seal  Purdue News

September 17, 2003

Report: Indiana may need new electricity sources in 2008

WEST LAFAYETTE, Ind. – A new report made public today (Wednesday, 9/17) cautions that Indiana may be faced with a significant need for additional power-generating facilities in the next five years due to increasing electricity demand.

"This is something that will need to be addressed," said Douglas Gotham, associate director of the state Utility Forecasting Group, a state-funded panel of researchers based at Purdue University.

The 90-page report, which the research group prepared for the Indiana Utility Regulatory Commission (IURC), details projections about future electricity demands and costs for the state. Gotham and analyst Forrest Holland presented the report's findings to the utility commission at 2 p.m. at the Indiana Government Center South, 302 W. Washington St., Room E306, Indianapolis.

Among the report's findings is the prediction that by 2008 the state will need to provide an additional 2,400 megawatts of electricity, which represents a 10 percent increase over the present level.

The report, entitled "Indiana Electricity Projections: The 2003 Forecast," contains projections of the state's energy needs over the next 20 years.

The forecast was prepared by Tom Sparrow, a professor of industrial engineering at Purdue and former director of the forecasting group; Gotham; Holland; analysts Zuwei Yu and David Nderitu; and consultant R. Jeffrey Green, co-director of the Center for Econometric Model Research at Indiana University and a professor of business economics and public policy at IU's Kelley School of Business.

The panel used a system of sophisticated mathematical models to predict future trends for residential, commercial and industrial power users in the state.

The increased demand by 2008 will need to be met by building new plants, purchasing electricity from other generators on the power grid or increasing efforts to conserve electricity, Gotham said.

The analysts used energy models to study eight power providers representing more than 99 percent of the electricity supplied to Indiana. The report looked at three categories of electricity provided to users: baseload power, which is produced by plants that generate electricity throughout the day; peaking power, which is produced by plants providing electricity only during times of the heaviest demand, such as the hottest periods on summer days; and cycling power, which is produced by plants providing power for uses that are between peaking and baseload demand.

Baseload plants, which are more expensive to build, generally use coal or nuclear energy. Peaking plants are usually powered by natural gas. Peaking and cycling plants are less expensive to build, but their power is more expensive to generate. Cycling plants may use coal or natural gas generators that are more efficient than the plants used for peaking power generation.

Of the projected 2,400-megawatt increase in 2008, more than 1,000 megawatts is for baseload power. The distinction between baseload power and the other two forms of generation is significant not only because baseload plants are expensive to build but also because they take at least five years to construct, Gotham said.

"This is the first forecast that identifies a substantial need for additional baseload capacity," Gotham said.

The analysis reveals a steady annual increase in baseload power demand of about 200 megawatts.

Gotham said the increase in power demand is due to natural growth.

The Purdue-based group prepares the reports about every two years to predict Indiana's future electricity requirements and the need for new generating capacity. The previous report was released in 2001.

The forecasting report outlines other findings, including:

• The so-called "real price" of electricity, or the price adjusted for inflation, will remain steady over the next 10 years, with prices expected to drop slightly after that.

• The recent economic slowdown has had little impact on overall peak demand. While the hard-hit industrial sector has cut back on electricity usage, the sour economy has had little impact on the peak-demand power consumption. In fact, peak demand actually has increased in recent years because it is driven largely by residential users who continue to operate air conditioning during hot summer months regardless of economic factors.

• Recent low wholesale electricity prices have stopped companies from building new power stations. Price spikes in wholesale power during the late 1990s prompted companies to build new plants to capitalize on those high prices, but the recent trend of lower wholesale prices has made it less profitable to build new plants, resulting in a standstill on new construction.

A copy of the report is available on the Web.

The forecasting group does not make recommendations. The studies are done in accordance with a state law enacted in 1985 to provide the state regulatory commission with an impartial projection of electricity consumption and peak demand. That information is used in determining whether the need exists for additional power plants. This is the ninth full report compiled by the group.

Writer: Emil Venere, (765) 494-4709,

Sources: Douglas Gotham, (765) 494-0851;

Tom Sparrow, (765) 494-7043, , cell (765) 490-0501,

Mary Beth Fisher, public information director of the IURC, (317) 232-2297;

Purdue News Service: (765) 494-2096;

Note to Journalists: A copy of the report is available from Patricia Bridwell at the State Utility Forecasting Group, (765) 494-4223; It is also available online.

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