As the pendulum swings
Riding high on the boom: Operating performance 2001-2002
Generation hiatus expected in 2003

Pam Boschee, Managing Editor

This year’s operating performance report requires an introduction that provides “the big picture” of the business of generation. The cyclical nature of power supply and demand is not new; however, where generation’s blip appears on the radar screen of trends adds another dimension to the interpretation of the specific data discussed later in this article.

Over the past year, the robust generation boom that began in 1999 began its transformation into a tenuous rumble. Cash constraints and forecasts for a plump generating capacity margin for next year (19 percent, The Williams Capital Group LP), muted the boom.

Consider that in 2000, 7,991 MW in new units started commercial operation–4,300 MW more than the capacity in new units that started commercial operation in 1999, according to the Energy Information Administration’s (EIA) most recent data (March 2002). The existing capacity of U.S. electric utilities in 2000 totaled about 605 GW, a net decrease of about 35,000 MW from the total reported in 1999. Most of the decrease was due to the sale or transfer of 43,000 MW of capacity to nonutilities.


Georgia Power’s Scherer plant was ranked third in coal-fired generation
Click here to enlarge image

The Williams Capital Group’s Christopher R. Ellinghaus, an energy analyst with the N.Y.-based investment bank, recently forecast that the generation capacity margin will peak next year with a surplus of about 65,000 MW. He reported that the surge in power plant construction from 1999 to now has resulted in the addition of 80,000 MW of generating capacity. By the end of next year, the majority of 200,000 MW of new power plants being built over the 2000 to 2004 period should be complete, according to Ellinghaus.

The boom’s surplus will likely keep power market economics soft through 2003 and 2004. Spark spreads, the difference between the cost of natural gas used to produce electricity and the wholesale price at which it’s sold, have weakened over the past year as a result of excess capacity, the limping economy and the near-death status of energy commodity trading markets. The additional capacity slated to come on-line next year will serve to smother the spark spread even more, resulting in less incentive for developers to build new generation in the near future.

Ellinghaus predicted that in 2005 and 2006, peak capacity margins are likely to drop to the 12 to 15 percent range. When this level erodes, the pendulum swings back to power shortages and higher prices for electricity.

A close-up on coal generation

Energy Ventures Analysis (EVA), Arlington, Va., provided the rankings for this year’s report. Included are the top 20 rankings for U.S. coal, nuclear and combined-cycle gas plants. Plants were ranked by generation, heat rate (energy efficiency), capacity factor and environmental emissions. EVA collected data from public data sources (U.S. Department of Energy (DOE)-EIA Forms 423, 860, 900 and 906 and the Environmental Protection Agency’s CEMS [Continuous Emissions Monitoring] data). EVA used its discretion in eliminating power plants from the rankings when data problems were apparent.

EVA’s Tom Hewson, principal, discussed the results with EL&P.

Click here to view Tables

Table 1 ranks by MWh generated the top 20 coal-fired power plants, which account for 17 percent of the total U.S. generation.

It should be noted that this table (and Tables 2, 3 and 4) separates and ranks only the coal-fired capacity of power plants. Last year’s classification was steam-electric, which also included gas-steam capacities. One result of this change in classification can be seen when comparing Parish’s (15) ranking with last year. It ranked higher last year in MWh generated because its gas capacity and coal-fired capacities were combined.

Hewson identified four newcomers to this list compared to last year. They include: Gavin (9), Colstrip (11), Sherburn County (16), and Paradise (18). Three of these four are new plants in the western part of the country.

On the other hand, power plants that dropped from the list were all from the East, according to Hewson. He added that overall total U.S. generation output decreased from 2000 to 2001. Consequently, coal-fired generation was cut back, particularly in the East.

Hewson said, “To be on this list, you need to have high capacity factor. To have high capacity factor, you have to have low fuel cost.”

A power plant’s proximity to fuel makes a significant difference in fuel transport and delivery costs. For example, Gibson is a minemouth power plant. Navajo, Colstrip, Jim Bridger, Martin Lake, and Four Corner all have nearby coal sources.

He added, “These plants [in Table 1] are dispatched early, have a high capacity factor and therefore high generation.”

Looking ahead, Hewson said coal-fired plants that are required to add environmental controls will see their rankings drop. Due to environmental penalties associated with NOx requirements, Hewson expects to see more of these effects in 2004. One example from last year’s list is Mansfield, which did not make the cut this year. The combination of its added controls and diminished dispatch during the ozone season (which favors gas-fired generation), resulted in its dropping off the top 20 list.

Table 2 lists the top 20 coal-fired plants ranked by heat rate. Hewson said, “To get on this list, plants must be: heavily utilized; newer, with more efficient technologies; and dispatched often with few starts and stops. Cycling units don’t make it on this list.”

Hewson pointed out several major factors affecting heat rate efficiency. “The type of technology makes a difference, such as supercritical vs. subcritical boilers. Super are more efficient, but are less flexible in terms of turning them down. Environmental controls also affect efficiency. When an FGD [flue gas desulfurization] or SCR [selective catalytic reduction] is added on the backend, efficiency gets hit. As environmental requirements tighten, heat rate efficiencies of coal-fired units are going to degrade. Cooling water also makes a big difference–it can make a difference of 1 to 300 Btu per kWh. Once-through cooling is better than an open cooling tower in terms of efficiency. Colder cooling water temperatures mean less back pressure and fewer fans; therefore resulting in improved efficiency.”

Hewson added that the top three plants on this list–Bull Run, Marshall, and Belews Creek–do not have environmental controls.

To meet the limits required by the NOx SIP call, 110 GW of existing coal-fired capacity will need to be retrofitted with SCR. Hewson said that many of the plants now on the list may not be in the future. Instead, the ranks will be filled with smaller capacity units without environmental controls.

Xcel Energy’s Valmont is a small capacity generator appearing on this year’s list. Hewson said Valmont spent $15 million to upgrade their steam turbine, increasing capacity from 181 to 195 MW without changing Btu input. Their heat rate, which previously was about 10,400, improved to 9,272.

Hewson used Valmont to illustrate the point that this type of plant modification has not occurred much, partly due to the New Source Review (NSR) debate. In most cases, plant owners may be reticent to modify because of concerns of triggering NSR and perhaps also triggering FGD and SCR requirements.

Valmont’s situation was unique because they had already agreed to install a dry scrubber. Hewson added that next year, Valmont may not be on the list because their heat rate will be affected by the scrubber. “Environmental controls often offset many of the gains.

“If the NSR is issued as the Bush administration proposed it, you’ll see much more investment such as Valmont’s with accompanying improvements in heat rate.”

Earlier this year the EPA, urged to do so by a White House energy task force, proposed relaxing NSR of the Clean Air Act to make it easier for utilities to upgrade and expand coal-burning power plants.

Table 3 ranks coal-fired plants by capacity factor. The bottom line for inclusion on this table is that the plant is dispatched often. Hewson said, “What makes high capacity plants, many of which are in the West, is that they transmit into big centers, such as Denver or into California. They’re less expensive than the native sources, such as gas-fired generation in California’s case. These plants can sell as much power as they can push into the system. They run all the time because of their less expensive capacity.”

Table 4 ranks the top 20 cleanest coal-fired power plants based upon 2001 SO2 emission rates (EPA CEMS data). Sulfur is targeted for tight limitations because of its relationship to acid rain and fine particulates. Hewson said, “In order to make it on the top 20, the plant must have a scrubber or it must be an operating IGCC plant.

“If a plant starts out with low-sulfur content coal, the sulfur emissions will be low. Some of these plants have very high efficiency scrubbers. Harrison has a 98 percent removal scrubber. The design and performance of the scrubbers is important. Most of the new units with new technology are in the West.”

First generation integrated gasification combined-cycle (IGCC) power systems were developed in the 1990s. According to the DOE, environmental performance of the first generation IGCC systems has been exceptional. Emissions of SO2, NOx and particulates were less than one-tenth of the limits allowed by the New Source Performance Standards.

Although DOE’s Clean Coal Technology program has three active demonstration projects, only Tampa Electric Co.’s IGCC, Polk (10), is fueled by coal alone and, therefore, included in Table 4 (Wabash River IGCC and Pinion Pine IGCC both also burn natural gas).

Hewson noted that the plants listed in Table 4 are much cleaner than the national average (1 lb SO2/MMBtu), mostly due to scrubber technology. Most of these plants were designed with scrubbers vs. being retrofitted. Retrofits are Harrison (7), Conemaugh (8), Hayden (14), and Cumberland (20).

Nuclear plants shoulder heavy loads

Table 5 lists the nuclear workhorses in the U.S. These multi-unit plants “run flat out as much as they can, come down very rarely, usually just for fuel outages,” according to Hewson.

There are 65 stations, of which the top 20 account for about half the total U.S. nuclear generation. Palo Verde (1) has three reactors and is the 12th largest nuclear plant in the world. It also holds the performance record for the most electricity generated–30.4 million MWh in 1999.

Exelon holds the lion’s share of U.S. nuclear capacity followed by Entergy.

Hewson said, “For the first time in EVA’s forecasting, we are assuming the building of new nuclear plants in the long-term.

All new capacity is going to be added to existing plants. Browns Ferry plans to restart Browns Ferry #1. Dominion may put one in at North Anna. Entergy is talking about adding one to Grand Gulf.”

Nuclear power’s overall capacity factor is 90 percent, compared to coal’s 65 percent and combined-cycle’s 45 percent.

Natural gas combined-cycle generation snapshot

Tables 6 through 9 rank combined-cycle power plants. According to Hewson, compilation of combined-cycle data presents a challenge since many of the plants are not required to report because they are owned by nonutilities. He said, “In 2001, of the 77 GW of combined-cycle capacity we think exists, 29 GW were not found in the Form 906 data. However, it should be noted that as of the last monthly report for Form

906, they’ve knocked that number down to 17-18 GW not reported. This reporting trend could continue.”

Hewson stated that for those combined-cycle plants that do report, there was a 40 percent increase in generation between January to December 2001. “To be on the list, multiple units (higher capacity) make a big difference; and being located in Florida and the Southeast where you’re backing up oil-steam generation helps to put you on the list.”

Tables 7 and 8 rank combined-cycle heat rates and capacity factors. Hewson said, “Unlike a coal plant that has a comparatively flat curve in terms of what the heat rate is at various points of load, in the gas combined-cycle plant it is incredibly steep. So, the less a plant is operating at baseload–operating flat out–the less likely it is to achieve these heat rate factors.

“I’ve noted that more people are very optimistic about their heat rates–but are not grounded in fact. When you look at how much surplus capacity is being built, there’s no way we can get all the plants to operate at the optimal part of their heat rate curve. There are going to be some disappointed people. They may not quite be able to get the kind of returns they were anticipating because of capacity factors.” He added that low capacity factors occur when combined-cycle is up against coal because coal plants are much less expensive to dispatch.

Table 9 ranks the top 20 gas combined-cycle power plants in terms of NOx emission rates.

These plants have very low NOx rates when compared to the national average of 0.16 lb/MMBtu. Hewson said, “These all have SCR. It used to be that 0.03 lb/MMBtu was incredibly good; there are 17 plants that beat that level on this list.”

Ft. St. Vrain (1) was formerly a nuclear plant that was repowered. The rest are all new plants–greenfield units.

For more information about Energy Ventures Analysis, visit www.evainc.com or call 703-276-8900.

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