The Generation Glut: When Will It End?

An analysis of the timing, location, and mix of new capacity additions that may be needed in the future.

It is universally accepted that there is excess generating capacity in most, if not all, regions in the country. Looking forward, several obvious, and interesting, questions arise: (1) When will new capacity be needed? (2) Where will it be needed? and (3) What types of plants will be needed? As any good economist would say, it all depends. We have attempted to address these questions under a range of assumptions regarding future environmental regulations, natural gas prices, and the cost of a new generation of nuclear plants. Depending on how events unfold, the timing, location and mix of new capacity additions could be quite different. To address these questions, we start from our most recent, end of 2003, assessment of announced plans for new generating plants and modifications to existing facilities. We assume that plants reported to be under construction will enter service as scheduled. We have incorporated these plans into our company's proprietary Electric Power Market Model of the United States and Canadian electric grids that consists of 33 interconnected power markets. We projected when, where, and what types of new capacity would be needed in the U.S. and Canada in addition to those units under construction. The analysis also was based on projections of demand growth from the North American Electric Reliability Council (NERC) and future fuel prices, as well as the costs and characteristics of new generating options from the U.S. Department of Energy's Energy Information Administration (EIA), and its .