Thursday, September 26, 2013

New Generation Capacity Matches Retirements In 2013 Putting More Downward Pressure On Wholesale Electricity Prices

America is awash in excess generating capacity and electricity consumption is down in 2013.  Even so, new generation coming on line this year slightly exceeds the amount of capacity retiring.

Excess capacity, declining consumption, and new plants exceeding retirements are a recipe for low wholesale electricity prices.  Moreover, lots of the new capacity is wind and solar that have the lowest operating costs and so can bid zero into wholesale markets and take whatever the market clearing price is.  As such, the rising amount of renewable energy will put more downward pressure on wholesale market prices.

So far, 9,033 megawatts of new generation have been built in 2013, while 8,566 megawatts have retired.  So, what capacity is retiring and being built?

Most of the retired capacity is coal, nuclear, and natural gas.  Most of the new capacity is natural gas, wind, solar and also some coal.

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