Tag Archives: electricity

EIA STEO: Natural Gas – 2/8/17

In its January 2017 Short-Term Energy Outlook (STEO), the EIA expects the Henry Hub natural gas spot price to average $3.55 per million British thermal units (MMBtu) in 2017 and $3.73/MMBtu in 2018, both higher than the 2016 average of $2.51/MMBtu.

The confidence interval range for natural gas prices is a market-derived range that reflecting trading on futures, not supply and demand estimates.

The EIA expects natural gas consumption to rise based on a return to more typical winter temperatures, while use of natural gas for electric power generation is expected to decline because of higher fuel prices.

Natural gas-fired power generation is forecast to rise in 2018, but remain below the 2016 level. Current plans for additions show 11.2 GW in 2017 and 25.4 GW in 2018, equating to an overall increase of 8% from the total capacity existing at the end of 2016.

The expansion of natural gas-fired capacity follows five years of net reductions of total coal-fired capacity. Available coal-fired capacity fell by an estimated 47.2 GW between the end of 2011 and the end of 2016, equivalent to a 15% reduction.

The electricity industry has been retiring some coal-fired generators and converting others to run on natural gas in response to environmental regulations, as well as low cost of natural gas resulting from expanded production from shale formations. Many of the natural gas-fired power plants currently under construction are located near major natural gas shale plays or pipeline networks.

Rising natural gas prices could lead developers to postpone or cancel some planned projects, or reduce the capacity used in existing plants. Despite the additions to capacity in 2017, the STEO forecasted share of total U.S. generation supplied by natural gas falls from 34% in 2016 to 32% in 2017. By 2018, however, the scheduled expansion of overall capacity fueled by natural gas is expected to result in a slight increase in natural gas’s share of total U.S. electricity generation despite other factors.

The Kemper Project: Clean-Coal Gone Awry – 2/1/17

Southern Co.’s “clean-coal” plant in Kemper County, Mississippi has been hailed as a first-of-its-kind project; it could also be the last.

After running more than two years behind schedule and $4 billion over its original $2.88 billion budget, the Kemper project was already hard to call a success. That difficulty becomes nearly insurmountable when you add a number of cheaper, cleaner alternatives to coal and a climate change skeptic in the White House.

The Kemper project began around 2008 when many believed that natural gas would soon become scarce. Shortly after, hydraulic fracturing applied to shales in the United States unlocked so much natural gas that the U.S. soon became a net exporter of the fuel.

And with skyrocketing supplies came plummeting prices.

In a matter of years, natural gas became a much better bet than coal.

Emissions related to combusting coal (206 to 229 lbs CO2/MMBtu) are also higher than those associated with combusting natural gas (117 lbs CO2/MMBtu), according to the EIAA cleaner burn makes natural gas more palatable for environmentalists and helps insulate it from future regulation of emissions. Such qualities are a must for new power plants which have lifetimes measured in decades and must remain profitable through multiple presidential and Congressional administrations.

Kemper was supposed to show how coal could be “clean”, but utilities have to make money too and Kemper only showed how far away carbon capture technology is from matching up to other available options.

On the regulatory side of things, the Trump administration’s committment to clean-coal technology and reviving America’s coal industry seems like a lucky break for the Kemper project. However, promises to roll back energy regulations hold their own problems.

Trump’s antipathy toward the Clean Power Plan would make the financial justification for clean coal an even tougher sell, said Christine Tezak, a managing director at Washington-based ClearView Energy Partners.

“The economics are incredibly disadvantageous,” Tezak said.

Once the government is no longer pushing for lower emissions, the Kemper project loses one of the few justifications for existing, or at least appears to, making it harder to build support.

On top of its economic and regulatory problems, the Kemper facility remains in a tricky legal situation as well. Oil producer, Treetop Midstream Services LLC, is suing for $100 million because of a canceled CO2 supply contract and customers are alleging Southern failed to fully disclose facts related to the plant’s cost. An institutional investor filed suit against Southern on Jan. 23, accusing the company of giving false information about the project.

Southern recently told state regulators that the five-year operating and maintenance costs of the facility have nearly quadrupled to about $1 billion from the original estimate, according to a regulatory filing. When some of those costs are passed along to ratepayers, as they inevitably will be, the project will grow harder and harder to defend.

EIA Annual Energy Outlook for 2017: Summary and Thoughts – 1/31/17

The EIA has released its annual energy outlook for 2017 so here is the short version with some additional analysis.

For starters, the EIA sees no growth for nuclear power industry. Nuclear generation is expected to decline slowly from now through 2040 as units are retired and relatively little new nuclear capacity comes online.

In contrast, EIA’s assessment of the renewable sector shows strong growth. From 612 billion kwh in 2016, renewable generation is expected to climb to 1,212 billion kwh by 2040.

The third major finding in EIA’s analysis has coal generation moving little from its initial 1,232 billion kwh, reaching 1,400 billion kwh in the late 2020s before falling back to 1,390 billion kwh in 2040. Overall, coal’s share of the electric generation market would decline from 30.3% to an estimated 27.8% of annual generation.

Keep in mind that the EIA projections do not reflect the possibility of future regulations such as the now assumed defunct Clean Power Plan. Should another administration or even a number of state governments implement emission reduction targets then coal share would drop relative to other power sources. The federal government has never set a comprehensive national energy policy anyways whereas many states have their own policies planned or in place making this a real possibility.

The EIA previously released data on the LCOE for new generation resources projected for 2020 which helps to explain some of its conclusions in the 2017 Outlook.

(click image to enlarge)

For context:

Fracking and horizontal-drilling capabilities have vastly lowered the cost of natural gas as reflected in the table above.

Prices for solar power modules have fallen 70% in the past six years.

Wind power costs have dropped 58% in the past five years.

Battery prices, which are seen as complementary to intermittent power sources like wind and solar, have also fallen approximately 14% annually since 2007.

Coal on the Decline in the U.S. and China – 1/30/17

China and the U.S. are the first and second largest consumers of coal in the world, respectively. And though the governments of each nation are regarding the resource very differently for 2017, it doesn’t have much of a future in either.

China will invest $361 billion over the next three years in renewable power generation, while also canceling plans to build 103 coal-fired power plants, its National Energy Administration recently announced. If the Chinese government follows through on the plan, then it would mean stopping the addition of 120 GW of capacity, including projects already under construction.

The cancellations are in line with China’s goal of limiting its total coal-fired power generation capacity to 1,100 GW by 2020. Under the promise of reducing air pollution and greenhouse gas emission, coal use has been on the decline in China since 2013 and cleaner sources of power have account for a larger share of new additions each year.

Still, implementing the cuts could prove difficult. China is building more capacity than it needs for a number of reasons including the fact that power plant projects are popular way for local governments to raise tax revenue and employ citizens. It is unclear if local officials will play along with canceling contracts when the political cost of doing so is high. Unfortunately for those officials, the directive names each project set for cancellation, so they are likely to face heavy pressure to comply.

In the U.S., coal is under also under threat, though for different reasons. Despite, promises to revive the industry from the executive branch, coal’s share of American electricity generation peaked long ago and all signs point to further decline.

Natural gas alone has devastated coal’s share of energy consumption. Even before the massive shale gas deposits came into play with the rise of fracking, natural gas was a competitive threat. Nowadays, between the low cost of gas and its relatively clean burn, coal can’t even compete with another fossil fuel, let alone renewables with fast-falling costs and popular support.

Fewer than 60,000 Americans now make their living mining while clean energy employs at least 2.5 million Americans.

On top of that, nearly half of American output is produced by companies in bankruptcy.

And utilities in the United States have only four coal-fired plants set to go online through 2020, with a combined capacity of less than 1 GW, according to the U.S. Energy Information Administration. For comparison, more than 13 GW of coal-fired capacity was retired in 2015.

Be it in China or the U.S., with or without government support, coal is set for continued decline for the foreseeable future.

India: A Rising Star in Solar Power – 1/27/17

Falling costs and competition among developers are sending solar power prices plummeting around the world, but solar’s success in 2017 could depend heavily on one nation: India.

As the second most populous nation and one of fastest growing economies in the world, India is set to invest heavily in electricity generation — something that will conflict with its air pollution reduction goals unless it uses more non-coal fuel sources. To solve the issue, India adopted auctions in 2010 to help achieve Prime Minister Narendra Modi’s solar target of 100 GW of capacity by 2022.

In 2016, both Chile and the United Arab Emirates used auctions to develop solar projects for less than half the 6 cents a kilowatt-hour average global cost of coal power. Fortunately, the price paid for solar power at auction in India is following the same trend, according to Bloomberg data.

India is also expected to add nearly twice as much new solar as last year, according to forecasts by Bloomberg New Energy Finance.

The most conservative estimate from the forecasts put India’s solar additions at about 8.9 GW of new capacity in 2017, nearly twice the 4.5 GW last year.

The rapidly falling prices are made possible by the consistent decline in costs associated with manufacturing. Silicon modules used in solar panels are were 30% cheaper in 2016 than the year before, and prices are expected to fall another 20% in 2017, according to London-based BNEF. With the expectation of further cost declines, developers have been willing to cut prices below costs for the sake of securing contracts.

EIA: Natural Gas Fuels Cleaner Power Sector – 1/26/17

Full EIA articles on natural gas and its effect on the power sector: first, second

For the first time since the late 1970s, U.S. CO2 emissions from the transportation sector exceeded electric power sector CO2 emissions on a 12-month rolling total basis, measured from October 2015 through September 2016. Electric power sector emissions are now regularly below those of the transportation sector  despite making up a larger share of total U.S. energy consumption.

The reason for this is a significant decline in carbon intensity for the power sector as natural gas replaces coal as the preferred fuel of electricity generators. On average, emissions associated with combusting coal (~206 to 229 lbs CO2/MMBtu) are higher than those associated with combusting natural gas (~117 lbs CO2/MMBtu). Natural gas electric generators also tend to be more efficient than coal generators, because they require less fuel to generate the same output.

In the 12 months from October 2015 through September 2016, coal and gas accounted for 31% and 34% of electric power generation, respectively. However, their shares of electric power sector emissions were 61% and 31%, respectively, as coal is much more carbon-intensive. Overall power sector carbon intensity has also decreased as generation share of fuels such as wind and solar has grown.

Emissions from the transportation sector are primarily from fuels which have carbon intensities lower than coal but higher than natural gas. For example, gasoline emits an average of 157 lbs of CO2/MMBtu. In the months observed, motor gasoline represented 60% of the total emissions from the transportation sector, while 23% was from distillate fuel oil and 12% was from jet fuel.

Falling prices for natural gas have helped fuel the shift from coal to natural gas in the power sector.

Natural gas spot prices in 2016 averaged $2.49 per million British thermal units (MMBtu) at the national benchmark Henry Hub, the lowest annual average price since 1999. Warmer-than-normal temperatures for most of the year and changing natural gas demand were the main drivers of natural gas prices in 2016.

In the first quarter of the year, much warmer-than-normal winter temperatures and large amounts of natural gas in storage caused prices to decrease. Prices began to gradually increase in late spring, with increasing demand and decreasing production, before sharply increasing at the end of the year with the onset of cold temperatures in mid-December.

Because of warm weather, natural gas consumption in the residential and commercial sectors in 2016 declined 7% and 4%, respectively, from the previous year. As a result, natural gas storage inventories were at or near record levels throughout most of the year.

In November 2016, the United States became a net exporter of natural gas on a monthly basis for the first time since 1957, based on data from PointLogic.

U.S. pipeline exports to Mexico continued to grow throughout 2016, making up 87% of all U.S. natural gas exports and, in May 2016, the Sabine Pass terminal began commercial operations in the Gulf Coast to export liquefied natural gas.

Despite growing demand, low prices resulted in lower natural gas production in 2016. Based on preliminary data, the EIA estimates natural gas marketed production to face its first annual decline since 2005. The number of active natural gas drill rigs is down 19% from the year-ago count, however, production has not fallen as sharply as the number of active rigs, as producers have continued to make gains in drilling efficiency.

Renewable Additions, Distributed Solar, Etc. From the EIA – 1/13/17

The EIA expects that 24 GW of generating capacity was added to the power grid during 2016 and that, for the third consecutive year, more than half of these additions come mostly from renewable energy, especially wind and solar.

Of the 2016 renewable additions, nearly 60% were scheduled to come online during the fourth quarter when additions are usually high because of timing qualifications for federal, state, or local tax incentives.

Monthly U.S. renewable electricity generation peaked in March with high hydroelectric and wind generation.

Most renewable generation comes from the Western U.S., which accounted for the majority of the hydroelectric (63%) and solar (77%) generation in 2016. Wind generation was more evenly spread across the country with 37% occurring in the Midwest, 35% in the South, 24% in the West, and the remaining 4% in the Northeast.

At the end of 2015, EIA also began publishing monthly estimates for distributed small-scale solar photovoltaic (PV) capacity and generation. As of October 2016, the United States had a total of 12.6 GW of small-scale solar PV installed. Of this capacity, 56% was in the residential sector, 36% in the commercial sector, and 8% in the industrial sector.

Because wind and solar facilities generate power only to the extent their respective resources are available, their capacity factors (ratio of its actual output over a period of time to its potential output if operated at full capacity continuously over the same period) are typically lower than those of other resources.

Other renewable electricity highlights in 2016:

The production tax credit (PTC) for wind and the solar investment tax credit (ITC) were extended at the end of 2015 with bipartisan support. The tax credits include an eventual decline in value for both technologies with the PTC for wind expiring in 2020 and the ITC for large-scale solar declining from 30% to a permanent 10% and expiring for residential projects in 2022.

New York, Oregon, and the District of Columbia extended and expanded their mandates for renewable electric generation to reach 50% of each state’s total electricity generation by 2030, 2032, and 2040, respectively.

Hydroelectric generation increased as drought conditions that affected hydroelectric generation on the West Coast in 2014 and 2015 diminished.

Energy in the U.S.: 2016 and 2017 – 1/12/17

Ten years ago, coal accounted for about 49% of the electricity generated annually in the U.S. This year, the EIA’s December Short Term Energy Outlook has it close to 30%, compared to 34% for natural gas and 5% for wind which both more than doubled their shares of total generation for the same period.

Almost 50 GW of coal-fired capacity has been retired since 2010 with virtually no new coal-fired capacity added or planned.

On average, the coal power plants retired were more than 50 years old while the average life of such plants is 40 years, according to the National Association of Regulatory Utility Commissioners. That capacity, and by extension the main point of consumption for coal, is expendable for utilities and being replaced almost entirely by natural gas, wind, and solar power assets.

As Gerard Anderson, chairman and CEO of Detroit-based DTE Energy, in an interview with mlive.com said “All of those retirements  are going to happen regardless of what Trump may or may not do with the Clean Power Plan [referring to the company’s plans to close another eight coal power plants in the years ahead]… I don’t know anybody in the country who would build another coal plant.”

Or as Robert Murray, CEO of Murray Energy Corp., the largest underground coal mining company in the U.S. has a similar opinion saying in an interview with POWER: “I’ve asked President-elect Trump to temper his comments about bringing coal miners back and bringing coal back. It will not happen. The destruction that has happened is permanent.”

Apparently, even if it played a part in moving utility companies away from coal, there are other forces at work besides government regulation. The most likely suspects are changing economics and customer preference for cleaner fuels.

Natural gas at least appears cleaner than coal when it comes to CO2 emissions, and natural gas prices are so low in some places that coal cannot even compete on a price basis. With the abundant supplies unlocked by fracking and horizontal drilling, that fact doesn’t look likely to change. As a result, energy generation from natural gas has rocketed upwards at coal’s expense.

source: wikipedia

Renewables are also chippng away at coal’s market share. Wind power generated more than 4.4% of the nation’s electricity in 2014 versus 2.3% in 2010 and 0.2% in 2000, and solar’s growth rate and future potential are staggeringly high. From essentially zero installed utility-scale generation capacity in 2008, operating capacity jumped to 14 GW by the end of 2015 and the latest Solar Market Insight report estimates that more than 10 GW of utility-scale generation will come online this year alone. The Solar Energy Industries Association projects that another 20 GW of capacity will come online by 2020.

And as far as jobs in energy, the solar and wind industries reportedly create more jobs than coal each.

At least according to the latest census by an entity affiliated with SEIA, there were more than 200,000 solar industry jobs at the end of 2015, 150,000 of which were in installation and manufacturing. In wind, the American Wind Energy Association credits the industry with some 88,000 jobs at the beginning of 2016, of which 21,000 were wind-related manufacturing jobs and 38,000 were project development and construction jobs.

Meanwhile, data from the Bureau of Labor Statistics puts the number of coal mining jobs at about 68,000.

On top of winning by sheer numbers, many of those wind jobs are located in Republican-led districts. Earlier this year, AWEA released data showing that 86% of all the wind generating capacity in the United States is located in congressional districts represented by Republicans.

EIA: Coal Production Declines in 2016 – 1/11/17

EIA data for the coal industry in 2016 shows U.S. coal production declining significantly, 17% lower than in 2015 and at its lowest level since 1978.

Low natural gas prices (see: Natural Gas: Now and Later), warmer-than-normal temperatures during the 2015-16 winter that reduced electricity demand, the retirements of some coal-fired generators (see: The Difficulty of Bringing Back Coal Jobs), and lower international coal demand have contributed to an eight-year decline in U.S. coal production.

Nearly all coal use in the United States is used for electricity generation where it has faced increasing competition from natural gas and renewables (see: Power Producers and Clean Energy p.II). The average daily natural gas spot price at the Henry Hub, a key benchmark, fell from $2.63 per million British thermal units (MMBtu) in 2015 to $2.40/MMBtu in 2016, resulting in increased natural gas-fired electricity generation.

In 2016, natural gas-fired electricity generation also surpassed coal-fired generation for the first time, accounting for an estimated 34% of total electricity generation compared with coal’s 30% share. The most recent Short-Term Energy Outlook forecasts total 2016 power sector coal consumption at about 681 MMst, the lowest level since 1985.

New generation capacity additions estimated by the EIA for 2016 also show dominance of solar, natural gas, and wind power over other power sources. Coal was expected to have negligible additions.

U.S. coal exports also declined in 2016 on the lower international coal demand. Approximately 26 MMst of coal were exported to Europe in 2016, down nearly a third from 38 MMst in 2015. Coal exports to Asia, particularly to South Korea, declined as well. Exports to South Korea saw a 43% decrease from the 2015 level. The EIA estimates that the United States exported 57 MMst of coal in 2016, a 23% decline from 2015.

Solar: Prices Falling Faster Than Costs – 1/9/17

Solar power is edging closer and closer to becoming the lowest-cost option for electricity generation in most of the world. Yet, new lows in costs are being outpaced by falling prices as most solar manufacturers are set to sell their wares at a loss in 2017.

Better technology, economies of scale, and manufacturing experience are allowing the solar panel manufacturers to make cost reductions unrivaled by competitors in energy generation. And the International Energy Agency expects utility-scale generation costs for solar to fall 25% on average in the next 5 years with a further drop of 43% to 65% by 2025.

Since 2009, solar prices are down 62% and, by 2025, solar may be cheaper than using coal on average globally, according to Bloomberg New Energy Finance.

The falling price of solar is, without a doubt, a positive thing since it means more affordable clean power that can compete without subsidies in at least some parts of the world.

The only problem: with such low prices, the companies selling solar panels are going to struggle just to break even.

Suppliers are forecasting rapid expansions in capacity this year even as demand is expected to slow and push prices down. On top of possible over-capacity problems, developers keep submitting lower and lower bids to supply solar power. A 2016 August solar power auction in Chile yielded a contract for 2.91 cents a kilowatt-hour. In September, a United Arab Emirates auction yielded another with a bid of 2.42 cents a kilowatt-hour. For comparison, U.S. coal power costs about 3.23 cents a kilowatt-hour on average.

The cost of solar power has fallen dramatically, but not quite that dramatically. Such bold proposals come on the bet that the cost of the technology will continue to fall fast enough to make such projects profitable. That makes for a risky bet even if solar technology is expected to continue improving.

The current prices are already lower than cost estimates from major firms in the industry like Chinese manufacturer, Trina, the biggest supplier of panels in 2015.

Yet, some companies’ cost structures remain competitive, even with prices this low. With some of the lowest cost estimates in the industry, Canadian Solar Inc. reported costs of 37 cents in the third quarter, and the company says it expects to reach 29 cents a watt by the fourth quarter of 2017.

Not every maker of solar panels will thrive in the next few years, but with Saudi Arabia, Jordan, and Mexico already set to hold their own auctions this year, aiming to drop solar prices even further, companies able to keep costs in line with those prices will at least have an opportunity to do a lot of business.

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