Electric Power Generation
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Industry Overview
The US electric power generation industry consists of about 480 companies with combined annual revenue of about $120 billion. Major companies include American Electric Power, AES, Dominion Resources, Duke Energy, and Exelon. The industry is highly concentrated: the 50 largest companies account for about 85 percent of revenue.
Government entities and cooperatives that own generating plants are not included in the industry. Companies that transmit and distribute electricity are covered in the Electric Power Transmission, Distribution & Marketing industry profile. Companies that generate electricity only from wind are covered in the Wind Power Generation profile. Companies that generate electricity only from the sun are covered in the Solar Power Generation profile.
The global electricity industry generates about 20 trillion kilowatt hours (KWh) of electricity. The leading countries in electricity generation are the US, China, Japan, and Russia. Large companies based outside the US include China Datang Group and China Power; Tokyo Electric Power Company; and Inter RAO (Russia).
Competitive Landscape
Demand is driven by commercial, government, and residential needs for electrical power, which depend mainly on economic activity and population growth. Profitability is determined by government regulations and fuel costs. Large companies have an advantage in negotiating fuel contracts and being able to pass the costs of implementing government regulations directly to consumers. Small companies can compete effectively by exploiting market niches, such as offering green power in regulated markets. The industry is capital-intensive: average annual revenue per employee is about $700,000.
In about 15 states and the District of Columbia, retail electricity markets have been fully or partly deregulated to encourage competition. In deregulated markets, ownership of generating plants is typically separated from ownership of transmission and distribution facilities.
Products, Operations & Technology
The primary product of the industry is alternating current (AC) electrical power. Electricity is produced by generators that convert mechanical energy into electrical energy when large coils are rotated in a powerful magnetic field. Most commercial power comes from turbine engines powered by steam produced by burning fossil fuels, mainly coal and natural gas. Other power sources include steam from nuclear reactors; conventional hydroelectric conversion; and renewable sources such as solar, wind, and geothermal. Coal produces about 45 percent of electricity used in the US; natural gas, 23 percent; nuclear, 20 percent; and hydroelectric, 7 percent.
Power plants typically produce between 500 and 900 megawatts of power, or enough to supply the needs of 500,000 to 1 million households. Larger plants require special metals and fabrication and require more downtime for maintenance, while smaller units aren't as economical to operate.
The output of the generation plant is stepped up to a high voltage at the transmission substation for connection to the power distribution grid. The grid transports power from multiple power stations to local distribution systems for delivery to homes and businesses.
Selecting the method of powering an electric generator is key to its long-term efficiency, since fuel costs are a significant portion of annual operating expenses. The cost of environmental pollution controls are also a major consideration in selecting a power source. Petroleum and natural gas emissions can be controlled at reasonable costs, but prices for these fuels are often volatile. Coal prices are the most stable of potential fuels, but emission controls can be expensive and some of the control technology is untested. Challenges to designs, extensive environmental studies, and lack of a long-term solution for nuclear waste make the costs of nuclear power plants higher than that of conventional plants. Hydroelectric plants are the most thermally efficient and least polluting generation method, but the number of suitable locations for dams is limited and long-term downstream effects are a growing concern.
Some consideration is being given to having multiple power sources for generators, but that raises power plant costs considerably. A number of state initiatives, particularly in the western US, are aimed at increasing the proportion of commercial electric power generated from renewable sources to more than 30 percent.
Power plants are highly automated with monitoring equipment sensing and measuring all operations, from burning fuel to controlling plant output voltage, frequency, and amperage. Monitoring equipment senses load changes in milliseconds and adjusts output accordingly. In nuclear power plants, monitoring is highly sophisticated and includes reactor performance and radiation monitoring. The control systems at nuclear power plants can sense dangerous conditions and automatically shut down the reactor.
