re: gas

["Mark Jones" <jones118@xxxxxxxxxxx>]

Less Than Half of Power Plants in Development Likely to Be Completed


Williams Capital Group Analysis Shows Tight Less Than Half of Power Plants
in Development Likely to Be Completed Supplies Likely to Continue Unless
Coal-Fired And Nuclear Generating Stations Take Pressure Off Demand for
Natural Gas
( June 29, 2001 )
NEW YORK, Jun 29, 2001 (BUSINESS WIRE) ?
Fewer than half of the electric power plants now in development in the
United States are likely to be completed, according to an analysis of
electricity and natural gas supply and demand by Christopher R. Ellinghaus,
energy analyst with The Williams Capital Group, LP, a New York-based
investment bank.
While those new facilities that actually do get built will ease tight power
markets and alleviate political pressures to control prices in the near
term, high gas prices and electricity price volatility are likely to
continue. Only if new coal-fired or nuclear power plants come on line in
significant numbers, something that cannot begin to happen until 2005, are
shortages likely to be abated.
Although independent power producers and other electricity suppliers hope to
have 300,000 MW of new generating capacity on line by 2005, it is doubtful
that much more than 100,000 MW will be possible over the next three years,
Mr.  Ellinghaus maintained. He attributed the difference to a ?multiple of
infrastructure constraints,? including U.S. energy policy, public attitudes
toward new facilities and anemic growth of natural gas supplies, the fuel to
be used in over 90 percent of the proposed plants.
Noting that gas supplies have been growing by less than one percent annually
despite record drilling activity, Mr. Ellinghaus warned that ?unless
unprecedented amounts of new, net gas production emerges over the next three
to five years, only a fraction - maybe 40-45 percent - of the natural
gas-fired plants currently being developed will actually be constructed.?
Demand for electricity is likely to grow by three percent annually through
2010, Mr. Ellinghaus forecast. This rate reflects the fundamental shift in
the U.S.  economy that has made electricity-intensive technologies such as
computers, telecommunications and the Internet the engines of U.S. economic
growth, he noted.
To meet this demand and build sufficient reserves to avoid price shocks,
U.S.  power generators would have to build 330,000 MW of new and replacement
capacity by 2010, a 41.7 percent increase from the 822,000 MW of capacity in
2000. If all the new plants were gas fired, demand for natural gas would
grow by between 11 and 15 trillion cubic feet, requiring the gas market to
grow from 22.4 trillion cubic feet to between 33 and 38 trillion cubic feet.
To meet that demand, natural gas supply would have to increase by nine
percent annually. Based on production experience over the last decade, it is
doubtful that such a level of increased production could be achieved, Mr.
Ellinghaus noted. Most gas exploration and production analysts expect an
annual growth rate in the one percent - three percent range, he added.
There will be adequate gas supply to the fuel new plants being built this
year and next, when 43,000 MW and 36,000 MW of new generating capacity are
expected to come on line, Mr. Ellinghaus said. However, in subsequent years
there only would be enough gas supply to support 20,000 MW of new plant
construction, he pointed out. ?Natural gas remains the principal constraint
to completing and operating plants currently in development.?
As a consequence of insufficient gas supplies, power generators would have
to build 200,000 MW of generating capacity fueled by coal or uranium to meet
long-term demand, Mr.Ellinghaus pointed out. However, because of the lengthy
development cycle and public policy concerns, new plants relying on these
energy sources will not begin to come on line in sufficient numbers until
2005 or 2006, he said.