Proposed merchant capacity soars

Washington, D.C. – The total amount of planned capacity additions announced by merchant power plant developers has skyrocketed in less than two years, evidence that competitive power suppliers are aggressively responding to market demands for generation adequacy and greater system reliability according to numbers released by the Electric Power Supply Association (EPSA).

“Not only are competitive power suppliers investing significant capital in regions of the country where capacity reserve margins are the tightest, there also is evidence that they are expediting their developments in order to accommodate the immediate and growing needs of power customers,” said EPSA executive director Lynne Church.

Merchant plants-generating stations financed by investors willing to accept market risks associated with start-up and operation-differ from regulated power facilities in two major aspects: Merchant plants receive no guaranteed rate of return, and they typically do not have long-term sales contracts.

According to EPSA’s announced merchant plant database, planned capacity additions from competitive power suppliers now total more than 250,000 MW, a drastic increase from the 121,733 MW announced as of October 1999, and more than quadruple the 56,500 MW that had been announced the previous October.

The contribution of merchant power developers to the industry has been cited by the North American Electric Reliability Council (NERC), which noted that “near-term reliability is dependent on merchant capacity additions.”

“More than half of the announced generation [as of June 2000] will be needed to keep pace with demand growth in the next two years,” according to NERC’s 10-year reliability assessment. “Without the announced new generation capacity, capacity margins could be dangerously low, challenging the ability of the bulk electric supply systems in the Eastern Interconnection to respond to higher-than-projected customer demand caused by extreme weather and unexpected equipment shutdowns or outages.”

“It also continues to be the case, however, that merchant developers will focus their attention on those regions of the country where they have access to, or are likely to have access to, open retail and dependable wholesale markets,” Church said. “Unfortunately, much of the country is still likely to face reliability challenges in the years ahead due to a lack of generation investment-investment that will only come when power suppliers are truly given a green light to compete in those states.”

Announced merchant plants table (PDF)


Copies of EPSA’s merchant plant matrix are available by contacting Samantha Slater, manager of state and regional affairs for EPSA, who can be reached via phone (202/789-7200), fax (202/789-7201) or e-mail (sslater@epsa.org).
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