August 15, 2006

Banana republic

—Dr. Robert Peltier, PE Editor-in-Chief

Ignoring reality

Residents of New England are on notice, much as Californians were in 1999, that the clock is ticking. Procrastination on building new capacity will result in fewer, more expensive, and more painful solutions. Wholesale markets collapsed post-Enron when independent generators with scores of assets went bankrupt; some threatened to shut down their older, less-economic plants, and others stopped building new plants altogether. ISO NE reliability-must-run contracts were an interim solution but, now totaling over 6,000 MW, they cost ratepayers around $700 million/year.

Naysayers blame New England's competitive markets for the looming crisis. But Gordon van Welie, president and CEO of ISO New England, says the markets are merely revealing the structural cracks in their underlying fundamentals. Combine antidevelopment sentiments, environmentalists' opposition to any power plant development, an unstable regulatory environment, plus retail and wholesale price caps, and you have all the ingredients for a California-size implosion.

Tracking the location of new plants is a key indicator of a region's economic future. As a region, New England has 26% of its power needs met by nuclear power. But not one of the 14 or so announced next-generation nuclear projects is in New England, where no major generating project of any type is in the queue. One developer, finding it hard to overcome NIMBY opposition to a small 30-MW wind project, astutely observed that the region has gone beyond NIMBY to BANANA—build absolutely nothing anywhere near anyone. That's not a healthy attitude.