Wind and Solar Projects to Dominate North American Power Industry Capital Spending in 2010

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Rising costs and the prospect of carbon-dioxide reductions have stymied construction activity for nuclear and coal-fired generators in the U.S. this year, leading to a surge in project starts for renewable energy generation. This trend likely will continue into 2010, said Industrial Info Vice President for Research for Power Industry Markets Britt Burt at an Industrial Info event held in Baton Rouge, Louisiana, last week.

Click on image at right for a breakdown of projected 2010 Power Industry spending in the U.S. and Canada.

Approximately 300 people attended Industrial Info's "Twenty-Ten Industrial Market Outlook," held November 10 at the White Oak Plantation in Baton Rouge, Louisiana. Attendees represented a broad spectrum of industry: equipment vendors, distributors, manufacturing firms, engineering and construction firms, labor unions, and financial service companies. The "Twenty-Ten Industrial Market Outlook" event coincides with Industrial Info's release of the 2010 Global Industrial Outlook, which highlights industrial spending forecast for the coming year. Since 1993, IIR has published a forecast for capital and maintenance spending for the industrial market in North America, and the 2010 outlook marks the fifth year of projecting spending estimates around the world.

Looking back at 2009 project activity, Burt said, "Coal and nuclear are pretty much at a standstill right now, and wind power has been the big beneficiary of that." Burt said he expects natural gas generation to continue to serve as a baseload bridge fuel until matters become more settled for coal and nuclear power.

So far in 2009, Industrial Info data shows a total of 409 capital projects valued at $38 billion being launched in the North American Power Industry, Burt told the attendees in Baton Rouge. Wind power projects account for 37% of capital project commitments, a total of $14.8 billion in investments. Natural gas capital projects garnered 22% of North American power spending, with a total investment value (TIV) of $8.8 billion. Spending for power transmission and distribution projects that Industrial Info has confirmed are still moving forward totaled $5.5 billion as of early November.

By geographic region, capital spending for power generation this year has been concentrated in four regions: the Rocky Mountains region, the Great Lakes region, the West Coast, and the Southwest, according to Industrial Info's North American Industrial Database. Spending on generation maintenance projects has been particularly strong in the Great Lakes, followed by the Southeast, Mid-Atlantic, and Northeast regions, Burt noted.

"Development of wind energy has been widespread across the U.S. and Canada, but most of the capital projects have been occurring in the Pacific Northwest, in Midwestern states like Kansas, Iowa, the Dakotas, and Southwestern states, notably Texas and Oklahoma," Burt said. He added that natural gas construction activity has been particularly active in Florida, North Carolina, Texas, Oklahoma, and the Rocky Mountain and Northeastern regions of the U.S.

Looking forward to 2010, Burt predicted that construction starts for wind power, solar energy, natural gas, and coal will account for the largest slices of capital spending projects in North America. Burt said that wind power projects are scheduled to account for 31% of all power generation construction starts in 2010. These projects have a TIV of $53.1 billion, according to Industrial Info. Capital projects for coal ($23 billion) and natural gas ($22.5 billion) round out next year's major projected power generation spending by fuel type in North America, he said.

Burt cautioned that not all proposed projects would kick off as planned in 2010, and that the data reflects every project Industrial Info has identified to start construction in the next year. "We track a large amount of project activity that is in various stages of development. Historically, we see approximately 22% of the activity move forward in a given year," he said. More than 7,000 megawatts (MW) of solar power projects are scheduled to begin construction next year, "but we know not all of that will get built." Solar projects account for 18% of scheduled North American construction kickoffs next year, with a TIV of $30.2 billion.

Many generation owners deferred power plant maintenance activity during 2009, which should lead to an uptick in maintenance spending for 2010, predicted Burt. Currently, 484 generating units in the U.S. are between 40 and 49 years old. These units represent a total generation capacity of about 85,000 MW. An additional 257 power generating units, representing aggregate generating capacity of about 120,000 MW, are 30 to 39 years old, Burt said. These aging generators are sprinkled across the U.S., but are particularly concentrated in Texas, Indiana, Illinois, Ohio, Missouri, Pennsylvania, West Virginia, and Georgia.

Click on image at right for a map detailing U.S. generation capacity that is 30 or more years old.

Burt told the Baton Rouge audience that delays in construction of new coal and nuclear power generation sources are expected to drive modernizations and incremental capacity increases among the existing generation fleet. The recession and reduced consumer demand for electricity have cut into scheduled power plant maintenance activities. But maintenance dates are coming up for thousands of megawatts of combustion turbine units that have been installed in recent years. "You can't keep deferring maintenance activity forever," he said.

Burt also predicted healthy spending for environmental compliance projects next year. Spending on environmental compliance has reached $2.4 billion so far in 2009, and could reach $5.1 billion next year. By geographic region, environmental compliance projects in the Power Industry next year will be concentrated in the Great Lakes region, the Southwest and the Southeast. Environmental compliance spending will go toward reduction of nitrogen oxide (NOx), including installations of low-NOx burners or selective catalytic reduction (SCR) units; flue gas desulfurization units to reduce sulfur dioxide (SO2) emissions; baghouses for particulate control; and mercury reduction projects.

Asked by an audience member about the Final Greenhouse Gas Reporting Rule issued earlier this year by the U.S. Environmental Protection Agency (EPA), Burt said: "This rule, using the EPA's authority under the Clean Air Act, creates a requirement that certain facilities and industries report their annual emissions of CO2 and other greenhouse gases to the EPA. The new reporting system covers approximately 85% of total U.S. greenhouse gas emissions and will allow the EPA to gain a more comprehensive understanding of where emissions are coming from to help inform and guide the development of emissions management and reduction policies." For more on this rule, see articles from October 7, 2009 - EPA Acts on Greenhouse Gas Emissions After Senate Stalls on Cap & Trade and July 23, 2009 - EPA Wades Through Comments on its Draft Greenhouse Gas Reporting Rule.

Burt also was asked to comment on Performance Specification 17 (PS-17) and Procedure 4, EPA actions that pertain to industrial emissions monitoring. "These are actions established to develop consistent requirements for ensuring and assessing the quality of data measured by continuous parameter monitoring systems, and to provide quality assurance procedures for continuous emission monitoring systems used to monitor multiple pollutants," he said. "This likely will lead to installation of next-generation continuous monitoring systems at power plants in the United States."

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.