Power Plant Capacity Additions Appear Poised to Rebound

By Peter Maloney, Chief Editor, Platts Global Power Report

POWER PLANT CAPACITY ADDITIONS IN THE United States continued a four-year down trend, falling 37% to 13,321 MW, compared with 21,194 MW added in 2005, according to data from Platts Energy Advantage. However, if all the plants expected online come online, this year could be the beginning of a multi-year uptrend for the addition of generating capacity in the US.

According to Energy Advantage, 22,539 MW of new capacity is expected online in 2007, with 19,097 MW online in 2008, 24,864 MW coming online in 2009, and 29,258 MW starting up in 2010.

Across the border in Canada, where capacity additions have followed a steadier path, 1,731 MW were added in 2006, compared with 1,463 MW added in 2005 (Figure 1).

Figure 1. Trendline: Capacity additions in Canada and the United States. Source: Platts Energy Advantage

Based on company type, capacity additions from both utility and non-utility companies peaked in 2002 with 54,273 MW from non-utilities and 18,022 MW from utilities (Figure 2).

Figure 2. Trendline: Capacity additions in Canada and the US by company type. Source: Platts Energy Advantage

Contributions from both types of companies fell after 2002, but utility capacity additions rose in 2005 to 13,030 MW, from 9,012 MW in 2004. Non-utility contributions, meanwhile, fell steeply to 9,651 MW in 2005, from 21,343 MW in 2004. In 2006 utility contributions, 7,860 MW, slightly outpaced non-utility contributions of 7,117 MW.

Looking forward, non-utility capacity additions jump in 2007 to 21,837 MW, compared with 8,708 MW from utilities, and decline gradually — except for a jump to 23,538 MW in 2010 — until projected contributions from utilities catch up with non-utility contributions in 2012, with 11,453 MW expected from utilities and 7,083 MW expected from non-utilities.

The jump in non-utility additions in 2010 is likely to shrink significantly, by as much as 7,000 MW, if TXU follows through on its plan to cancel eight planned coal-fired plants in Texas. But, as Steve Piper, power domain expert at Platts Energy Advantage pointed out, others may attempt to fill the gap. International Power has already said it could be interested in building a coal plant in Texas. And municipal utilities in Austin and San Antonio have projects on the drawing board.

In general though, Piper noted that utilities usually operate with longer planning horizons than do non-utilities. But that level of activity could easily change because of new proposals and project cancellations, he said.

By fuel, natural gas was, once again, the favored fuel in the US with 9,014 MW coming online in 2006, compared with 17,742 MW in 2005 (Figure 3). Like capacity additions overall, projections of gas-fired generation additions follow an uptrend starting next year with the expected addition of 8,945 in 2007, 11,513 MW in 2008 and 12,006 MW in 2009.

Figure 3. Trendline: Capacity additions in the United States by fuel. Source: Platts Energy Advantage

Wind power made the second largest contribution to capacity additions in 2006, with 2,559 MW. In fact, wind power capacity actually increased from 2005 to 2006 by 2,019 MW.

Coal-fired, oil-fired and geothermal generation additions also increased from 2005 to 2006, but not by as wide a margin as did wind power. A total of 1,213 MW of coal-fired capacity was added in 2006 compared with 388 MW in 2005. And 30 MW of geothermal capacity was added in 2006 compared with 26 MW in 2005.

According to Piper, it would not be surprising to see the ground shift under proposed coal-fired plants. "There has been a slackening of coal plant activity in the last couple of months," he said, adding that he would expect the timeline of some of the proposed coal-fired plants start to stretch out in the wake of the proposed acquisition of TXU by a private equity group led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group.

As part of that deal TXU agreed to cancel eight planned coal-fired plants and to work as an advocate to mitigate the environmental effects of power generation.

In the wake of TXU announcement, one investment banker, John Cogan, a director in Credit Suisse's energy group, speaking at Platts Texas Power Markets Forum in Houston earlier this month, said that while there are more than 100 coal-fired plants that have been proposed in the US, he now believes only "a really small number" are ever likely to be built. There has been "a sea change around carbon that has been remarkable," he said.

In Canada wind power made the biggest contribution, with the addition of 868 MW in 2006 (Figure 4). Wind was followed closely by gas-fired generation, which added 533 MW to Canada's total capacity in 2006, followed by the addition of 320 MW of hydroelectric capacity. Last year there were 575 MW of hydro capacity added in Canada, followed by 450 MW of coal-fired capacity, 214 MW of gas-fired generation and 147 MW of wind power.

Figure 4. Trendline: Capacity additions in Canada by fuel. Source: Platts Energy Advantage

Looking forward, coal-fired generation additions in the US overtake gas-fired capacity additions in 2010 when 16,173 MW of coal-fired generation is expected online and 11,366 MW of gas-fired generation is expected online.

Projections of wind power capacity additions peaks in 2007 at 11,723 MW, and trails off from 4,650 MW expected online in 2008, and then drops to 1,041 MW in 2009, 880 MW in 2010 and 225 MW in 2012.

Wind power additions are likely to remain cyclical because plans to build wind farms are dependent on the periodic renewal of the production tax credit. The PTC was last renewed in 2006. It now expires in December 2008.

There has been much talk of a revival of nuclear generation, but the first new nuclear plant is not expected online until 2014.

There were, in fact, 58,059 MW of nuclear plants proposed in 2006, a huge increase from 150 MW in 2005 (Figure 5). The next closest resource in terms of proposals was natural gas. A total of 63,321 MW of new gas-fired plants were proposed in 2006, compared with 75,355 MW in 2005. Coal was a close second, with 56,662 MW of coal plants proposed in 2006, compared with 46,710 MW in 2005. Wind power represented a distant fourth place, with 12,193 MW of wind farms proposed in 2006, up from 11,041 MW proposed in 2005.

Figure 5. Proposed power plant additions in the US by fuel. Source: Platts Energy Advantage

Other resources, in descending order, were oil — 5,307 MW of oil-fired plants were proposed in 2006 compared with 315 MW in 2005 — and pumped storage. A total of 2,720 MW of pumped storage facilities were proposed in 2006 compared with 312 MW in 2005. Finally there were 1,031 MW of solar power projects proposed in 2006, down slightly from the 1,311 MW proposed in 2005.

In Canada, the biggest contribution is expected from gas-fired generation, with 7,834 MW expected to be added between 2007 and 2012 (see Figure 4). Wind power capacity additions are projected to follow gas capacity with 4,814 MW expected online by 2012. Hydroelectric capacity additions are expected to follow closely behind wind capacity additions with 4,441 MW due online by 2012.