Are We Building Too Many NatGas-Fired Electric Plants?

MDN has been highlighting Marcellus/Utica gas-fired electric plant projects from some time. Our lead story today is about IMG Midstream’s “tiny” power plants–a contrarian strategy of building small rather than large. We cover these projects because (a) they use a lot of natural gas, and therefore are an important new market/demand for our oversupply of natural gas here in the northeast, and (b) each of these projects results in millions (sometimes billions) of dollars of new investment in local communities where they get built. Electric generating plants are a feel good, good news story. However, we have to ask the question, Are we now overbuilding new power plants? On the surface it seems ludicrous to even ask the question. “Everyone knows” that coal generating plants are closing down and something (typically natgas) has to replace all of that generating capacity that’s closing down, right? Not so fast. The electricity market is complex. The market where most of the plants we cover are getting built is in the PJM grid, which covers all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. Natural gas and coal are not the only two choices to generate power. In fact, did you know that the #1 power generating source in PA is nuclear? An article from Bloomberg discusses a “glut of supply” in PJM which has led to prices falling throughout the region. So once again, are we building too many electric plants too fast? Will there be enough demand for all of the electricity we generate from new natgas-fired plants?…

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