GenerationHub: Continued growth in natural gas, wind, solar expected in 2017 and beyond

77.2 GW of domestic coal power has already retired in the United States, and 40 GW are planned to retire

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PennWell’s GenerationHub is projecting continued growth in natural gas, wind and solar power in 2017 and beyond, with gas dominating the landscape, according to Kent Knutson, director of Hub Services for PennWell.

GenerationHub is also tracking a growing number of combined cycle projects and “after 2018 and into the future, there is a fair number of nuclear power plants, driven by low interest [rates], low natural gas [prices], tax credits,” and the wave of coal plant retirements that is occurring, Knutson added during the Dec. 14 GenerationHub Quarterly Market Update.

As noted in GenerationHub’s presentation, 77.2 GW of coal power has already retired in the United States, and 40 GW are planned to retire.

According to GenerationHub data, in the most recent 12 months ending in September, as compared with the same period in 2015, the U.S. electric utility fuel mix saw an increase of 9.7% in natural gas use; a decrease of 15.7% in coal; a decrease in nuclear of 1.2%; an increase in hydro of 7.4%; and an increase of 16.5% in other renewables.

Also, in that same timeframe, compared to the same period in 2015, for electric utilities, the delivered price of coal was down 5.6% to $2.18 per mmBtu, and the delivered price of natural gas was down 21.8%, to $3.02 per mmBtu; for independent power producers, coal was down 8.8%, to $1.96 per mmBtu, and natural gas was down 26.4%, to $2.42. Meanwhile, in that same timeframe, residential electric rates were up 0.32%, to 12.57 cents per kWh, while rates for all customers were down 1.32%, to 10.8 cents per kWh.

GenerationHub is tracking 24,000 MW of projects that are being worked on now and are expected to be online in 2017, Knutson said. Most of the natural gas plants are being planned in PJM Interconnection, ERCOT and the Midcontinent ISO, he said.

As noted in the presentation, new gas projects that came online this year include: * Virginia Electric and Power’s (Dominion Virginia Power) 1,472-MW Brunswick County Power Station in Virginia

* Midwest Generation LLC’s 1,320-MW Joliet 29 plant in Illinois; this was a repower project, going from coal to gas

* Florida Power & Light’s 1,260-MW Port Everglades plant in Florida

Gas projects that are planned to be online in 2017 include: * Lackawanna Energy Center LLC’s 1,665 MW Lackawanna Energy Center in Pennsylvania

* Exelon’s (NYSE:EXC) 1,230-MW Colorado Bend II plant in Texas

* Old Dominion Electric Coop’s 1,114-MW Wildcat Point plant in Maryland

The presentation also noted that new wind projects that came online this year include: * Geronimo Wind Energy’s 400-MW Grande Prairie Wind Farm in Nebraska

* MidAmerican Energy’s 301-MW Ida Grove Wind project in Iowa

* SunEdison’s 300-MW South Plains II project in Texas

Wind projects that are planned to be online in 2017 include: * Tri Global Energy’s 500-MW Goodnight project in Texas, which is under construction

* Boralex’s 350-MW Red Willow Wind project in British Columbia

* NextEra Energy Resources’ 301-MW Huron Wind LLC project in Michigan

The presentation further noted that new solar projects that came online in 2016 include: * Sempra Energy’s 210-MW Mesquite Solar 3 LLC project in Arizona

* Recurrent Energy’s 205-MW RE Tranquility project in California

* SunEdison’s 120-MW Comanche Solar project in Colorado

Solar projects that are planned to be online in 2017 include: * SunPower Corporation’s 278-MW Rosamond West Solar Project in California

* Soda Mountain Solar LLC’s 264-MW Soda Mountain Solar Project in California

* Innovative Solar 37 LLC’s 100-MW Innovative Solar 37 project in North Carolina

Knutson noted that electric demand continues to decline, even though GDP is strong, and “there’s going to be a wild ride to some degree ahead for wind and solar [power] as those phase-out periods happen with the investment tax credit [(ITC)] and the production tax credit [(PTC)] – the PTC goes to 80% of its total value starting on Jan. 1 of next year; the ITC has been extended a few years.”

As noted in the presentation, residential electric sales for the most recent 12 months ending in September, compared with the same period in 2015, were down 1.6%; commercial electric sales were down 0.5%; and industrial electric sales were down 4.5%.

While there has been an uptick recently, with cold weather driving up demand, natural gas prices continue to be low, Knutson said. As noted in the presentation, Henry Hub futures estimate natural gas to be $2.90 in March 2017, $3.25 in January 2018, and $3.11 in January 2019.

Knutson also noted that $180.8bn were invested in production, distribution and transmission in the United States from 2013 through 2015; that figure does not include big public utilities like the Los Angeles Department of Water and Power.

According to the presentation, Duke Energy (NYSE:DUK), for instance, invested about $19.5m from 2013 through 2015 in service capital additions; American Electric Power (NYSE:AEP) invested about $9.8m; and Southern Company (NYSE:SO) invested about $9.3m.

Knutson also noted that PennWell’s TransmissionHub is tracking $123.8bn in electric transmission, representing 36,811 miles of transmission lines.

Among other things, the presentation noted that factors driving generation involve: * Investment remaining strong but could slow in light of fears over an interest rate hike

* The fate of the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan

* A potential revamp of organized markets

* Work on a federal energy policy bill that is unlikely to continue until next year

* The incoming Trump administration, as well as vacancies at FERC and the U.S. Nuclear Regulatory Commission (NRC)

Post-election

GenerationHub Chief Analyst Wayne Barber noted during the webcast that after the presidential election, there has been speculation as to whether the Clean Power Plan, as envisioned by the Obama administration, will be either overturned by the Appeals Court or dialed back significantly before the U.S. Supreme Court.

“[T]he nominee that President-elect Trump has indicated that he will tap for the head EPA post is the Oklahoma Attorney General, [Scott Pruitt], who … has been leading his state’s fight in the multi-state litigation against the Clean Power Plan before the D.C. Circuit and related avenues,” Barber said.

He also noted that Trump “has evidently settled on former Texas Republican Gov. Rick Perry to be the secretary of Energy,” and that Perry, “while he was a candidate for the Republican nomination, talked about closing down the Energy Department.”

Barber said that DOE, in addition to being involved in energy research and development, is also “the watchdog of the nation’s nuclear stock pile.”

Of the vacancies at FERC and the NRC, Barber noted that both of those commissions currently have three members instead of five total.

“Those are both designed as bipartisan commissions, although the presidential party in power usually, pretty quickly, has a majority on there,” he said, adding that there is one NRC nominee that has already been nominated by the Obama administration.

Since the presidential election, there has also been much speculation about what will happen for renewable power under Trump, who in a recent New York Times interview, detailed misgivings with wind power, including that turbines “kill birds,” and that wind power relies “on subsidies, and had various other problems,” Barber said.

He noted that most of the action on renewable power is done in Congress and at the state level, with 29 states having renewable portfolio standards (RPSs) in place that require a certain amount of energy to come from wind, solar and geothermal sources, among others.

On nuclear, wind, coal

Discussing nuclear power, Barber said that there have been a number of plant retirements announced recently.

As GenerationHub reported, when Entergy (NYSE:ETR) said on Dec. 8 that it plans to retire the 800-MW Palisades nuclear power plant in Michigan during the fall of 2018, it marked the latest in a growing number of reactor retirement announcements. Entergy and its power customer, and former Palisades owner, CMS Energy (NYSE:CMS) also said Dec. 8 that they had reached agreement to end their power purchase agreement in the spring of 2018. CMS utility Consumers Energy had been scheduled to buy almost 100% of the power generated by Palisades through April 2022.

There have been some high spots for nuclear power in 2016, as the Tennessee Valley Authority (TVA) Watts Bar 2 facility in Tennessee, for example, finally went commercial and there is ongoing construction of four new reactors being built in Georgia and South Carolina.

Among other things, Barber said that the biggest issue of late has been the survival of the existing nuclear plants.

As GenerationHub reported, a combination of high operating costs, flat demand for electricity and low power prices are making it increasingly difficult to keep existing nuclear reactors in business, Nuclear Economics Consulting Group (NECG) Principal Edward Kee told the GenForum event at POWER-GEN on Dec. 12 in Orlando, Fla.

GenerationHub Chief Analyst Barry Cassell noted during the webcast that a number of wind projects are moving forward.

As GenerationHub reported, Electric Transmission Texas on Dec. 2 filed with the Public Utility Commission of Texas a revised ERCOT standard generation interconnection agreement (SGIA) with Willow Springs Windfarm LLC. Those companies had originally entered into an SGIA as of May 1, 2015. They worked out a First Amended and Restated SGIA as of Sept. 21, 2015; the new version makes several changes from that first revision. The project will interconnect via Willow Springs Windfarm's Salvation substation, which will be located in Haskell and Knox counties, about 15 miles east of Haskell, Texas. Once the facilities are completed and energized, the point of interconnection will be located at the dead-end structure inside the Smoky Hill 345-kV station of Electric Transmission Texas, which terminates the project company's 345-kV transmission line from the substation.

Cassell also noted that “there is a major program going on right now in Maryland” for offshore wind energy.

As GenerationHub reported, U.S. Wind Inc., on Nov. 30 applied to the Maryland Public Service Commission (PSC) for approval to develop a 750-MW wind farm project off the coast of Maryland, and is seeking offshore renewable energy credits for about 248 MW of the project. Maryland in April 2013 enacted the Offshore Energy Act of 2013 which, among other measures created a “carve-out” for offshore wind energy in Maryland’s RPS.

New York, for instance, has a “very aggressive renewable energy goal,” Cassell said.

As GenerationHub reported, New York Gov. Andrew Cuomo’s Clean Energy Standard requires New York to source 50% of its electricity from renewables by 2030, which is the impetus for a lot of wind farm development work, and several large wind projects are working through the state’s regulatory system. For instance, the Heritage Wind LLC subsidiary of Apex Clean Energy on Nov. 23 filed with the New York State PSC its blueprint for citizen involvement in the approval process for a 200.1-MW wind project that would be located in the Town of Barre, Orleans County, N.Y. The proposed interconnection point is within the Town of Barre along National Grid's existing Shelby-Sweeden 115-kV power line.

Among other things, Cassell noted that “coal continues to face some bad times.” For instance, coal has been under heavy pressure in Maryland because of the state’s stringent clean air laws, he said.

As GenerationHub reported, PJM in November said that it received requests for the shutdown as of June 1, 2018, of Crane Units 1 and 2.

As per normal practice, PJM didn't name the power plant owner. The affected units are:

Crane Unit 1, 190 MW, 55 years old, reliability analysis on grid impacts of the shutdown underway;

Crane Unit 2, 195 MW, 54 years old, reliability analysis underway; and

Crane GT1, 14 MW, 50 years old, deactivation as of Nov, 18, 2018, reliability analysis underway.

Without offering a specific reason, C.P. Crane LLC on July 28 sent a brief letter to the Maryland PSC asking it to drop a review of a June 24 application for approval to fire gas at Crane Unit 2. Said the July 28 letter: "For reasons not anticipated at the time of filing of the application, Crane no longer expects to proceed with the project for which a CPCN was sought."

C.P. Crane is a wholly-owned subsidiary of Avenue Capital Group. The Crane plant is operated by PurEnergy Operating Services LLC.

Corina Rivera-Linares
About the Author

Corina Rivera-Linares

Corina Rivera-Linares, chief analyst for the Hub's website, has covered the U.S. power industry for the past 10 years. Before joining Hubs, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics and education for weekly newspapers and national magazines. She can be reached at corinar@pennwell.com.

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