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ly 2012 ENERGY MARKET PERSPECTIVE MID‐YEAR REPORT A NEW ERA OF “SMART PLANNING” 26 Jul ROB PATRYLAK A NEW ERA OF SMART PLANNING
ly 2012
ENERGY MARKET PERSPECTIVEMID‐YEAR REPORTA NEW ERA OF “SMART PLANNING”
26 Ju
l
ROB PATRYLAK
A NEW ERA OF SMART PLANNING
AGENDA
About the EMPPower Sector ProjectionsjFuel Market ProjectionsMoving Forwardg
ABOUT THE ENERGY MARKET
26 July 2012
ABOUT THE ENERGY MARKET PERSPECTIVE (EMP)
• Subscription‐based service
• Uses proprietary Integrated Market Modeling processModeling process
• 25‐year projections (2012 – 2037)
• Covers 5 regions of North America• Covers 5 regions of North America
TheEMPfeaturesanalyticalneutralityanddoesnotadvocatecertaintechnologiesoragendas
EMP DELIVERABLES
26 July 2012
EMP DELIVERABLES
• Insights on industry trends and market opportunities
• Fundamental capacity energy emission• Fundamental capacity, energy, emission and power fuel price forecasts for North American Energy Markets
• Easily assessable data
ClientsuseEMPtoplanforandmanagerisksofNorthAmericanshifttonaturalgasgeneration
KEY ISSUES AND ASSUMPTIONS THAT
26 July 2012
KEY ISSUES AND ASSUMPTIONS THAT INFLUENCE THE BASELINE PERSPECTIVE
• Generation expansion plans
• Transmission
• Regulation
• RPS requirements and response • Transmission
infrastructure
• Unit retirements
response
• Power demand and conservation
• Supply and pipeline expansion plan
• Fuel demand and pricing
/ • Finding and development costs
• LNG imports / exports
• Future construction costs
Integratesprimaryresearch,leadingdatasourcesandclientconsultingexperience
costs
2012 UPDATE INCLUDES
26 July 2012
2012 UPDATE INCLUDES
• All new fundamentally develop commodity prices (coal, natural gas, petroleum, etc.)
• Mid‐year update results reflect a more rapid shift• Mid‐year update results reflect a more rapid shift to gas than anticipated last year.
• Consideration of updated regulatory and economic outlooks
• Addition of supply‐side technology improvements in gas turbine technologyin gas turbine technology
Mid‐yearupdateresultsareconsistentwithtoday’slownaturalgaspriceenvironment
POWER SECTOR PROJECTIONS
ROB PATRYLAKMANAGING DIRECTOR, STRATEGIC RESOURCE PLANNING AND ENERGY MARKET PERSPECTIVEBLACK & VEATCH MANAGEMENT CONSULTING
RENEWABLE ENERGY GROWTH
26 July 2012
RENEWABLE ENERGY GROWTH WILL CONTINUE
• ~112,000 MW of new capacity additions anticipated by 2037
• Wind will make up majority of new• Wind will make up majority of new capacity additions
• Solar capacity expected to grow as a result of technology advances
Lopburi 55 MW Solar FarmThailand
RenewablecapacityadditionsaredrivenbystateRenewablePortfolioStandardsrequirements
ECONOMY GAS PRICES SLOW
26 July 2012
ECONOMY, GAS PRICES SLOW NUCLEAR DEVELOPMENT
• Expect deferrals and cancellations of new units to continue
• Utilities will work to get the most of• Utilities will work to get the most of existing units with up‐rates
• Uncertainty regarding Fukushima “lessons learned” will diminish
Refueling Nuclear Reactor
Inthenear‐term,budgetdeficitandwastedisposalconcernslimitfederalloanguaranteeprograms
COAL UNIT RETIREMENTS
26 July 2012
COAL UNIT RETIREMENTS FORECAST REMAINS UNCHANGED AT 61.5GW BY 2020
• Forecasted retirements driven primarily by EPA hazardous air pollutant y prequirements
• Forecast does not include retirements from potential future GHG emissionfrom potential future GHG emission regulations
Black&Veatchforecastsadditional70GWofcoal‐fueledgeneratorretirementsby2037
NATURAL GAS‐FUELED
26 July 2012
NATURAL GAS FUELED GENERATION WILL CONTINUE TO GROW
• Power sector demand for gas expected to grow 2% annuallyto grow 2% annually
• More than 380,000 MW of new capacity is expected before 2037 – a nearly 27% i f i f tincrease from previous forecast
• Technology advances
Emporia Energy CenterKansas
Coalretirementsanddeclineinregionalreservemarginswilldrivecontinuedcapacitygrowth
THE CHANGING U S CAPACITY MIX
26 July 2012
THE CHANGING U.S. CAPACITY MIX
CAPACITY MIX (MW) IN 2013 CAPACITY MIX (MW) IN 2037
Nuclear102,5760.1%
Coal (IGCC)1,125 Nuclear
79,9110.6%Coal
(Conventional)
Coal (IGCC)7,977
9.6%
6.6%
7.2%29.6%
Renewables70,588
Steam Gas76,277
Coal (Conventional)
314,927
5.8%
13.3%
2 9%
13.3% Renewables182,833
Steam Gas39 645
(Conventional)189,924
7.2%
11.0% Hydro116,758
2.9%
8.7%
39,645
Hydro119,208
35.9%Natural Gas382,951
55.4%Natural Gas
762,319
Capacitywillincreasebynearly30%duringthenext25years
THE CHANGING U S ENERGY MIX
26 July 2012
THE CHANGING U.S. ENERGY MIX
ENERGY MIX (GWh) IN 2013 ENERGY MIX (GWh) IN 2037
0.2%
Coal (IGCC)7,017
Nuclear 898,987
0.9%Coal
(Conventional)573,614
Coal (IGCC)57,322
Nuclear1,104,482
23.7%30.3%
Coal (Conventional)
1,408,649
898,987
Renewables505,221
,
14.8%
8.3%
9.4%
4.6%
13.3%
Renewables212,005 Hydro
568,7399.3%
57 3%28.0% Hydro
617,837Natural Gas
1,302,070Natural Gas
3,489,285
57.3%
Naturalgas“marketshare”ofelectricityconsumptionwillincreasefrom28%to57%
OIL PRICES CONTINUE TO
26 July 2012
OIL PRICES CONTINUE TO DRIVE GLOBAL ENERGY MARKETS• Oil prices will remain above $100/Bbl and rise over time
• Oil and gas prices in North America will• Oil and gas prices in North America will remain decoupled
• Indirect linkages between oil and gas prices will influence market decisions and prices
Persistingoil‐gasspreadswillfurtherencouragenewmarketsforgasandoil‐shaledevelopment
COAL PRICES REFLECT
26 July 2012
COAL PRICES REFLECT WEAKENING DEMAND
• U.S. coal price forecast is flat
• U.S. consumption down 9% in 2011
• Coal‐on‐coal competition drives portfolio and railroad realignmentsportfolio and railroad realignments
ExportstoAsiatoreplacelostmarketswillbelimitedbyportandrailcapacity
NATURAL GAS OUTLOOK
26 July 2012
NATURAL GAS OUTLOOK
• Gas production rises as shale gas life cycle costs decrease
• Near‐term and long‐term demand grows• Near‐term and long‐term demand grows with new market development
• Capital investments increase as new infrastructure is built to serve a growing market
• Environment‐related costs rise• Environment‐related costs rise moderately as new safeguard measures are deployed
Pricesrisegraduallytomoresustainablelevelsasmarketsseekequilibrium
NATURAL GAS NEAR‐TERMMARKET
26 July 2012
NATURAL GAS NEAR TERM MARKET DRIVEN BY SUPPLY ISSUESCOAL‐TO‐GAS SWITCHING IN THE POWER MARKETS
Lower 48 Gas Consumed for Power Generation Sector
352009 2010 2011 2012
20
25
30
10
15
20
Bcf/d
0
5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Price‐drivenfuelswitchingisexpectedtocontinueinto2013
NATURAL GAS NEAR‐TERMMARKET
26 July 2012
NATURAL GAS NEAR TERM MARKET DRIVEN BY SUPPLY ISSUESNATURAL GAS LIQUIDS LOWER GAS PRICESQ
Gasprice“subsidy”hingesonNGL‐Oilpriceratiosandglobalpetrochemicalmarkets
NATURAL GAS NEAR‐TERMMARKET
26 July 2012
NATURAL GAS NEAR TERM MARKET DRIVEN BY SUPPLY ISSUESBASIS COMPRESSION RESULTS FROM DISPERSED SUPPLY SOURCES
North American Shale Gas Production Projection
/dBcf/
Regionalgasongascompetitionencouragesportfolioapproachtogasprocurement
NATURAL GAS NEAR‐TERMMARKET
26 July 2012
NATURAL GAS NEAR TERM MARKET DRIVEN BY SUPPLY ISSUESPIPELINE AND STORAGE MARKETS CONTINUE TO EVOLVE
Pipelinethroughputandvaluereflectsupplyrealignment
NATURAL GAS LONG‐TERM
26 July 2012
NATURAL GAS LONG TERM MARKET DRIVEN BY DEMAND ISSUES PRODUCERS SEEK NEW MARKETS • LNG exports
• Petrochemical markets return to North America
• Natural gas vehicle programs progress• Natural gas vehicle programs progress
Costa Azul LNG Receipt TerminalBaja, California, Mexico
Increaseddemandcontributestoupwardpricemovements
NATURAL GAS LONG‐TERMMARKET
26 July 2012
NATURAL GAS LONG TERM MARKET DRIVEN BY DEMAND ISSUESINCREASE IN POWER MARKET CONSUMPTION
10%
Comparison of Gas Demand Growth by Region: 2012 – 2020 (CAGR)
6%
8%
10%
20 (C
AGR)
2%
4%
2012
–202
0%Midwest Mid‐Atlantic South Atlantic West Coast
Marketgrowthwillimpactregionsandtheirinfrastructureneedsindifferentways
SUPPLY PORTFOLIO STRATEGIES ADAPT TO
26 July 2012
SUPPLY PORTFOLIO STRATEGIES ADAPT TO MULTIPLE MARKET FORCES
24
MOVING FORWARD
ROB PATRYLAKMANAGING DIRECTOR, STRATEGIC RESOURCE PLANNING AND ENERGY MARKET PERSPECTIVEBLACK & VEATCH MANAGEMENT CONSULTING
PREPARING FOR A NATURAL GAS‐FUELED
26 July 2012
PREPARING FOR A NATURAL GAS FUELED POWER MARKET
• Coal‐to‐gas switching taking place at unprecedented levels
• EMP forecasts natural• EMP forecasts natural gas‐fueled generation will account for nearly 60% of U S energy mix by 2037
60%Natural Gas U.S. energy mix by 2037Natural Gas
UtilityandISOplannersconcernedaboutreliabilityasmigrationtogascontinues
LESSONS LEARNED:
26 July 2012
LESSONS LEARNED: SOUTHWEST COLD WEATHER EVENT • Prolonged cold snap interrupted gas supply
• Loss of supply impacted start up of• Loss of supply impacted start up of standby gas generation
• Led to more and longer power outages
• Approximately one‐third of ERCOT generation unavailable
FERCandNERCreportprovidedrecommendationstopreventrecurrence
GAS / ELECTRIC INTERDEPENDENCY
26 July 2012
GAS / ELECTRIC INTERDEPENDENCY
• Unprecedented pace of coal to gas switching creates near term opportunity for repeat of event
• With longer term view, interdependency is moreinterdependency is more important than ever• Gas/Electric System Planning• Gas /Electric System Operation
Interdependenceofgasandelectricsystemsmustbeincludedintosystemplanningefforts
SMART PLANNING
26 July 2012
SMART PLANNINGTHE ELECTRIC POWER / NATURAL GAS RELIABILITY CONTINUUM
Discrete Integrated
Gas Pi li d Power Power / Power /Gas Supply Planning
Pipeline Delivery
Gas Grid Operation
Power Grid
Operation
Power / Gas
Collaboration
Power / Gas
Convergence
A NEW ERA OF “SMART
26 July 2012
A NEW ERA OF SMART PLANNING” FOR UTILITIES
• Integrated planning effort across fuel and power are becoming increasingly important for reliability assessments
• Integrated resource planning includes demand‐side, supply‐side and environmental planning (gas & electric)environmental planning (gas & electric)
• Strategic resource planning is determining most robust portfolio for wide‐rage of regulatory futures
• Smart Planning integrates the above
Useofintegratedmarketbasecasesrepresentsindustrybestpracticeforanalyzingscenarios
CONTACT:CONTACT:ROB PATRYLAKMANAGING DIRECTOR, STRATEGIC RESOURCE PLANNING AND ENERGY MARKET PERSPECTIVE PRODUCT
OFFICE: 678‐932‐9131
EMAIL: [email protected]
www.bv.com
