April 4, 2003—More than 70,000 MW of an estimated 173,000 MW of new capacity announced in the WECC region since January 2000 has been cancelled or postponed according to Henwood’s Spring 2003 WECC Electricity and Gas Outlook just released. During this period, another 23,000 MW was completed and 14,000 MW are still under construction despite the overbuilt wholesale power market. The remaining 66,000 MW is in permitting, under study, or remains as “announced” according to Richard Lauckhart, the study’s principal investigator.
Henwood’s Power Market Advisory Service provides a 25-year long-term forecast of expected wholesale electricity and natural gas prices in the WECC and across more than 67 price zones in North America through five regional reports. Recently, FitchRatings selected Henwood’s Power Market Advisory Service market outlook and price forecasts as a benchmark for use in its ratings analysis, valuation of power generation, and structured financings.
“With so much new capacity, the region has gone from a period of tight supplies in 2000 to a situation of very high reserves and depressed spark spreads in 2003,” said Gary L. Hunt, Henwood’s Vice President of Consulting Services.
Adding to this cloud over the industry is the market uncertainty over natural gas price volatility, hydro availability, and the seemingly endless debate over market design rules and use of locational marginal pricing (LMP) to manage transmission congestion. Efforts to justify new transmission lines for their economic value rather than their reliability value are proceeding in many areas of WECC.
Other major issues facing the power industry in the West are the governance and fate of regional transmission organizations (RTOs) and standard market design (SMD), favored by FERC. California’s Independent System Operator (CAISO) is adopting LMP as an integral part of its market re-design initiative (MD02) which is expected to have significant implications for generation, in particular renewable energy resources. “However, there are not enough renewable projects to come close to meeting the portfolio standards California regulators are setting,” said Lauckhart.
For more information, contact Henwood Energy.
