Recent Electricity Trends and Coal Plant Retirements

Transcription

1 June 19, 214 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 Disclaimer 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 2

3 Outline 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? 3

4 Growth in electricity use slows, but still increases by 29% from 212 to 24 percent growth (3-year compounded annual growth rate) 14% 12% 1% 8% 6% 4% History electricity use 212 Period Annual Growth Electricity use GDP 195s s s s s Projections 2% GDP % -2% Source: EIA, Annual Energy Outlook 214 Early Release Overview of AEO214 Accelerated Power Plant Retirement Side Cases May 2, 214 4

5 Electricity and GDP Growth ~3 Year Avg. Year-over-Year Growth Rates, 1982Q1-214Q1 For a medium-term comparison, IHS projects kwh growth of 1.8%/year and GDP growth of 3.%/year from Annual Growth Rate Electricity End Use Annual Growth Rate Real GDP All Periods 1.89% 2.77% Non-recession 2.25% 3.21% Recession -1.4% -.87% 1-4 quarters after recession.66% 1.17% 1-8 quarters after recession 1.97% 2.6% 5-8 quarters after recession 3.29% 4.3% Long-term relation of kwhgr/gdpgr =.683 Implicit AEO 214 relation =.381 (212 to 24); 56% of long-term relationship 5 Sources: Electricity, EIA, Monthly Energy Review, Table 7.6, Electric Power Month, STEO; GDP, Bureau of Economic Analysis, NIPA Table Real GDP Chained 25 Dollars; Rates, AEO214 Tables 8 and 2; and NETL analysis; IHS, North American Power Quarterly Briefing, May 5, 214; gr stands for growth rate.

6 3-year moving average kwh Growth Rate*: AEO 14 vs. SEAP 14% 12% 1% Forecast 8% 6% 4% 2% SEAP AEO 14 % % 6 Sources: BEA NIPA Table 1.1.6; EIA Monthly Energy Review; Annual Energy Outlook 214; *kwh end use (consumption); dashed lines represent 6 th order polynomial fit

7 Generation (BkWh) 13, 12, 11, 1, 9, 8, 7, 6, 5, 4, 3, 2, Growth of U.S. GDP vs. Generation Historic and Forecast What if historic What trend If, in in addition, kwh and GDP growth is GDP applied grew to at forecasted AEO 5 rate? GDP? GDP Generation AEO 14 Forecast 3.% CAGR 39, 35, 31, 27, 2.46% CAGR 23, 19, 15, 11, 7, 1, 1, BkWh* missing in in 24; 24; 3, Equivalent to baseload 23 BkWh BkWh GW Baseload 124 GW baseload Structural Change in The Economy, Anticipates Less Energy Required Per Unit of GDP; Higher Prices Also Assumed to Suppress Demand Real GDP Billions (21$) 7 Sources: BEA NIPA Table 1.1.6; EIA Annual Energy Review; Annual Energy Outlook 214

8 Real GDP (Billion 21$) Total Electricity Consumption vs. GDP Forecasts (all AEOs extrapolated through 24) 35, 3, 25, 2, 15, 1, 24 kwh difference from AEO 5 to AEO 14: 2,215 BkWh R-squared =.971 +$8.2 trillion (38.1%) more GDP from ~same kwh AEO 14: $29.6 trillion GDP from 4,954 BkWh (24) AEO 5: $21.4 trillion GDP from 4,958 BkWh 6 5 5, 1, 2, 3, 4, 5, 6, 7, Billion kwh 8 Sources: EIA, Annual Energy Outlooks (editions AEO5 through AEO14; Annual Energy Review; BEA: Implicit Price Deflator and Real GDP)

9 Outline Electricity Trends and Projections Issue in Focus Ageless Baseload EIA Response : Accelerated Retirement Scenario All Bets on Gas 9

10 AEO 13 Issues in Focus (page 42) The Ageless Baseload Assumption Generation by fuel In the Reference case, coal-fired generation increases by an average of.2 percent per year from 211 through 24. Even though less capacity is available in 24 than in 211, 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 7 percent from 22 through 28, but the capacity factor has declined since then, falling to about 57 percent in 212. As natural gas prices increase in the AEO213 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 225 and 78 percent in 24. Across the alternative cases, coal-fired generation varies slightly in 225 (Figure 3) and 24 (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 24 ranges from 69 percent in the High Oil and Gas Resource case to 81 percent in the Low Oil and Gas Resource case. 1

11 Gas-fueled units account for most projected capacity additions in the AEO214 Reference case U.S. electricity generation capacity additions gigawatts History Projected Other Renewables Solar Wind Oil and Natural Gas Nuclear Hydro / Other Coal Source: Form EIA-86 & EIA Annual Energy Outlook 214, Early Release Overview of AEO214 Accelerated Power Plant Retirement Side Cases May 2,

12 Electricity Generation by Fuel, billion kilowatthours 25 History 212 Projections Coal Natural Gas Nuclear Renewables Petroleum 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: AEO214 Early Release (December 213). Overview of AEO214 Accelerated Power Plant Retirement Side Cases May 2,

13 Average capacity utilization of natural gas combined cycle and coal generating capacity, percent History Projections Coal 5 4 Natural Gas Source: AEO214 Early Release (December 213) Overview of AEO214 Accelerated Power Plant Retirement Side Cases May 2,

14 Capacity (GW) Aging Baseload Coal-fired Fleet in 24 Capacity-weighted Average Age New AEO Capacity Existing Capacity in 24 Operating at Highest Capacity Factors Ever at 62 Years Average Age? Virtually no new Coal Capacity to make up for aging and retired units Age Includes AEO 14 additions after 214 Accounts for announced retirements And EIA forecasted retirements 14 Reference Ventyx Velocity Suite (existing units and announced retirements - EIA AEO 214 (forecasted additions and Retirements)

15 Average capacity factor (%) Coal unit capacity factors drop off as they age Average capacity factors for Coal units for operations by unit age % 6% Approximation of actual industry capacity factor experience based on unit age Unit age (years) 14% 15 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.

16 Capacity (GW) Coal Capacity and Unit Ages in 24 Historic Age-based Capacity Factor Trend ( ) 8% Historic AVERAGE Capacity Factor Existing Units ( ) AVERAGE Capacity Factor based on 24 ages and 16 year historic operation Capacity-weighted average age 62 (average unit age 66) AEO 13 AVERAGE Capacity Factor 24 78% AEO 14 AVERAGE Capacity Factor 24 73% 6% 14% 64% 28% Capacity Factor (%) New Capacity (213-24) Existing Capacity Age Includes AEO 13 additions after 212 Accounts for announced retirements and EIA forecasted retirements 16 Reference Ventyx Velocity Suite (existing units and announced retirements - EIA AEO 213 (Reference case forecasted additions and retirements; AEO 214 reference case generation)

17 BkWh Average capacity factor (%) Potential Coal GWs - Reference Average capacity factor by unit age for coal operations, Q3 8% Unit age in years 6% 14% 1,8 1,6 1,4 1,2 1, Development needed today? 31 GW EIA AEO 14 Generation 56 GW 79 GW 19 GW 144 GW 1,7 BkWh 17 Reference Ventyx Velocity Suite; - EIA AEO 13 remaining coal unit identities; AEO 214er reference case generation; missing generation estimate 144 average C.F. for new units to meet 24 demand; includes AEO 13 estimate of retiring units beyond public announcements

18 Capacity (GW) Coal & Nuclear Baseload Capacity by years or older by 24 Coal: 168 GW (66%) Nuclear: 43GW (42%) 1 5 Virtually no new Coal Capacity and very little Nuclear Capacity to make up for aging and retired units Age New Coal Capacity Existing Coal Capacity New Nuclear Capacity Existing Nuclear Capacity Reference Ventyx Velocity Suite (existing units and announced retirements - EIA AEO 214 (forecasted additions and Retirements)

19 Outline Electricity Trends and Projections Issue in Focus Ageless Baseload EIA Response : Accelerated Retirement Scenario All Bets on Gas 19

20 Gigawatts Accelerated Nuclear and Coal Retirements Scenario (ANCR): Coal Retirements Doubled 12 ANCR 9 6 Reference 3 MATS fully implemented in Source: EIA, AEO 14

21 BkWh Average capacity factor (%) Potential Coal GWs - ANCR Average capacity factor by unit age for coal operations, Q3 8% Unit age in years 6% 14% 1,8 1,6 1,4 1,2 1, Development needed today? 19 GW EIA AEO 14 ANCR Generation 33 GW 8 GW 563 BkWh 21 Reference Ventyx Velocity Suite; - EIA AEO 13 remaining coal unit identities; AEO 214er reference case generation; missing generation estimate 144 average C.F. for new units to meet 24 demand; includes AEO 13 estimate of retiring units beyond public announcements

22 Summer Capacity (GW) Retirements Additions Additions and Retirements Twice as much baseload retires as is replaced by gas Effective Renewable Capacity Derate Adj. Renew. Renew Nuclear 6 C Turbine 18 NGCC 19 Coal -44 Oil NG Steam -1 C Turbine -7 Renew. Adj. Renew Nuclear 6 C Turbine 2 NGCC 36 Coal -83 Renew Nuclear C Turbine NGCC Oil NG Steam Coal Renew Nuclear C Turbine -1 Oil NG Steam -12 C Turbine -8 NGCC Oil NG Steam Coal -15 Reference ANCR 22 EIA AEO 214, Reference and Accelerated Coal and Nuclear Cases

23 Summer Capacity (GW) Retirements Additions Additions and Retirements Will gas capacity arrive in time? Effective Renewable Capacity Derate Adj. Renew. Renew C Turbine 93 Nuclear Nuclear 1 NGCC 131 Coal -45 Oil NG Steam -27 C Turbine -9 Reference Adj. Renew. Renew Nuclear 6 C Turbine 91 NGCC 195 Coal -98 Oil NG Steam -32 C Turbine -9 Nuclear ANCR Renew Nuclear C Turbine NGCC Oil NG Steam Coal Renew Nuclear C Turbine NGCC Oil NG Steam Coal Vast majority of gas capacity additions come in well after coal retirements 23 EIA AEO 214, Reference and Accelerated Coal and Nuclear Cases

24 Coal Retirements by 22 AEO 214 ANCR Side Case Coal Retirements 99 GW Retirements GW (21 units) View Layer Off On Announced Retirements GW (211 units) Estimated ANCR Case Coal Retirements* 24 (less announced) GW by 22 Off On Off On Summer Capacities *NETL Best Estimate based on unit size, capacity factor, age, and competitiveness Actual Retirements (21-213) Announced Retirements Estimated ANCR Retirements (less Announced Retirements) Operating Units as of 214 /Remaining units in 22 after applied retirements

25 New NGCC Builds by 22 Actual Announcements NGCC Builds in GW View Layer Off On Retired Coal New NGCC GW 23 GW Committed 37 GW 25 GW Uncommitted 42 GW 58 GW Total 99 GW 16 GW Proposed NGCC Builds 83 GW 25 Under Construction +16 GW Permitted +18 GW Proposed +49 GW Off On Off On Off On New NGCC Builds Built in Under Construction Permitted Proposed Off On View Coal Retirements Layer Actual Retirements (21-213) Announced Retirements Estimated ANCR Retirements (less Announced Retirements)

26 Percentage of total state generation from coal retirements Generation from Retiring Units, January 214 3% 25% % from projected retirements % from announced retirements 2% 15% 1% 5% % KY MI IN WV WI MN ND OH MD MO TN VA IA IL PA NY SD 26 Ventyx, based on EIA, and NETL projections

27 Outline Electricity Trends and Projections Issue in Focus Ageless Baseload EIA Response : Accelerated Retirement Scenario All Bets on Gas 27

28 Tcf Natural Gas Consumption/Use AEO 214 Reference and ANCR Cases AEO 214 Reference case AEO 214 Accelerated Nuclear and Coal Retirement case Large (5-6 Tcf) increases in gas for power and exports leaves little for industrial expansion Commercial Electric Power Residential Industrial Net Exports *Does not Include Pipeline and Distribution Does not Include GTL Heat & Power nor Lease & Plant Fuel Data Sources: EIA MER 12/213; EIA AEO 214 (Reference and Accelerated nuclear and coal retirement case)

29 $/mmbtu (212$) 225 Projections: NG Dry Production vs. Price* AEO 8 AEO 7 AEO 6 AEO 5 AEO 1 AEO 9 AEO 11 AEO 4 AEO 12 STEO for 214 Long Run Supply Curve? AEO 3 AEO 13 Cases: - High Economic Growth - Reference - Low Economic Growth Increasing Prices Decreasing Prices ANCR AEO 2 AEO 14 AEO 1 ANCR AEO 14: Trillion Cubic Feet Source: EIA, various AEO editions, MER; BEA, Implicit Price Deflator, NIPA Table *Prices for AEO 1 through AEO 6 are Wellhead averages; prices for AEO 7 through AEO 14 are Henry Hub; Henry Hub tended to be at least 5 cents/mmbtu greater than wellhead price. AEO 1, 2 extrapolated through 225, based on projected growth rates.

30 Coal and Natural Gas Price History and Forecasts $/MMBtu (year 213$) $14 $12 $1 $8 $6 $4 $2 $ A continuation of trend of AEO under predicting gas price would suggest AEO serves as price floor Natural Gas Coal Historical Price AEO 2 Gas Price Prediction From 22 to 211, actual price was, on average, 65% higher than what AEO 2 predicted AEO 14 forecast Upside Risk: AEO+65% Price Floor :AEO 3 Sources: EIA, Electric Power Monthly, Table 4.1; Monthly Energy Review; AEO 214; AEO 22 *Electric Power Sector prices

31 Conclusions Historic relationship between electricity demand and economic growth suggests current under-projection of required power generation ~1-2 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 ~1-15 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? 31