New Power Plants: Won’t Make Electricity Cheaper

The bottom line of the article at Industry Week is that while there are quite a few new power plants being built or on the drawing board to be built, it wont be enough. On top of it there are serious problems with the underfunding of the national transmission system that will likely mean no reductions in electricity prices, and increases.

While power generation requires attention, both electricity users and consumers say the transmission system requires equal, if not greater, attention. Indeed, “Ensuring a fully adequate transmission system and a regulatory system that allows consumers to benefit from lower-cost generation are more important to most American manufacturers than generation, which is adequate in most areas,” says Marc Yacker, vice president, government and public affairs for ELCON, a national association of large industrial users of electricity. “Prehistoric” is how Yacker describes the transmission system in some parts of the United States.

The problem is that transmission systems cross state borders making such systems in the purview of both state and federal regulatory agencies. Further, the rate of return on transmission systems is generally pretty low. And to add insult to injury lets not forget NIMBYism, BANANAism, and environmentalism, all of which can kill both planned construction of generation and transmission lines. Not only does the poor state of the transmission system raise issues with regard to the systems relibability, but also it poses issues for the cost of electricity. Congestion on transmission lines can be a big factor in driving prices up. So if your electricity bill has been going up, don’t plan on it going down anytime soon. In fact, plan for further increases. And given that 80% of the planned new generation capacity is fired by natural gas, plan on your heating bill going up as well (assuming you heat with natural gas).

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Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. spaceman says:

    What put Nuks out of business in the first place was endless litigation during the construction process, which delayed plants horribly and drove up costs. It’s about as hard to license a coal burning plant. Not that much has change, the US regulatory process can’t handle new plants. But the rest of the world is building Nuks like crazy.

    What’s left, natural gas. That’s about all that has been built in the last 20 years, which has put tremendous pressure on the gas market.

  2. ken says:

    Coal plants could have been built instead of gas fired plants. All they had to do was build them to produce electricity as cleanly as gas fired plants did.

    This was too expensive at the time, so we got twenty years of the industry building cleaner gas fired power plants instead. Not a bad deal, eh?

    Now that gas is more expensive it may be economically feasable to build coal plants that crub their exhaust to the standards required to not sicken the people they are built to serve.