A new report by ICF International highlights the near-term impacts of global economic recovery on U.S. energy markets and examines the implications of lower carbon dioxide prices on the long-term energy outlook.
The Integrated Energy Outlook notes that the Environmental Protection Agency (EPA) has released proposals for the Clean Air Transport Rule (CATR), the Air Toxics Rule, coal combustion residuals and cooling water intake structure standards. Although the combined impact of the rules remains uncertain, the regulations could lead to up to 40 gigawatts of coal plant retirements in the next decade.
Contrary to projections that indicate environmental regulations will impact U.S. coal production severely, ICF projects U.S. coal production will be maintained at more than 1 billion tons per year in the long term, despite the projected retirement of nearly 40 gigawatts of coal-fired electric generation in response to new environmental regulations and relatively low natural gas prices.
The study also finds that increasing demand for renewable energy credits (RECs) along with the loss of key federal incentives will cause REC prices in eastern states to rise sharply during the next 15 years. Similarly, California will fall short of the state’s bundled interim requirements through 2016, maintaining upward pressure on delivered REC prices.
ICF’s Integrated Energy Outlook addresses significant issues, including:
“- How the new EPA-proposed rules might impact the industry,
“- How natural gas prices will respond in the face of increased shale gas production,
“- Whether on-peak energy prices continue to recover and return to 2008 levels in the near future, and
“- How rising renewable requirements will affect REC prices in U.S. regions.
Using a suite of proprietary analytical tools, ICF has fully integrated assessment of wholesale power, transmission, fuel and emissions markets to offer the most complete picture of the energy industry. By incorporating global expertise from all areas of the industry, the outlook provides big picture insights about these volatile energy markets, as well as market-specific projections and forecasts. For example, the outlook shows a significant shift, driven by expected carbon controls, to renewables and natural gas, which will affect the wholesale power competitive landscape dramatically.
The outlook offers insight into emissions, gas, coal, renewable energy and power.
“- How state and regional SO2 and NOX markets will evolve under the EPA’s new CATR,
“- How many coal units will retire and how many will spend the capital needed to comply with hazardous air pollutants maximum achievable control technology (MACT) requirements,
“- What new capacity will be built to replace retired capacity and meet growing demand,
“- How the MACT requirements will interact with pending ash and water regulations, and
“- The possible directions for CO2 regulation and its potential impact on control and retire decisions.
“- How current trends in demand will shape the market,
“- How basis differentials are developing given regional supply development and pipeline projects, and
“- How shale gas production will change the future of the gas market and how environmental concerns might impact this.
“- Whether eastern coal prices continue to increase,
“- Whether coal exports continue expanding, transforming the U.S. into a major player in global coal markets, and
“- How environmental regulations will shift production and consumption trends.
“- How activity in California’s new tradable REC market will affect prices for bundled RECs in the state,
“- How REC prices in PJM will respond to sharp increases in renewable energy demand during the next decade, and
“- Whether offshore wind will provide meaningful contributions toward meeting the New England renewable electricity requirements.
“- Whether the 2010 energy price recovery will be sustained,
“- The regional outlook for on-peak spark spreads, and
“- How much environmental policies affect regional price differences.
Additional projections include:
“- Emissions—Allowance prices for federal cap-and-trade programs (CO2, NOX, and SO2); national pollution control installations, including carbon capture and storage deployment; CO2 emissions abatement by sector; domestic and international emission offset demand.
“- Gas—Regional gas production and consumption, delivered prices, basis differentials and pipeline capacity and flows.
“- Coal—Minemouth prices for nine common U.S. marker coals and three international coals; delivered prices to major power hubs; coal production by region; imports and exports; multisector coal consumption; coal distribution.
“- Renewable Energy—REC prices for California, aggregate REC prices for PJM and NEPOOL; renewable generating capacity additions; renewable energy supply and demand forecasts.
“- Power—Peak power prices for five major trading hubs.