Independent/Merchant Power Production Industry Trends

Consolidation

Use of Renewable Sources

The largest investor-owned utilities (IOUs) have gained significant market share over the past 15 years, mainly due to consolidation. The 10 largest IOUs own more than 50 percent of total IOU generation capacity. The application of "best practices" encourages consolidation, as does the need for large financial resources to fund more efficient generating capacity.

Issues concerning safety (nuclear); long-term cost (petroleum and natural gas); and greenhouse gases (coal) are complicating and making more expensive the approval process for new power plants. Federal and state legislatures are actively encouraging development of electric power from wind, solar, geothermal, and hydro sources. A number of states have set capacity targets for the amount of power produced using renewable sources.

Re-Regulation

New Technologies for Coal-Fired Plants

The deregulation catastrophe in California has caused other states to rethink their plans. The California electricity crisis of 2000 and subsequent revelations about market manipulation by large energy trading companies prompted calls for re-regulation of the industry.

Coal is the most plentiful and cheapest fossil fuel in the US and has a relatively stable price. Considerable research is being conducted into developing “clean” burning coal plants. One latest method under development captures and liquefies the carbon dioxide from burning coal and sells it to oil companies to recharge oil wells.

Low Investment in Transmission Lines

Renewed Interest in Nuclear Plants

Utility investments in high-voltage power lines have been falling since the late 1970s, and the industry plans to add only 6,000 miles of lines, a 3 percent increase, during the next few years. Capital costs are up to $2 million per mile on above-ground lines and more than twice that for underground.

New nuclear plants are being considered in the US for the first time in 20 years - since Long Island Lighting Company spent over $5 billion on the Shoreham nuclear plant that never received operating approval. France produces 79 percent of its electrical power from nuclear plants, and plants worldwide have operated without major problems since the Three Mile Island (1979) and Chernobyl (1986) incidents. In the past 20 years, plant designs and control mechanisms have become more sophisticated. A number of utilities plan to propose new facilities, but the length and complexity of the permitting process remains a challenge.