Economics and Financing Spark Spread The opportunity cost of not installing inlet cooling in the past has been limited. Most plants had fixed Power Purchase Agreements and fixed fuel costs. Therefore, the "spark spread" was predictable. There might have been enough of an incentive in the spark spread to justify adding inlet cooling; but more often than not, it just wasn't worth the trouble. We now see this situation changing dramatically. The opening of spot power markets, not just in New England and California, but in every region, is driving up the spark spread in the summer. In some of the hot spots, such as Chicago, New York City, and PJM, there sometimes is just not enough hot weather power, not at any price. This situation will not completely work itself out with the addition of new base-load capacity, so there will always be a little less margin in hot weather than most people would like to see. This is due to the so-called discipline of project finance sources, which will not put up money for a project unless the power supply looks a little tight for the near future. In such a case, the technology risk of adding an inlet cooling system to a well-established gas turbine plant is dwarfed by the financing and permitting risk of developing a brand new peaking plant. The opportunity to address increasing spark spreads is the most exciting aspect of inlet cooling. However, it takes sophisticated technical and financial tools and software to predict the benefits of inlet cooling in spot markets. This is where Polar Works holds a major advantage over our refrigeration competition, as we specialize in detailed analysis tools and software, better even than those used by some power plant developers. So while we think that "payback" is not a proper means of screening inlet cooling projects, we see paybacks becoming strikingly short for large inlet cooling projects in regions of the country that have diminished summer reserve margins.
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