Filife_print

Power Surplus to Aid Homes

by: Rebecca Smith, Wall Street Journal | Jun 1, 2009

Weak demand for electricity and abundant stockpiles of fuel are creating conditions that could benefit consumers in two important ways this summer: more reliable delivery of power and, in some places, cheaper prices.

In most parts of the U.S., electricity reserves are getting fatter even though few power plants are being built. Overall U.S. electricity demand is expected to be 1.8% less this summer than last summer, according to the North American Electric Reliability Corp., or NERC, which is responsible for grid operations.

Weak demand for electricity and abundant stockpiles of fuel are creating conditions that could benefit consumers in two important ways this summer: more reliable delivery of power and, in some places, cheaper prices.

In most parts of the U.S., electricity reserves are getting fatter even though few power plants are being built. Overall U.S. electricity demand is expected to be 1.8% less this summer than last summer, according to the North American Electric Reliability Corp., or NERC, which is responsible for grid operations.

Power demand in industrialized nations usually rises steadily with population growth. However, the sharp drop in the economy, which has shuttered some big power users such as auto plants, has led to an unusually large falloff in demand. Demand is usually highest in the summer, when air conditioners can strain the delivery system.

As recently as 2006, a year of record U.S. energy demand, grid officials worried that the nation wasn't adding new generating capacity fast enough to maintain reliability. Plans for dozens of coal-fired power plants were announced by 2007, but few have gone forward because of pending climate-change legislation and a run-up in construction costs. Lower demand buys the sector some time to add other resources, most likely gas-fired plants.

The amount of surplus generating capacity is about five percentage points higher for this summer than last, exceeding 15% in most parts of the nation and above 25% in parts of the Midwest. High numbers for these reserves give grid operators many options for meeting demand, even if some power plants have problems.

The U.S. hasn't experienced any major problems meeting demand since California's power crisis in 2000 and 2001, when traders were able to withhold supplies in the hope of driving up prices in the state's deregulated market, leading to sporadic blackouts. A widespread blackout in eastern Canada and the U.S. in 2005 was caused by a variety of complex factors.

Summer demand forecasts have softened. On Friday, Texas grid officials lowered their forecast for the state's summer peak demand to 63,491 megawatts, down 1,731 megawatts from what they predicted four months ago. The reduction is equivalent to shutting down three or four big power plants.

Forward prices for bulk electricity are sinking, too, and are about half what they were a year ago.