An Alarming Trend Affecting U.S. Baseload Power
States, regulators, and market participants have in recent years called attention to a trend concerning uneconomic baseload generation in organized wholesale markets, specifically in ISO New England, New York Independent System Operator (NYISO), MISO, PJM, the Electric Reliability Council of Texas (ERCOT), and the California Independent System Operator (CAISO).
Cheap natural gas, low power demand growth, increasing operating costs owing to state and federal rules, and market design issues are affecting bottom lines and forcing some power companies to withdraw generating capacity or reconsider participation in these competitive markets.
1. An alarming trend.
This baseload exodus could have a worrying impact on reliability, as shown by summer planning reserve margin projections (%) from the North American Reliability Commission’s 2015 Long-Term Reliability Assessment.
2. Goodbye, Ohio.
On Sept. 14, American Electric Power (AEP) agreed to sell four Midwestern power plants—a total 5.2 GW for about $2.17 billion—in an effort to become a fully regulated company. The plants include the 1,186-MW natural gas–fired Lawrenceburg Generating Station in Lawrenceburg, Indiana; the 840-MW natural gas–fired Waterford Energy Center in Waterford, Ohio; the 507-MW natural gas–fired Darby Generating Station in Mount Sterling, Ohio; and the 2,665-MW coal-fired Gen. James M. Gavin Plant in Cheshire, Ohio.
Duke Energy in 2014 made a similar move when it announced it would transition its generating fleet away from volatile organized wholesale markets.
Pictured: AEP’s 2,665-MW coal-fired Gen. James M. Gavin Plant in Cheshire, Ohio, is one of the largest in the U.S.