Coal and Renewable Energy Development Increase New Generation Spending Activity in 2005.

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Researched by Industrialinfo.com (Industrial Information Resource, Incorporated; Houston, Texas). Currently, capital spending in the Power Industry is weak in comparison to the boom experienced just a few years ago; however, project activity for grassroot power plant construction and unit additions has increased in 2005 when compared with 2004.

Click on the image at right to view a chart showing a comparison of new generation construction starts between 2004 and 2005.

At this time, there are more than 13,000-megawatts (MW), representing $12.9 billion in investment, of all fuel types, which have either already started construction in 2005 or are scheduled to begin construction by the end of the year. This includes over 9,000 MW that has already reached the construction stage since January 2005 and the remainder is expected to kick off by the end of this year. The figures for 2005 represent a 46% increase over 2004’s total of 9,100 MW and an 84% spending increase of the $7 Billion total investment value (TIV) in 2004.

The increase in capital spending activity we are seeing this year is due in large part to the switch from natural gas to renewable energy and coal project development.

Click on the image at right to view a table showing the breakdown of projects by fuel type.

This is a banner year for renewable energy and coal-fired projects. Activity is up dramatically, and together the two fuel categories represent over $9 Billion, or 72%, of the total investment value (TIV) for new generation expected to reach the construction stage by the end of this year.

With coal-fired generation averaging $1.3 million per megawatt and renewable energy (wind, geothermal, hydro, biomass, landfill gas, digester gas) at $1.2 million this year, the switch in project type has increased the average spending per megawatt from $770,000 in 2004 to $973,000 in 2005.

Coal

Advancements in emission control technologies and concerns over the volatility of natural gas prices have lead many developers to pursue pulverized coal-fired power projects. Already, five construction projects are underway representing 2,500 MW and an additional four projects totaling 1,300 MW are expected to kick off before the end of the year. Together, they could represent as much as $5 billion, which more than doubles the previous year’s expenditures.

One of the largest projects under development this year is the Omaha Public Power District’s Nebraska City Unit 02, a 663 MW sub-critical pulverized coal addition. Groundbreaking ceremonies were initiated this week and commercial start-up is expected during the summer of 2009. Another project is Wisconsin Energy Corporation’s 1,354 MW Elm Road grassroot, two-unit supercritical pulverized coal power, "Future Energy Project," which started construction in June 2005. The first unit will come on-line in the summer of 2009 and the second in the summer of 2010.

Renewable

The production tax credit extension, approved in September 2004, unleashed a backlog of projects that had previously been placed on hold without a tax incentive in place. This created another boom year for renewable energy project development, with over 2,200 MW representing $2.6 billion in investment reaching the construction stage since January and an additional 900 MW bringing an additional $1.4 billion in TIV expected to start construction before the end of the year. The two largest renewable energy projects under development this year are in the wind category, with FPL Energy’s 220 MW Horse Hollow project in Taylor County, Texas, which started construction in May and is expected to be completed in December. Horizon Wind Energy’s Wild Horse Wind Farm is expected to start construction in October and Puget Sound Energy has agreed to purchase and operate the wind farm once it is complete in May of 2006.

Natural Gas

Spending for natural gas remains flat this year. Only around 6,100 MW, representing $3.5 billion is expected to kick-off construction this year. In comparison with the 5,740 megawatts, or $3 billion spent in 2004.

Excess generation capacity and high fuel prices continue to delay development for new natural gas-fired power generation. Only growing energy demands and transmission constraints experienced regionally are requiring additions in mostly Southern California, Florida, New York, Utah, Texas the Northeast, and the Midwest. The two largest projects underway are General Electric’s Inland Empire 800 MW two unit, single-shaft combined cycle project that started construction last month in Sun City, California and is expected to start-up in the summer of 2008, and FPL Group’s 1,100 MW Turkey Point 4-on-1 combined-cycle expansion, that started construction in March 2005 and is expected to be completed by the fall of 2007.

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