In the midst of an overbuilt power generation market that has seen wholesale power prices plummet, merchant power company valuations crater, and gas turbine manufacturer order volumes crumble, it might be difficult to spot a growing demand for baseload power. Yet that is what is happening—or more precisely, what will happen in the not-too-distant future. Hidden behind the excess capacity currently prevalent in the U.S. is a looming shortage of baseload capacity in the 2008-2012 time period. To prepare for this pending shortfall, utilities must begin planning now. And stung by volatile natural gas prices in recent years, many will be turning to coal-fueled power plants for new generation needs. The North American Electric Reliability Council (NERC) released its annual long-term reliability assessment in late 2003, with supply and demand projections covering the 2003-2012 time period. A cursory examination of the supply situation provides little indication that baseload capacity will be needed in the near future. Capacity margins in most of the NERC regions are above 20% currently, with some in the 40%+ range. These reserve margins will begin to decline after peaking in the next year or so, but, for the most part, they aren't projected to fall back below 15% until after 2010.
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