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Regulatory Complexities, Natural Gas Economics Driving Power Markets

October 7, 2014 By Karen Henry

ICFInternational-energy-manageRegulatory issues surrounding greenhouse gas emissions will continue to boost the natural gas and renewable energy markets, according to ICF International’s ICForecast Energy Outlook for the fourth quarter of 2014. Highlights from the forecast include the following:

Regulatory Issues: ICF’s retirement projection for US coal plants leading up to the EPA’s Mercury and Air Toxics Standards rule compliance deadline remains steady in the range of ~60 GW. As the EPA moves forward with the rulemaking process for its proposed Clean Power Plan and US states consider alternative paths to compliance, expected unit retirements, fuel prices and power prices will shift. Recent CO2 proposals for new power plants will further strengthen market trends favoring natural gas and renewable technologies.

Natural Gas Market: Over the next 18 months, gas prices will stay firm but then decline because of continued production growth. Increased gas exports, demand from the petrochemical industry and a continued shift from coal toward gas will place upward pressure on gas prices through the remainder of the decade.

Coal Market: Coal stockpiles remain below average and are not expected to normalize until well into 2015. Over the next 10 years, coal consumption is expected to remain relatively flat, and coal demand will remain flat despite the expected coal retirements through 2016 as the remaining coal plants will run at somewhat higher capacity factors.

Renewable Market: The Renewable Electricity Production Tax Credit (PTC) is not likely to be extended. As a result, in regions where wind is not economic, renewable portfolio standards will drive development opportunities. Conversely, the landscape for distributed renewable energy continues to evolve, as distributed solar continues its rapid growth.

Power Market: The US power market will add nearly 225 GW of new capacity by 2030. Wind and solar technologies will dominate the mix, but low capacity factors keep their share of total generation constant to slightly declining over time. Coal generation remains almost flat through 2020, and by 2030, gas will start to dominate the generation mix. By 2037, retirement of nuclear units will provide further momentum for gas-based generation.

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