PennWell’s GenerationHub is tracking nearly 150 GW of projects that are planned or under construction, and expected to be online through the next three years, Kent Knutson, director of Hub Services for PennWell said during the March 4 GenerationHub Quarterly Market Update.
He noted that 94% of those projects are natural gas, wind and solar projects. According to a presentation during the webcast, U.S. investment in 2016-2018 is forecast as such:
- 87.4 GW, or 59%, of natural gas
- 29.7 GW, or 20%, of wind
- 21.3 GW, or 15%, of solar
“We see a fairly robust infrastructure development going on out there,” Knutson said. “In 2016, when all is said and done, we should see the highest investment year since 2012.” Continued growth in the renewable sector is expected in 2017, partly because of the extensions of the production tax credit (PTC) and investment tax credit (ITC), he said, adding that natural gas is expected to continue to dominate the landscape in 2018 and beyond.
- According to the presentation, new gas generation plants expected to come online in 2016 include: * Virginia Electric and Power’s (Dominion Virginia Power) 1,472 MW Brunswick County power station in Virginia
- Midwest Generation’s 1,320 MW Joliet 29 plant in Illinois (refuel project)
- Florida Power & Light’s (FPL) 1,260 MW Port Everglades plant in Florida
New wind generation facilities expected to come online in 2016 include: * Geronimo Wind Energy’s 400 MW Grande Prairie Wind in Nebraska
- Infinity Wind Power’s 400 MW Western Plains Wind Project in Kansas
- Invenergy’s 300 MW Ida Grove Wind Energy in Iowa
The presentation further noted that new solar projects expected to come online in 2016 include:
- Centauri Energy’s 300 MW Beltran Solar facility in California
- TX Nazareth Solar’s 260 MW Nazareth Solar facility in Texas
- First Solar’s 250 MW Moapa Southern Paiute Solar Project in Nevada
While that planned investment is important, other factors in the generation industry are worth noting as well, he said, noting, for instance, that electric demand continues to decline. As noted in the presentation, residential electric sales in the most recent 12 months ending in February, compared with the same period in 2015, declined 0.6%; commercial electric sales rose 0.4%; industrial electric sales declined 3.7%; and all sales were down 1.1% Also, the coal power industry “suffered yet another blow” with Peabody Energy’s (NYSE:BTU) announced bankruptcy. As GenerationHub reported, the nation’s largest coal producer, Peabody Energy, succumbing to the same forces that recently forced other industry giants like Arch Coal and Alpha Natural Resources into bankruptcy, on April 13 voluntarily filed petitions under Chapter 11 for the majority of its U.S. entities in the U.S Bankruptcy Court for the Eastern District of Missouri.
“[D]riven by low natural gas prices, the declining electric demand, and, most importantly, a huge regulatory cost burden, the coal industry has been obliterated,” Knutson said.
Coal retirements in recent years accounted for more than 243 MWh as recently as 2010, he said, adding that plants scheduled for retirement in 2016 alone generated more than 81 MWh in 2010. The generation landscape “seems to be changing rapidly and [there are] no signs it’s going back, Knutson said. “Along with coal plant retirements, there are several nuclear power plants on the block because of current market economics.”
Knutson noted that Entergy’s (NYSE:ETR) Vermont Yankee nuclear plant closed at the end of 2014, while the company’s Pilgrim plant will retire in spring 2019. Similarly, the James Fitzpatrick nuclear plant was scheduled for retirement at the end of the year, but it is “now looking more like 2017,” he said.
Knutson noted that the recent extensions of the PTC and ITC for wind and solar energy “make it even more difficult for coal and nuclear to make ends meet.”
Other factors affecting the industry include the upcoming presidential election, commissioner vacancies at the Federal Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission, as well as the seat left vacant at the U.S. Supreme Court following the death of Supreme Court Justice Antonin Scalia in February.
Additionally, as TransmissionHub reported, the Senate on April 20 approved the Energy Policy Modernization Act of 2016, with senators now looking to reconcile the large legislation with a version passed by the House of Representatives last December.
That bill, Knutson said, “promotes investment in aging electric transmission and [natural] gas pipeline, so that bodes well for the electric transmission business and also on the gas side.”
Court, FERC matters watched closely
Also speaking during the webcast was GenerationHub Chief Analyst Wayne Barber, who discussed various court happenings.
For instance, as GenerationHub reported, the Supreme Court on April 19 ruled that a power generation program in Maryland, which is a de-regulated state, is preempted because it disregards the interstate wholesale rate required by FERC.
The ruling affirms an earlier one by the United States Court of Appeals for the Fourth Circuit. The case had been argued in front of the Supreme Court on Feb. 24.
“We agree with the Fourth Circuit’s judgment that Maryland’s program sets an interstate wholesale rate, contravening the [Federal Power Act’s] division of authority between state and federal regulators,” the high court held.
Also, after ruling against the Maryland Public Service Commission (PSC) in-state generation incentive for a gas-fired power plant, the Supreme Court elected not to hear litigation on a similar case in New Jersey. The 3rd Circuit Court of Appeals had ruled against the New Jersey generation program, GenerationHub reported.
During the webcast, Barber said: “The decision was cheered by the Electric Power Supply Association (EPSA), [and] it was less enthusiastically greeted by the American Public Power Association (APPA). But, even people who did not like the outcome of the decision agreed that the Supreme Court decision was narrowly drawn and might not have sweeping impact in the power markets.
Another court matter that Barber discussed involves the U.S. Environmental Protection Agency’s Clean Power Plan, which was stayed by the Supreme Court pending legal review by the U.S. Court of Appeals for the District of Columbia Circuit.
“The next big thing in that will be oral arguments that will occur before a three-judge panel of the D.C. Circuit on June 2,” he said, noting that that decision could take anywhere from several weeks to several months.
Barber also discussed a matter before the Public Utilities Commission of Ohio (PUCO). Specifically, PUCO has approved various power purchase agreements (PPAs) for baseload capacity. “These are old, long-established baseload power plants – for the most part, they are either coal, with a few nuclear plants thrown in,” Barber said. “However, these are what the independent power people refer to as incumbent utilities that are getting” the benefits of the PPAs, with the two beneficiaries of the decisions being units of American Electric Power (NYSE:AEP) and FirstEnergy (NYSE:FE).
AEP and FirstEnergy subsidiaries are getting the PPAs, which call for advancement in clean energy and grid modernization, he said, adding that the PPAs include some cost controls, but “not enough to satisfy critics of this deal, which call it reregulation.”
FERC is now going to review the PPAs, which is not welcome news for AEP and FirstEnergy, Barber said.
New nuclear power, one solar bankruptcy in the news
Barber also noted that there is some good news for nuclear power as the Tennessee Valley Authority (TVA) recently announced that it expects to achieve “criticality” at its Watts Bar 2 facility in Tennessee.
As GenerationHub reported, TVA said that it is continuing power ascension testing for that facility, which is expected to reach initial criticality this month, with commercial operation in summer 2016, at a total estimated project cost of $4.7bn.
Among other things, Barber noted that while, overall, most of the news for renewables is pretty good, one large solar company recently filed for bankruptcy. As GenerationHub reported, SunEdison (NYSE:SUNE) on April 21 said that it and certain of its domestic and international subsidiaries have filed voluntary petitions for reorganization under chapter 11 at the U.S. Bankruptcy Court for the Southern District of New York.
Renewables boom, coal firms file Chapter 11
Still, renewable development continues, with smaller solar projects more common in the East Coast and bigger solar projects more typical in the West Coast, GenerationHub Chief Analyst Barry Cassell noted during the webcast.
He also noted MidAmerican Energy’s wind ventures. As GenerationHub reported, MidAmerican Energy told the Iowa Utilities Board in an April 14 application that its 2,000 MW Wind XI development program is designed to meet renewable energy needs and extended PTC authorization from Congress.
MidAmerican Energy applied for a determination of ratemaking principles for the proposed Wind XI Project, which, like its name implies, is the eleventh installment of a slate of wind projects developed in recent years. MidAmerican on April 14 publicly announced the filing of this application.
Any real opposition to that endeavor is unlikely as “Iowa seems to embrace wind pretty well,” Cassell said.
Discussing coal news, including Peabody’s announced bankruptcy, Cassell said, “I think we’re going to see, basically, a privatization of the coal industry.”
In a lot of cases, Cassell said, creditors that are going to take over the assets may not want those assets, but having them is a way to protect as much as they can of their original investment, or their original loans to companies.
Cassell noted that financial institutions are under public pressure to not finance coal anymore.
Despite the bankruptcies of some, he said that “it’s not a clean sweep [in] that if you’re a public company, you’re in serious trouble, but you’re not doing as well as you used to and you’re doing a lot worse than you used to. I think that’s pretty safe to say all around, and we’ll just have to see how that affects coal production and supply to utility companies.”
Among other things, Knutson discussed recent trends in electric generation. As noted in his presentation, for instance, for the most recent 12 months ending in February, compared with the same period in 2015, natural gas was up 17.1%; coal was down 15.4%; nuclear power was down 0.2%; hydropower was down 5.3%; and other renewables were up 10.2%.
Also, in that same timeframe, compared to the same period in 2015, for electric utilities, the delivered price of coal was down 6.7% to $2.16 per mmBtu, and the delivered price of natural gas was down 30.9%, to $3.34; for independent power producers, coal was down 8.1%, to $2.06 per mmBtu, and natural gas was down 38.1%, to $2.66.
Meanwhile, in that same timeframe, residential electric rates were up 0.4%, to 12.7 cents per kWh, while rates for all customers were down 0.8%, to 10.4 cents per kWh.