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Why Baseload Matters: Understanding Electricity Generating Capacity

DISCLAIMER: Any written content contained herein should be viewed strictly as analysis & opinion and not in any way as investment advice. Visitors to this site are encouraged to conduct their own due diligence.

Essentially, generating capacity is defined as the maximum power output for a given power generator. The key point here is the maximum amount of electricity which can be produced when a generator (be it wind, hydro, thermal or nuclear) is running at full blast. For the sake if simplicity, this maximum output capacity is measured in megawatts (MW), kilowatts (KW) or gigawatts (GW). For context, with 93 operating reactors at 55 nuclear power plants spread over 28 states, US nuclear generating capacity exceeded 95.4GW in 2021. This made up approximately 8% of the nation’s total generating capacity (this is not to be confused with the fact that actual electricity produced from nuclear sources amounted to 19% of all produced electricity in the US, in 2021).

Generating capacity allows one to compare the reliability/efficiency from various power generators relying on different inputs. As can be seen below (data provided by the US Energy Information Administration), for 2021, nuclear had by far the largest capacity factor at 92.7%, followed by Geothermal sources at 71.0%. Renewable power from Hydro, Wind and PhotoVoltaics (Solar PV) lagged behind at 37.1%, 34.6% and 24.6% respectively. Why are the capacity factors so low for the renewables ? Simply because the availability of the required fuel (that being wind, sunlight or the flow of water) can be very intermittent in volume and consistency. Secondly, given the laws of thermodynamics, during the process to convert one energy source to another (for example, fuel combustion for the generation of electricity), it will never be a simple 1:1 conversion - some of the potential energy will be lost via transfer in the form of heat, matter or process. That being understood, capacity factors for 100% can never be attained, but nuclear in the high 90s is a very efficient benchmark, while capacity factors at the low 40s for wind is also considered to be efficient.

Note that there are some thermal plants which dramatically outperform the averages listed below, (certain combined-cycle turbine gas plants have been known to reach capacity factors of 80%+) however for the sake of simplicity, the averages below are representative of the given source and current dated technologies in use. Either way, though not baseload capacity, renewables can certainly provide adequate backup as part of a fully integrated grid. The emergence of storage capacity will also aid in this regard going forward.

This brings up the next key point, baseload energy generation. Baseload generation refers to those power plants which can reliably (with no interruptions) produce a consistent given level of power, 24 hours per day, seven days per week. Baseload power generation can be furnished from nuclear, geothermal or thermal sources however as the capacity factors decline (ie for renewables) consistent power generation becomes less reliable. Baseload power generation is critical for both household consumption and more specifically for general industry across the globe. Forward curve baseload power contracts form the benchmark for power contracting in any given region.

For more recent examples of these concepts – Constellation Energy (CEG), the nation’s largest nuclear fleet operator, reported last month that its 21 nuclear reactors achieved a 99% generating capacity this past summer. This performance essentially equates to the nation’s highest level of generation reliability, all from carbon-free nuclear power plants, operating without interruption 24/7. More on why we like Constellation Energy here and here.

Elsewhere, this past quarter it was reported that Ontario Power Generation’s (OPG) Darlington GS Nuclear unit enjoyed a 96.1% capacity factor for the six-month period dating to June 30, 2022. This comes despite planned outages for upgrades and refurbishments. OPG’s Pickering Nuclear Plant achieved a capacity factor of 85.6% over the same six month timeframe as the on-going refurbishment programs looks to extend the four unit lifespan by at least 30 years. Though Constellation Energy ranks the highest, these capacity factors are typical and very comparable to the other nuclear fleets spread across the country:

Though many power sources (mostly in the thermal domain) are nearing 60, 70, 80+ years in age, it is understood that for a traditional power plant, a capacity factor between 40%-50% is closest to the maximum achievable generating capacity. Yes, there are outages for nuclear power plants but these outages are planned well ahead of time. The fact of the matter is that a single AP100 nuclear power plant can do the job of over 3.0M solar panels or over 300 wind turbines. Nuclear fission is actual energy creation whereas solar, wind or hydro is simple energy capture. No one can make the argument that nuclear is neither efficient nor reliable. Baseload generating capacity matters.


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