🇺🇸United States

Overbuilding Fossil Capacity and Locking In Stranded Capital from Flawed Planning Assumptions

Updated: Feb 20262 verified sources

Definition

Integrated resource and capital planning processes at utilities often overestimate fossil load growth and underestimate alternative resource options, leading to approvals of uneconomic fossil plants. Evidence from all‑source procurement and planning studies shows that mis-specified need assessments and failure to run competitive, all‑source solicitations cause utilities to select higher‑cost fossil projects instead of cheaper portfolios, stranding capital and raising system costs borne by customers.

Key Findings

Financial Impact: Analyses of U.S. utility planning show that mis‑procurement of fossil resources instead of least‑cost all‑source portfolios can raise consumer costs by hundreds of millions to billions of dollars over a plant’s life; one industry study notes that consumers bear fossil fuel cost risk via fuel riders, creating incentives to low‑ball fuel cost forecasts and approve plants that later prove uneconomic.[7]
Frequency: Recurring in each major integrated resource planning and capital budgeting cycle (typically every 2–3 years per utility, overlapping sector‑wide each year)
Root Cause: Capital project planning processes often define ‘need’ in terms of desired fossil capacity rather than system load and retirement requirements, and they omit or underweight demand-side and non‑fossil options; regulators frequently approve plans without robust all‑source competitive solicitations, and utilities have incentives to underestimate future fuel costs, resulting in systematically biased investment decisions.[7][6]

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Fossil Fuel Electric Power Generation.

Affected Stakeholders

CFO, VP Resource Planning, Generation Planning Director, Regulatory Affairs VP, Board Investment Committee, Public Utility Commissioners

Deep Analysis (Premium)

Financial Impact

$100M to $300M stranded cost for smaller utility; member-customer rate increases of $1-2/month cumulative • $100M–$1B in unquantified stranding exposure not flagged during capital planning; failure to adjust portfolio mix early enough • $10M–$100M per cooperative in suboptimal capacity decisions; elevated member electricity costs

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Current Workarounds

Cooperative consulting relationships with G&T organizations; paper-based board reports; manual PPA vs. own-gen spreadsheet comparisons; reliance on utility relationships for market data • Excel-based load forecasting models shared via email; manual scenario comparison across disconnected spreadsheets; reliance on historical fuel price assumptions; PowerPoint slide decks for board presentations without real-time validation • Local consultants hired ad-hoc for competitive-cost studies; reliance on utility vendor RFP responses (vendor-biased); manual cost comparisons in Word/Excel; limited access to industry benchmarking data

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