Gas, solar, wind generation will dominate in the future

Of the planned or under construction generation projects tracked by GenerationHub for the period between 2015 and 2017, 95% of the projects, which total 135.3 GW, are either natural gas, solar or wind facilities, Kent Knutson, director of Hub Services for PennWell, said on Feb. 19.

Speaking during GenerationHub’s Quarterly Market Update, Knutson noted that of the 135.3 GW of planned projects, natural gas accounts for 63%, wind accounts for 20% and solar accounts for 12%.

He added that this trend follows last year’s figures and will continue next year, except wind development will likely decrease in 2016 if the production tax credit (PTC) for wind does not extend into 2015.

Knutson noted that the solar investment tax credit (ITC) will expire next year, and without extensions of the PTC and ITC, both solar and wind will struggle to compete. He said that with the ITC, solar became the second most developed capacity in 2014, behind gas and ahead of wind.

Currently, there are about 31 GW of solar generation under construction or development, with photovoltaics accounting for about 89% of the 31 GW, he said.

Knutson said that GenerationHub is tracking about 127 GW of new natural gas projects, representing a $128bn investment, of which about 13 GW are repowering and refueling projects. In addition, GenerationHub is tracking 16 GW of solar projects expected to come online over the next three years and 29.8 GW of wind projects expected to come online over the next four years, with the majority of those wind projects expected to come online this year.

Knutson noted that 2015 is a landmark year for renewable portfolio standards (RPS), with four states – Texas, New Mexico, Montana, and New York, due to comply with their RPSs.

“Ohio last summer voted to delay their RPS, and recently West Virginia voted 95 to 4 to repeal its RPS of 25%,” Knutson said.

Utilities with nuclear generation are fighting to keep the 99 U.S. commercial nuclear reactors operating, Wayne Barber, chief analyst for GenerationHub, said during the Market Update.

“The demise of Dominions [(NYSE:D)] Kewaunee plant in Wisconsin and Entergy’s [(NYSE:ETR)] Vermont Yankee plant in the past couple of years really spooked the nuclear industry,” Barber said. “These operating plants were forced to shut down because of economic conditions, but there has been a major campaign in the industry – and the organized markets especially – to reflect the value of carbon-free base load generation.”

Nationally, the nuclear fleet performed well in 2014, with an average capacity factor of about 92%, Barber noted.

“With the scheduled retirement of Oyster Creek, and with five new units under construction, the national nuclear fleet would stand at about 103 in 2019,” Barber said, noting that it is an old fleet overall, and other retirements could come after 2025.

Barber noted that there have been a couple of developments relating to the U.S. Environmental Protection Agency’s (EPA) proposed Clean Power Plan that could drive development of the changing generation portfolio.

“One of [EPA] Administrator Gina McCarthy’s top lieutenants recently hinted at some significant tweaks that the EPA could make to its Clean Power Plan before the final version is issued,” Barber said. “One item under review regards the interim CO2 reduction targets for 2020.”

Barber noted that critics have been very vocal about having the carbon reduction timetable so front-loaded that it makes it very hard to comply and would erode reliability and dramatically drive up prices.

According to Barber, Janet McCabe, acting assistant administrator for the Office of Air and Radiation, hinted recently that the agency has been listening to these complaints about the so-called 2020 cliff and might be open to doing something for the industry on this issue.

Barber also noted that Ameren (NYSE:AEE) recently proposed an alternative carbon reduction plan that would eliminate the interim 2020 targets and building blocks and extend the overall compliance deadline to 2035 to make the utility’s carbon reduction plan more affordable.

“Another major point that Ameren is making is that improvements in the general reporting and the data on CO2 levels of reductions need to be made by the EPA because some of the data that went into the front end is incorrect,” Barber said.

Barry Cassell, chief analyst for GenerationHub, said during the Market Update that GenerationHub is tracking 28 plants that are repowering or refueling, totaling 53 units, of which 14 units are expects to go online in 2015.

Some of these repowering projects tend to be shorter term, he said, noting that switching from coal to gas, for example, will probably account for about five to eight years of extended life.

“These are interim projects to get the utilities through the Clean Power Plan compliance, and then they will likely shut those plants down and go with some other generation resource,” he said.

Cassell also said that GenerationHub is tracking 42 pipelines, with an estimated investment of $21.6bn. The majority of those pipelines are planned to come online between 2016 and 2018, he added.

The current trend toward projects that will export liquefied natural gas is driving those pipeline developments, he said.