June 19, 2014
Recent Electricity Trends and Coal Plant Retirements
The Importance of Baseload Power Renewal
Peter C. Balash, Ph.D.Deputy Director
Strategic Energy Analysis and Planning
2
• The analysis presented and conclusions drawn are solely those of the author(s), and do not represent the views of the United States Department of Energy
Disclaimer
3
• Electricity Trends and Projections– Growth and capacity needs may be under-projected
• Issue in Focus – “Ageless Baseload”– Is high utilization of aging capacity realistic?
• EIA “Response”: Accelerated Retirement Scenario– Infrastructure and reliability concerns
• All Bets on Gas– Elastic supply, or excessive optimism?
Outline
Growth in electricity use slows, but still increases by 29% from 2012 to 2040
-2%
0%
2%
4%
6%
8%
10%
12%
14%
percent growth (3-year compounded annual growth rate)
Source: EIA, Annual Energy Outlook 2014 Early Release
4
History
Projections
2012
electricity use
GDP
Structural Change in Economy - Higher prices - Standards - Improved efficiency
Period Annual GrowthElectricity use GDP
1950s 9.8 4.11960s 7.3 4.41970s 4.7 3.21980s 2.9 3.01990s 2.4 3.22000-2012 0.7 1.82013-2040 0.9 2.5
Overview of AEO2014 Accelerated Power Plant Retirement Side Cases May 20, 2014
5
Long-term relation of kWhgr/GDPgr = 0.683Implicit AEO 2014 relation = 0.381 (2012 to 2040); 56% of long-term relationship
Annual Growth RateElectricity End Use
Annual Growth Rate Real GDP
All Periods 1.89% 2.77%
Non-recession 2.25% 3.21%
Recession -1.04% -0.87%
1- 4 quarters after recession 0.66% 1.17%
1- 8 quarters after recession 1.97% 2.60%
5- 8 quarters after recession 3.29% 4.03%
Sources: Electricity, EIA, Monthly Energy Review, Table 7.6, Electric Power Month, STEO; GDP, Bureau of Economic Analysis, NIPA Table 1.1.6 Real GDP Chained 2005 Dollars; Rates, AEO2014 Tables 8 and 20; and NETL analysis; IHS, North American Power Quarterly Briefing, May 5, 2014; “gr” stands for growth rate.
Electricity and GDP Growth~30 Year Avg. Year-over-Year Growth Rates, 1982Q1-2014Q1
For a medium-term comparison, IHS projects kWh growth of 1.8%/year and GDP growth of 3.0%/year from 2015-20.
6 Sources: BEA – NIPA Table 1.1.6; EIA – Monthly Energy Review; Annual Energy Outlook 2014; *kWh end use (consumption); dashed lines represent6th order polynomial fit
19501953
19561959
19621965
19681971
19741977
19801983
19861989
19921995
19982001
20042007
20102013
20162019
20222025
20282031
20342037
2040
-2%
0%
2%
4%
6%
8%
10%
12%
14%
3-ye
ar m
ovin
g av
erag
e
SEAP
AEO’14
Forecast
kWh Growth Rate*: AEO’14 vs. SEAP
7
Growth of U.S. GDP vs. GenerationHistoric and Forecast
Sources: BEA – NIPA Table 1.1.6; EIA – Annual Energy Review; Annual Energy Outlook 2014
19701973
19761979
19821985
19881991
19941997
20002003
20062009
20122015
20182021
20242027
20302033
20362039
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
3,000
7,000
11,000
15,000
19,000
23,000
27,000
31,000
35,000
39,000AEO’14Forecast
“Structural Change in The Economy”, Anticipates Less Energy Required Per Unit of GDP;“Higher Prices” Also Assumed to Suppress Demand
Real GD
P Billions (2010$)
Bubble Divergence
Generation
GDP
Gen
erati
on (B
kWh) What If, in addition,
GDP grew at AEO’05 rate?What if historic trend in kWh and GDP growth
is applied to forecasted GDP?
672 BkWh* missing in 2040;Equivalent to 491 baseload BkWh
≈ 70 GW Baseload
1,187 BkWh* missing in 2040;Equivalent to 866 baseload BkWh
≈ 124 GW baseload
2.46% CAGR
3.0% CAGR
GDP Gap 70 GW
Generation Gap
124 GW
8
Total Electricity Consumption vs. GDP Forecasts(all AEOs extrapolated through 2040)
0 1,000 2,000 3,000 4,000 5,000 6,000 7,0000
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Billion kWh
Rea
l G
DP
(B
illi
on
201
0$)
AEO’05: $21.4 trillion GDP from 4,958 BkWh
1949-2005 R-squared = 0.971
Sources: EIA, Annual Energy Outlooks (editions AEO05 through AEO14; Annual Energy Review; BEA: Implicit Price Deflator and Real GDP)
‘05
‘11
‘10‘09 ‘08
‘07‘06
AEO’14: $29.6 trillion GDP from 4,954 BkWh (2040)
’12
+$8.2 trillion (38.1%) more GDP from ~same kWh
‘14
2040 kWh difference from AEO’05 to AEO’14:
2,215 BkWh
’13
9
• Electricity Trends and Projections• Issue in Focus – “Ageless Baseload”• EIA “Response”: Accelerated Retirement Scenario• All Bets on Gas
Outline
10
Generation by fuel“In the Reference case, coal-fired generation increases by an average of 0.2 percent per year from 2011 through 2040. Even though less capacity is available in 2040 than in 2011, the average capacity utilization of coal-fired generators increases over time. In recent years, as natural gas prices have fallen and natural gas-fired generators have displaced coal in the dispatch order, the average capacity factor for coal-fired plants has declined substantially. The coal fleet maintained an average annual capacity factor above 70 percent from 2002 through 2008, but the capacity factor has declined since then, falling to about 57 percent in 2012. As natural gas prices increase in the AEO2013 Reference case, the utilization rate of coal-fired generators returns to previous historical levels and continues to rise, to an average of around 74 percent in 2025 and 78 percent in 2040. Across the alternative cases, coal-fired generation varies slightly in 2025 (Figure 30) and 2040 (Figure 31) as a result of differences in plant retirements and slight differences in utilization rates. The capacity factor for coal-fired power plants in 2040 ranges from 69 percent in the High Oil and Gas Resource case to 81 percent in the Low Oil and Gas Resource case.”
AEO’13 Issues in Focus (page 42)
The “Ageless Baseload” Assumption
Gas-fueled units account for most projected capacity additions in the AEO2014 Reference case
11
U.S. electricity generation capacity additions
gigawatts
Source: Form EIA-860 & EIA Annual Energy Outlook 2014, Early Release
19501954
19581962
19661970
19741978
19821986
19901994
19982002
20062010
20142018
20222026
20302034
2038
-10
0
10
20
30
40
50
60
70
Other Renewables
Solar
Wind
Oil and Natural Gas
Nuclear
Hydro / Other
Coal
History Projected
Overview of AEO2014 Accelerated Power Plant Retirement Side Cases May 20, 2014
Electricity Generation by Fuel, 1980-2040
12
billion kilowatthours
19801983
19861989
19921995
19982001
20042007
20102013
20162019
20222025
20282031
20342037
20400
500
1000
1500
2000
2500
Coal
Petroleum
Nuclear
Natural Gas
Renewables
Note: Includes generation from plants in both the electric power and end-use sectors.
Source: History: U.S. Energy Information Administration (EIA), Annual Energy Review;
Projections: AEO2014 Early Release (December 2013).
ProjectionsHistory 2012
Overview of AEO2014 Accelerated Power Plant Retirement Side Cases May 20, 2014
13
Average capacity utilization of natural gas combined cycle and coal generating capacity, 2008-2040
percent
0
10
20
30
40
50
60
70
80
90
Natural Gas
Coal
2012
Source: AEO2014 Early Release (December 2013)
History Projections
Overview of AEO2014 Accelerated Power Plant Retirement Side Cases May 20, 2014
14
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 96 990
2
4
6
8
10
12
14
16
Age
Capa
city
(GW
)Aging Baseload Coal-fired Fleet in 2040
Existing Capacity in 2040New AEO Capacity
Reference – Ventyx Velocity Suite (existing units and announced retirements - EIA AEO 2014 (forecasted additions and Retirements)
Includes AEO ‘14 additions after 2014Accounts for announced retirementsAnd EIA forecasted retirements
Capacity-weightedAverage Age 62
Operating at Highest Capacity Factors Ever at 62 Years Average Age?
Virtually no new Coal Capacity to make up for aging and retired units
15
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 840
10
20
30
40
50
60
70
80
90
100
Average capacity factors for Coal units for operations 1998-2013 by unit age
Unit age (years)
Aver
age
capa
city
fact
or (%
)Coal unit capacity factors drop off as they age
Data source and notes: Data from Ventyx's Energy Velocity. Unit age in each year was calculated then averaged; black line is 3 rd order polynomial of the entire data set.
Approximation of actual industry capacity factor
experience based on unit age
80%
60%
14%
16
Coal Capacity and Unit Ages in 2040
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 96 990
2
4
6
8
10
12
14
16
0
10
20
30
40
50
60
70
80
90
Age
Capa
city
(GW
)
New Capacity (2013-2040)
Existing Capacity
Historic Age-basedCapacity Factor Trend
(1998-2013)AEO’13 AVERAGE Capacity Factor 2040
Historic AVERAGE Capacity Factor Existing Units (1998-2013)
78%
64%
AVERAGE Capacity Factor based on 2040 ages and
16 year historic operation
28%
Capacity Factor
(%)
Reference – Ventyx Velocity Suite (existing units and announced retirements - EIA AEO 2013 (Reference case forecasted additions and retirements; AEO 2014 reference case generation)
Includes AEO ‘13 additions after 2012Accounts for announced retirementsand EIA forecasted retirements
Capacity-weighted average age 62(average unit age 66)
AEO’14 AVERAGE Capacity Factor 2040 73%
80%
60%
14%
17
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84
0102030405060708090
100Average capacity factor by unit age for coal operations, 1998-2013Q3
Unit age in years
Avera
ge c
apacit
y f
acto
r (%
)
Potential Coal GWs - Reference
Reference – Ventyx Velocity Suite; - EIA AEO’13 remaining coal unit identities; AEO 2014er reference case generation; missing generation estimate 144 GW @80% average C.F. for new units to meet 2040 demand; includes AEO’13 estimate of retiring units beyond public announcements
20142015
20162017
20182019
20202021
20222023
20242025
20262027
20282029
20302031
20322033
20342035
20362037
20382039
20400
200
400
600
800
1,000
1,200
1,400
1,600
1,800
BkW
h
EIA AEO’14 Generation
Generation from current fleet, plus additions, less announced & AEO 2013
retirements, based on historic age/capacity factor operating data (above)
80%60%
14%
144GW
1,007 BkWh
109GW
56GW
31GW 79
GW
Development needed today?
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 96 990
5
10
15
20
25
Age
Capa
city
(GW
)Coal & Nuclear Baseload Capacity by 2040
New Coal Capacity
Existing Coal Capacity Existing Nuclear Capacity
New Nuclear Capacity
20402014
Reference – Ventyx Velocity Suite (existing units and announced retirements - EIA AEO 2014 (forecasted additions and Retirements)
60 years or older by 2040
Coal: 168 GW (66%)
Nuclear: 43GW (42%)
Virtually no new Coal Capacity and very little Nuclear Capacity to make
up for aging and retired units
19
• Electricity Trends and Projections• Issue in Focus – “Ageless Baseload”• EIA “Response”: Accelerated Retirement Scenario• All Bets on Gas
Outline
20
Accelerated Nuclear and Coal Retirements Scenario (ANCR): Coal Retirements Doubled
Source: EIA, AEO’14
20122014
20162018
20202022
20242026
20282030
20322034
20362038
20400
30
60
90
120
Gig
awatt
s
ANCR
Reference
MATS fully implemented in 2016
21
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84
0102030405060708090
100Average capacity factor by unit age for coal operations, 1998-2013Q3
Unit age in years
Avera
ge c
apacit
y f
acto
r (%
)
Potential Coal GWs - ANCR
Reference – Ventyx Velocity Suite; - EIA AEO’13 remaining coal unit identities; AEO 2014er reference case generation; missing generation estimate 144 GW @80% average C.F. for new units to meet 2040 demand; includes AEO’13 estimate of retiring units beyond public announcements
20142015
20162017
20182019
20202021
20222023
20242025
20262027
20282029
20302031
20322033
20342035
20362037
20382039
20400
200
400
600
800
1,000
1,200
1,400
1,600
1,800
BkW
h
EIA AEO’14 ANCR Generation
Generation from current fleet, plus additions, less announced & AEO 2013
retirements, based on historic age/capacity factor operating data (above)
80%60%
14%
Development needed today?
80GW
563 BkWh
33GW
19GW
22
Reference ANCR-150
-100
-50
0
50
100
Coal -44Coal -83
Oil NG Steam -10
Oil NG Steam -12
C Turbine -7
C Turbine -8
NGCC 19NGCC 36
C Turbine 18
C Turbine 20Nuclear 6
Nuclear 6
Renew
Nuclear
C Turbine
NGCC
Oil NG Steam
Coal
Renew
Nuclear
C Turbine
NGCC
Oil NG Steam
Coal
Sum
mer
Cap
acity
(GW
)2013-2020 Additions and Retirements
EIA AEO 2014, Reference and Accelerated Coal and Nuclear Cases
Retir
emen
tsAd
ditio
ns
Effective Renewable Capacity Derate
Adj. Renew. 5
Adj. Renew. 6
Renew. 26
Renew. 29
Twice as much baseload retires as is “replaced” by gas
23
Reference ANCR-200
-100
0
100
200
300
400
Coal -45Coal -98Oil NG Steam -27
Oil NG Steam -32
C Turbine -9
C Turbine -9
Nuclear -1.22
Nuclear -38.67
NGCC 131NGCC 195
C Turbine 93
C Turbine 91Nuclear 10
Nuclear 6
Renew
Nuclear
C Turbine
NGCC
Oil NG Steam
Coal
Renew
Nuclear
C Turbine
NGCC
Oil NG Steam
Coal
Sum
mer
Cap
acity
(GW
)2013-2040 Additions and Retirements
EIA AEO 2014, Reference and Accelerated Coal and Nuclear Cases
Retir
emen
tsAd
ditio
ns
Adj. Renew. 11
Adj. Renew. 13Effective Renewable Capacity Derate
Renew. 53
Renew. 64
Will gas capacity arrive in time?
Vast majority of gas capacity additions come in well after coal retirements
24
Coal Retirements by 2020AEO 2014 ANCR Side Case
Retirements 2010-2013-20 GW (210 units)
Operating and Standby Units
Estimated ANCR Case Coal Retirements*
(less announced) -42.6 GW by 2020
Announced Retirements2014 - 2020
-36.7 GW (211 units)
Coal Retirements 99 GWView Layer
Off
Off
Off
On
On
On
Actual Retirements (2010-2013)
Announced Retirements
Estimated ANCR Retirements (less Announced Retirements)
Operating Units as of 2014 /Remaining units in 2020 after applied retirements
Summer Capacities*NETL Best Estimate based on unit size , capacity factor, age, and competitiveness
25
Actual Retirements (2010-2013)
Announced Retirements
Estimated ANCR Retirements (less Announced Retirements)
New NGCC Builds by 2020Actual Announcements
View Layer
OffOnUnder Construction+16 GW
Proposed NGCC Builds 83 GW
Permitted+18 GW
Proposed+49 GW
Off
Off
On
On
New NGCC Builds
Built in 2010-2013
Under Construction
Permitted
Proposed
NGCC Builds in 2010 – 2013+23 GW OffOn
OffOn View Coal Retirements Layer
2010-’13 20 GW 23 GWCommitted 37 GW 25 GWUncommitted 42 GW 58 GW Total 99 GW 106 GW
New NGCC
RetiredCoal
26
KY MI IN WV WI MN ND OH MD MO TN VA IA IL PA NY SD0%
5%
10%
15%
20%
25%
30%
% from projected retirements
% from announced retirements
Perc
enta
ge o
f tot
al s
tate
gen
erati
on fr
om
coal
retir
emen
tsGeneration from Retiring Units, January 2014
Ventyx, based on EIA, and NETL projections
27
• Electricity Trends and Projections• Issue in Focus – “Ageless Baseload”• EIA “Response”: Accelerated Retirement Scenario• All Bets on Gas
Outline
28
Natural Gas Consumption/UseAEO 2014 Reference and ANCR Cases
Electric Power
IndustrialNet Exports
Residential
Data Sources:EIA MER 12/2013; EIA AEO 2014 (Reference and Accelerated nuclear and coal retirement case)
Transportation
*
*Does not Include Pipeline and DistributionDoes not Include GTL Heat & Power nor Lease & Plant Fuel
AEO 2014 Reference caseAEO 2014 Accelerated Nuclear and Coal Retirement case
Commercial
11.23
14.40
8.63
5.80
5.10
0.59
0.85
8.69
3.55
19501955
19601965
19701975
19801985
19901995
20002005
20102015
20202025
20302035
20400
2
4
6
8
10
12
14
16
Tcf
Large (5-6 Tcf) increases in gas for power and exports leaves little for industrial expansion
4.12
2025 Projections: NG Dry Production vs. Price*
Source: EIA, various AEO editions, MER; BEA, Implicit Price Deflator, NIPA Table 1.1.9. *Prices for AEO’01 through AEO’06 are Wellhead averages; prices for AEO’07 through AEO’14 are Henry Hub; Henry Hub tended to be at least 50 cents/mmbtu greater than wellhead price. AEO‘01, ‘02 extrapolated through 2025, based on 2010-2020 projected growth rates.
15 20 25 30 35 402
3
4
5
6
7
8
9
10
11
Trillion Cubic Feet
$/m
mbt
u (2
012$
)
Cases: - High Economic Growth- Reference- Low Economic GrowthIncreasing PricesDecreasing Prices
AEO’14AEO’03 AEO’13
AEO’12AEO’04
AEO’11
AEO’08 AEO’05
AEO’06
AEO’10
AEO’07
AEO’09
AEO’01AEO’02
AEO’14: 2040
ANCR
ANCR
Long Run Supply Curve?
30
Coal and Natural Gas Price History and Forecasts
19911994
19972000
20032006
20092012
20152018
20212024
20272030
20332036
2039$0
$2
$4
$6
$8
$10
$12
$14
$/M
MB
tu (y
ear
201
3$)
Sources: EIA, Electric Power Monthly, Table 4.1; Monthly Energy Review; AEO 2014; AEO 2002 *Electric Power Sector prices
AEO’14 forecast
Natural Gas
Coal
From 2002 to 2011, actual price was, on average, 65% higher than what AEO’02 predicted
AEO’02 Gas Price Prediction
Historical Price
A continuation of trend of AEO under predicting gas price would suggest AEO serves as price floor
Price Floor:AEO
Upside Risk: AEO+65%
31
• Historic relationship between electricity demand and economic growth suggests current under-projection of required power generation– ~100-200 GWeq.
• Reliance on high utilization of aging coal (and nuclear) baseload assets risky– Little historical basis for continued high utilization
• Considerable potential for new baseload assets due to aging of the current fleet– ~100-150 GW
• Current projections presume gas for all needs– Potential risks for reliability, infrastructure bottlenecks, and price volatility
• Large-scale timing issue for baseload replacement• Who gets the gas?
Conclusions
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