The Breakdown of the Merchant Generation Business Model – Wilkinson Barker Knauer LLP and the Power Research Group

Merchant generators are increasingly unable to recover fixed costs in electric power plants, an economic reality eroding their financial viability and grid reliability, according to a study released today by the Wilkinson Barker Knauer LLP law firm and the Power Research Group.  The study, The Breakdown of the Merchant Generation Business Model, questioned the underlying finances of the merchant generation business model.  In an atmosphere with flat demand for electricity, low gas prices and high penetrations of zero marginal cost renewables, the study breaks down the economics of the merchant model and explains how the dispatch or supply curve drives markets to the marginal cost of operation where merchants cannot recover fixed cost.