Power Industry Cuts Plans For New Plants
Date: Monday, January 07, 2002 @ 21:13:00 GMT
Topic: General


From ENL we learned that "the attorneys general of nine northeastern states are hosting a news conference regarding emissions policy on Tuesday. The group is expected to warn the Bush administration their states will consider legal action against the federal government if a pending review of the nation's emissions rules leads to a relaxation of enforcement against power plants and refineries." We think all states should do the same to make the message even stronger.
Here is another interesting news from The Wall Street Journal, Jan 4, 2002, indirectly related to the cause for the new energy revolution (you think they don't know what's coming?):



POWER INDUSTRY CUTS PLANS FOR NEW PLANTS, POSING RISKS FOR POST-RECESSIONARY PERIOD

Energy companies are scaling back construction of new power plants to cope with low wholesale electricity prices and market jitters over high levels of corporate debt.

New data show that some 18% of all announced projects already are effectively dead, nearly double the attrition rate a year ago. That could spell trouble when the U.S. emerges from recession and electricity demand again picks up. New plants not only support economic growth, but they replace older, dirtier plants, as required to satisfy increasingly stringent air-quality standards.
Many energy companies have been on the defensive in the wake of Enron Corp.'s collapse last month. A pioneer in deregulated energy markets, Enron came unglued as a result of a loss of investor confidence in the honesty of its accounting. The company is now seeking to reorganize under Chapter 11 bankruptcy-court protection from creditors.
Since Enron's sudden fall, competitors such as Dynegy Inc., Mirant Corp. and El Paso Corp. have said they are scaling back some development projects and have begun to shed assets. Calpine Corp., which has the most aggressive development program among power-plant builders, is expected to make a similar announcement later this month.
Data compiled by Energy Insight, a Colorado-based research unit of McGraw-Hill Cos., show that 91,139 megawatts of generating plants, out of a total announced portfolio of 503,780 megawatts, had been canceled or tabled by the end of 2001, amounting to 18% of proposed new additions. A year earlier, 30,909 megawatts of capacity had been jettisoned, amounting to about 10% of the announced total.

Last month was the first month in recent memory in which plant cancellations significantly exceeded newly announced projects. A net deficit of 2,952 megawatts of capacity was equal to the loss of about six major power plants. The Energy Insight statistics are based on company announcements and, if anything, understate what's actually happening in the marketplace, because companies often slow projects rather than kill them outright. In California, for instance, suppliers have five years to break ground, once permits are granted. New York sets no time limit.
No one expected all the announced plants to get built, but a significant sustained retrenchment could create special problems. In most cases, plants planned for start-up in 2002 and 2003, for which financing already has been obtained, are going forward. But projects with completion dates beyond 2004 increasingly are in doubt. "It's the later dates we're paying attention to," says Bob Therkelsen, deputy director of the California Energy Commission. "There are huge uncertainties."

Only one major plant has been canceled in New York, so far. California has lost four major projects and roughly two dozen small "peaking plants" that would run only during periods of especially high demand. Developers not going forward with projects in California include FPL Group Inc., Enron and El Paso. Both states experienced tight energy supplies in 2000 and again last year, while the economy remained robust. They are considered the most vulnerable when demand again increases.

"The pace of applications has slowed," says Maureen Helmer, chairwoman of the New York Public Service Commission. "Believe me, we're watching."
Analysts expect cancellations to build as companies trim debt. Only a few months ago, power suppliers boasted that they could borrow two dollars for every dollar of capital they had invested in new power-plant projects. When they needed money, they borrowed it or sold more stock, taking advantage of high market valuations.
Those are bygone days. Since Enron's collapse, credit-rating concerns have been taking a tougher look at debt levels, especially because the completion of aggressive construction programs often requires billions of dollars of borrowings. Low power prices have made it hard to produce the robust profits that many firms reaped in late 2000 and early 2001, and that sent their stocks soaring.

In the wake of fallen stock prices, a much less ambitious energy industry is more interested in keeping analysts and investors happy than in racking up strong growth numbers.
It leaves the nation's energy future uncertain. Not only may needed plants not get built, but there is no certainty that what does get built will be the best projects. There is no national master plan ensuring that generating capacity gets constructed where it is most effective in supporting voltage levels, maintaining abundant reserves near cities and making most efficient use of an overstressed high-voltage transmission system.
Poorly situated plants can increase bottlenecks on the electric high-voltage transmission system, making it harder to get electricity where it's needed and, ultimately, increasing wholesale power costs.

Even Texas, with the biggest electricity surplus of any region, may find itself with far less surplus juice in a few years. Its so-called reserve margin, which exceeds 20% today, is expected to decline to about 15% by 2005, even if everything that has been announced gets built, an unlikely event.





This article comes from ZPEnergy.com
http://www.zpenergy.com

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