it is frequently necessary to dispatch units out of merit order because of electric transmission infrastructure limitations, and in some cases this results in higher-cost resources being dispatched in place of lower-cost resources (DOE, 2005). When this happens, some lower-cost generators lose opportunities for sales.

Much of the nation’s coal-fired electric generating capacity is located at some distance from the urbanized areas that have the largest and most concentrated demands for electricity. For example, PJM Interconnection LLC operates the world’s largest centrally dispatched transmission grid, stretching from Illinois to New Jersey and extending as far south as Virginia and North Carolina (PJM, 2007). The bulk of the lower-priced coal-fired generation for the PJM grid is located in northern West Virginia, northern Virginia, Maryland, eastern Ohio, and southwestern Pennsylvania. The eastern Mid-Atlantic portion of PJM’s territory, which includes New Jersey, Delaware, southeastern Pennsylvania, and eastern Maryland, has experienced growing customer demand and relatively little new generation capacity. To the extent that transmission capability allows, lower-priced coal-fired generation in the central part of PJM’s territory displaces higher-cost generation in the East. However, both technical (e.g., risk of overheating transmission lines) and operational (e.g., need to maintain voltage at minimum levels) factors limit transmission capability.

Significant portions of the country are subject to transmission congestion and the resulting out-of-merit dispatch. Two densely populated and economically vital areas—the Atlantic coastal area from metropolitan New York to northern Virginia, and Southern California—currently have major transmission congestion or are projected to suffer severe congestion effects in the future (DOE, 2006, 2007b). The severity of such effects is linked to the size of the population affected, economic costs, size of the reliability problem, impact of a grid failure on the nation, or some combination of these factors. Four areas of concern were identified in which a large-scale congestion problem exists or may be emerging—New England, the Phoenix-Tucson area, the San Francisco Bay area, and the Seattle-Portland area. This analysis also noted the likely need for significant additional transmission investments to enable increased flows of electricity from midwestern coal-fired plants into the PJM grid and New York (DOE, 2006).

Planning for reliable electricity in the areas of greatest demand depends on a combination of local power plants to meet local demand without undue stress on the transmission system; distributed resources such as small on-site generators, energy efficiency and other demand reduction; and new or upgraded transmission infrastructure (NYC, 2004). It is difficult to predict the extent to which particular urbanized regions will endeavor to enhance the reliability of their electricity supply through local generation and transmission or by instituting energy efficiency or other demand reduction measures. If these areas implement alternative ways to increase electricity supply or enhance supply reliability other than by relying on new and upgraded transmission infrastructure, the need for increased coal usage will be diminished.

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