Generation 101

Some Generation Basics:

North America’s electric supply system relies on power generating units. Typically, this means coal, nuclear and natural gas power plants along with hydroelectric facilities – like the Hoover Dam.

In recent years, non-hydro “renewable” sources such as wind, solar and geothermal power facilities are increasing their role.

Power plants are usually broken into three categories depending on how much they are used – baseload, intermediate and peaking.

Baseload plants form the backbone of the electric power system. These are plants designed to run virtually all the time – except for regular refueling or maintenance outages. Coal and nuclear facilities are typically baseload plants – although natural gas is increasingly being used in this crucial role.

Peaking plants run very little. They can be thought of giant emergency backup generators. These tend to be natural gas plants. Sometimes they run only a few hours per year. These plants, however, can be brought online within minutes and are often used during summer heat waves or on other occasions when demand surges.Intermediate generation fills the sizable gap between baseload and peaker units. These power plants, usually fueled by natural gas, run a lot – but don’t usually keep the 24/7 schedule of many baseload plants. Intermediate generators often adjust their power levels (or cycle) to accommodate intermittent renewable energy sources like wind or solar power.

Intermediate generation fills the sizable gap between baseload and peaker units. These power plants, usually fueled by natural gas, run a lot – but don’t usually keep the 24/7 schedule of many baseload plants. Intermediate generators often adjust their power levels (or cycle) to accommodate intermittent renewable energy sources like wind or solar power.

During recent years renewables have been growing thanks to various government incentives – such as the production tax credit (PTC) and renewable portfolio standards (RPS). The PTC, run by the federal government, allows a tax credit based upon the amount of renewable or green energy produced. Many states also have an RPS – which basically requires electric utilities to meet a certain percentage of their needs through “renewable” sources.

Much of the U.S. generating fleet has been around for a long time. The U.S. Energy Information Administration estimates that 51% of the nation’s generating capacity was at least 30 years old at the end of 2010. Most gas-fired capacity is less than 10 years old, while 73% of all coal-fired capacity was 30 years or older at the end of 2010.

Natural gas and wind power units have seen a major building spree in the 2000s, EIA said. Since 2006, 36% of total electric power industry capacity additions have been wind generators.

The chief measure of the size and importance of power plants is their megawatt rating. A megawatt (MW) is equal to 1 million watts. By comparison, a kilowatt is equal to 1,000 watts.

As a rule of thumb, 1 MW from a baseload plant could power 1,000 homes. Therefore, a 1,000-MW power plant that runs around-the-clock could conceivably power 1 million homes.

Another used from time to time is gigawatt. A gigawatt (GW) is equal to 1,000 megawatts (MW). Gigawatt tends to creep up in news stories or reports about national or international trends. Instead of saying that new environmental rules could force early retirement of 50,000 MW of coal power some observers might instead choose to express this as 50 GW of coal retirements.

Most power generation in the United States is still owned by traditional electric utilities. These are often publicly traded companies that are regulated by a state Public Service Commission and are engaged in generation, transmission, and distribution of electricity. Their electric rates, and need for new infrastructure, are typically set by state commissions.

EIA describes electric utilities as high-investment businesses that historically have been treated as monopolies in order to avoid duplicate infrastructure. Thus, franchises were granted to electric utilities for given geographical areas by regulatory officials. To obtain a franchise, electric utilities had to provide service to all consumers in their territories at a reasonable cost.

Independent power producers are also important players in electric generation. They sell power to regulated utilities or other entities through power purchase agreements.

In the industrial realm, cogeneration or combined heat and power plants generate both electricity and useful heat for factories and refineries.

There are also a handful of federally-owned utilities. The Tennessee Valley Authority (TVA) is the largest producer of electricity in this category. Federal utilities do not produce power for profit.

There are other types of public-owned utilities, which are owned by entities including municipal governments, public power districts, state authorities, irrigation districts and other state organizations, according to EIA. These entities are non-profit. Many municipals just distribute power although some large ones produce and transmit electric power.

There are also member-owned electric cooperatives spawned by rural electrification efforts of the 1930s. The Rural Utilities Service, which is part of the U.S. Department of Agriculture, extends credit to these cooperatives to provide electric services to rural areas where it was relatively expensive to provide service.

Public utilities regulated by states are required to have more generation at their disposal than they expect they will actually need. This is referred to as the reserve margin.

The reserve margin is expressed as a percentage by which available electric capacity should exceed forecasted peak demand across the region.

Reserve margins are needed when demand exceeds the forecast during a heat wave or other extreme weather. The unexpected loss of large amounts of power generation is another reason for reserve margins.

Regulators and government players:

U.S. Environmental Protection Agency (EPA) regulates power plants’ impact on air and water – as well as waste disposal issues.

Nuclear Regulatory Commission (NRC) regulates nuclear power plant siting and safety.

Federal Energy Regulatory Commission (FERC) regulates natural gas pipelines and all-important electric transmission lines that take electricity from power plants to the areas they serve.

State Public Service Commissions (the names can vary from state to state) typically regulate electric rates for consumers and approve or deny power companies seeking permission to charge ratepayers for new power plants or power lines. Some states also have a Siting Council that can effectively license or reject power plant proposals. For example, the California Energy Commission handles power plant siting.

Regulated or Unregulated states: During the 1990s, many states moved to “deregulate” or “restructure” the manner in which electricity was sold. The movement was meant to increase customer choice and move away from the old utility monopoly model. The restructuring movement was abandoned or suspended in most states – although it survived in places like Texas and the Northeast power markets.

U.S. Department of Energy: While not a regulator; DOE is a chief funding source for energy research in the United States. DOE funds technology research for everything from cleaner coal technology to nuclear power to renewable energy.

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