February 22, 2006—The electric power industry’s preoccupation with passing through its biggest single-year fuel cost increases in history is creating a strong chance that US power markets will not be able to successfully address resource adequacy, resulting in power shortages in some areas of the country within the next five years, the Managing Director of Cambridge Energy Research Associates’ (CERA) Global Power Group, Lawrence J. Makovich, told a briefing at the firms CERAWeek 2006.
Fuel costs, which account for about one-third of total power production expenses, have increased from $68 billion in 2004 to $90 billion in the past year, Makovich noted.
The US power business is at the point where plans for new supply need to be addressed. Assuming all power plants currently under construction and half of those under development are eventually completed, less than half the new capacity needed over the next ten years will come online, Makovich said.
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