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Independent Power Producers Will Continue To Provide Significant Benefits to Louisiana Consumers, Says LSU Report

An analysis from Louisiana State University's Center for Energy Studies shows that consumers in the Bayou State will enjoy substantial benefits from independent power producers (IPPs) in the coming years - and could save even more if competition is allowed to more fully take hold.

The Power of Generation: Continued Economic Benefits from Independent Power Development in Louisiana updates the center's 2001 study on the current state of the IPP market and the benefits of IPPs. The report found that, "…there are considerable economic benefits that could be attained by harnessing the efficiency opportunities from replacing older, less efficient utility generation with newer competitive sources of power."

The study found the economic benefits from the considerable number of competitive power facilities coming on line in the next few years include:

• A $4.1 billion capital investment in the state by the end of 2005 in facilities that are likely to be completed;


• A likely investment of 7,406 MWs of new and efficient power generation;


• An estimated total economic impact associated with the construction of independent power facilities in Louisiana is $1.5 billion by 2005;


• The total potential employment opportunities associated with the construction of these independent power facilities is 4,963 jobs. Some 2,408 jobs are associated with the multiplier effects of these construction activities.

"These new highly efficient generators have the ability to displace older less efficient utility generation. These efficiency enhancing opportunities create lower cost wholesale electricity, which, in turn, lowers the cost of purchased power for regulated utilities. These lower purchased power costs, in turn, can be passed along to ratepayers who benefit from this enhanced wholesale competition," the report said.

The report found:

• The heat rates for new natural gas-fueled independent power facilities are very efficient:
  
  
  
  • As low as 5,000 Btu/kWh heat rate for a new cogeneration (combined heat and power) application;
    
  • As low as 6,000 Btu/kWh heat rate for a new combined cycle facility;
    
  • As low as 10,000 Btu/kWh heat rate for a new combustion turbine facility.
  
  

There are 12,901 MWs of natural gas-fueled, utility generating capacity that are operating at a heat rate of 10,000 Btu/kWh or higher. There are 18,958 MWs of natural gas-fueled utility generating capacity that are operating at a heat rate of 9,000 Btu/kWh or higher. This compares unfavorably with newer natural gas technologies under development by competitive developers.


• Louisiana and its regional utility generating facilities are old. While approximately 73 percent are more than 20 years old, some 43 percent are more than 30 years old.


• There are potentially significant opportunities for independent power facilities to begin to displace older generation facilities. Based on estimates provided in the report, the potential fuel cost savings associated with the displacement of these older units are as follows:
  
  
  
  • For the Entergy sub-region as a whole, some $411 million in 2000, $825 million in 2003 and $926 million in 2005;
    
  • The share of these regional efficiency savings estimates for Louisiana could be as much as $178 million in 2000; $357 million in 2003 and $401 million in 2005.
  
  

The bottom line is that Louisiana consumers will save if independent power producers are allowed to freely compete in markets with robust competition overseen by an independent and impartial system operator.

For more information, including the report, visit
http://www.enrg.lsu.edu/publications/online/pwr_of_gen_final.pdf or contact EPSA's Douglas Austin at daustin@epsa.org, or (202) 628-8200.