The second through fourth largest developers are Duke Energy, Panda and Southern Energy. Calpine alone had 203 gas turbines on order in mid 2001 and all U.S. manufacturing capacity for 60 Hz turbines is committed through 2005.
This bright, healthy story appears bleak if you live in California where politicians blame electricity producers.