Capacity payments will decide cogeneration's future in an era of low fuel costs

The market for direct power sales to end-users has peaked, but was never more than a niche market. The real opportunities lie in competing with utilities for the privilege of building new power plants to serve the grid. One purpose of the Public Utility Regulatory Policies Act (PURPA) is to encourage this competition in power generation, but the traditional monopolies of utilities will be a barrier. The author explores some of the ramifications of selling capacity to the utility in terms of payments, commitment, reliability, and security. Examples illustrate the struggle cogenerators face with various options as the rules evolve. It will be up to cogenerators to educate utility commissions on the relative risks and benefits of utility versus private development.