An S&P Global Ratings report into America’s independent power producer (IPP) market concludes that generators are at the mercy of thin margins and waning power demand – which could force energy companies to restructure their operations or even lead to generator closures.
In an article written by Project Finance International, S&P’s senior director, U.S. energy infrastructure, Aneesh Prabhu, believes the grid is at risk of oversupply from 2018 as a consequence of overzealous gas-fired generator construction. He says, “It is now just not possible for entering generation to earn a reasonable return unless vintage coal-fired or nuclear generation retires.”
For Prabhu, low power prices in this year’s capacity market auctions could be the final straw for many IPPs. He warns, “A price below US$125 per megawatt-day puts as much as 17GW of generation at risk” in 14 Eastern states alone. And given that last year’s capacity auction led to prices of approximately US$100 per megawatt-day, closures remain a likely outcome.
To read the full article, please click here (behind paywall).