Guest Editor's Note

The Baseload Gap

Going green is supposed to be a good thing, but it hangs like a cloud over the electric power industry. There's nothing wrong with going green. In fact, the CEOs of some of the largest utilities in the nation—and the world—have gone green with surprising alacrity and enthusiasm.

The problem is not going green, but the uncertainty of what that means and how it will be accomplished. The consensus is that there will be some form of carbon control, be it cap-and-trade or a flat tax, but not until some time after the presidential elections this November. That means the industry will have to wait and see; wait and see what form of mitigation Congress finally agrees on, and wait even longer to see how the law will be implemented and what the cost of carbon will be.

The prospects of a carbon tax and the uncertainty over its form has already caused developers to back away from coal-fired plants. Some are replacing them with plans for gas-fired generation, raising concerns about gas price volatility.

Clean coal technologies such as integrated gasification combined-cycle projects briefly held the promise of a technological solution, but most have fallen victim to spiraling costs and environmental opposition. The federal government even decided that its zero-emissions FutureGen demonstration project would be too costly and pulled the plug on its funding.

There is talk of a nuclear renaissance, and last year saw the first nuclear license application in nearly three decades, but those plants are not likely to come online for at least 10 or 12 years.

Meanwhile gas-fired peakers and energy efficiency may be able to fill the gap, but at some point new baseload capacity will have to be built. When it is built, it will be built in a new environment, one in which it is very likely that carbon constraints are a reality.

The groundwork for that new business climate is being laid today, and the ideas and discussions that will inform those decisions are already under way. In addition to carbon regulation, those ideas include grid operations and technology choices ranging from smart meters to solar power. It is important that those discussions fully air and explore these issues, for if workable solutions are not found the baseolad gap could become a baseload crisis.

Peter Maloney

Chief Editor, Platts Global Power Report

Peter Maloney