Resource additions spell hope for energy buyers

By Naomi R. Kooker -- Purchasing, 12/8/2000

New resource additions are spelling good news for manufacturers that purchase electrical energy to run their operations. So says the North American Electric Reliability Council, which recently released its "Reliability Assessment 2000-2009."

While electricity demand is anticipated to grow by approximately 60,500 MW in the next four years, new resource additions totaling from about 109,000 to 193,000 MW are projected to quench the industry, depending on the number of merchant plant projects that are assumed to be in service.

What that means is 15% to as much as 27% capacity margins in the United States during this time-a marked increase after several years of decline.

"With greater capacity available, the expectation is this would help mitigate any price spikes that might otherwise occur," says NERC spokesman Gene Gorzelnik. Gorzelnik can not quote anticipated prices because NERC does not deal directly with pricing issues.

The assessment is a 77-page document that reviews the overall reliability of existing and planned electric generation and transmission systems of the Regional Councils. The councils encompass virtually all of the electric systems in the continental United States, Canada and the northern portion of Baja California Norte, Mexico. The review is broken into two projections: near term (2000-2004) and long term (2005-2009). Near-term generation adequacy is deemed satisfactory, provided new generating facilities are constructed as anticipated.

If present trends continue it is possible long-term adequacy will also be satisfactory. Long-term performance is harder to evaluate because adequacy is dependent upon the continued response of merchant power-plant developers to market signals to construct new generating facilities (and their ability to obtain the necessary siting approvals) in areas with declining capacity margins.

Gorzelnik explains in a competitive industry such as the energy business, long-term plans are also seen as part of a company's strategic value.

"It's like holding your cards close to your chest," he says. Therefore, it's harder to obtain information on those long-term plans.

He also notes the industry is in its early stages of transition from being regulated to unregulated.

"You just don't make these changes overnight," says Gorzelnik. "So we're going to have a few years when we're going to have problems-and we'll work through these problems in a reasonable and expeditious way."

NERC defines reliability of the interconnected bulk electric systems in two terms: adequacy and security. Adequacy is the ability of the electric system to supply the aggregate electrical demand and energy requirements of the customers at all times, taking into account scheduled and reasonably expected unscheduled outages of system elements.

Security comes into play when the electric system withstands sudden disturbances such as electric short circuits or unanticipated loss of system elements.

As reliable as power systems are, Gorzelnik says there is no way to guarantee service seven days a week, 24 hours a day, 365 days out of the year. If a scorching day arrives on top of a storm or other demands, it's possible facility transmission lines may be taken out of service.

"When those things happen, utilities try to get that service back as quickly as possible," says Gorzelnik. "They certainly don't want their customers to be unhappy. Unhappy customers look for service elsewhere, especially in this new day of competition."