Released May 09, 2012 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The outlook for capital and maintenance spending in North America's Electric Power Industry has been shifted dramatically over the last 12 months by legislative and regulatory decisions, operational issues and fuel prices, Brock Ramey, Industrial Info's manager of research for the North American Power Industry, said in an exclusive "Navigating the Currents of Change" webcast. These changes likely will affect billions of dollars in power-related project spending and reshape the U.S. generating fleet.
Reflecting over the last 12 months, Ramey noted these dramatic changes:
Ramey noted the U.S. nuclear industry has achieved "major milestones" over the last 12 months. First, the U.S. Nuclear Regulatory Commission (NRC) (Bethesda, Maryland) has certified the AP1000 reactor developed by Westinghouse (Monroeville, Pennsylvania), a unit of Toshiba Corporation (TYO:6502) (Tokyo, Japan). Second, the NRC issued combined construction and operating licenses for unit additions at Georgia's Alvin W. Vogtle Nuclear Power Station and South Carolina's Virgil C. Summer Nuclear Power Station. These unit additions will feature the AP1000 reactor.
The Vogtle plant is operated by Georgia Power (Atlanta, Georgia), a subsidiary of The Southern Company (NYSE:SO) (Atlanta), while the Summer plant is operated by South Carolina Electric & Gas Company (Columbia, South Carolina), a unit of SCANA Corporation (NYSE:SCG) (Cayce, South Carolina). The Shaw Group Incorporated (NYSE:SHAW) (Baton Rouge, Louisiana) is the engineering, procurement and construction (EPC) firm for the Vogtle project, as well as the engineering and construction (E&C) firm for the Summer project.
It will cost about $29 billion to build four new generators at those facilities, according to Industrial Info's data. The new units, the first new U.S. nuclear plants to be started in more than 30 years, will add a total of about 4,434 megawatts (MW) of new generating capacity. Vogtle Unit 3 is scheduled to begin operating in 2016, while Vogtle Unit 4 should come online the following year. Summer Unit 2 is scheduled to begin generating electricity in 2016, and Unit 3 will come online in 2019.
Aside from those projects, Ramey predicted that there will be no additional nuclear power plants built in the U.S. for the next few years. However, he estimated U.S. nuclear operators would spend between $8 billion and $9 billion annually through 2015 for nuclear uprates and maintenance projects.
Turning to environmental regulations, Ramey noted that, over the last 12 months, the EPA has issued the Cross-State Air Pollution Rule (CSAPR), the Mercury and Air Toxics Standard (MATS) and a New Source Performance Standard (NSPS) for power-plant emissions of carbon dioxide. For more on these regulations, see October 13, 2011, article - EPA Proposes Technical Changes to Finalized Cross-State Air Pollution Rule; December 27, 2011, article - Environmental Protection Agency Finalizes Mercury and Air Toxics Standards and March 30, 2012, article - EPA Strikes Again With 'New Source Performance Standard.'
Ramey said the recent NSPS rule on power-plant CO2 emissions is a "unique" approach to regulation in that it adopts a new-build emission standard that can only be met by one fossil fuel--natural gas--or by installing very expensive and commercially unproven carbon capture and sequestration (CCS) technology on new coal-fired generation. The rule does not apply to currently operating coal-fired generators or coal-fired generation that begins construction within a year, he observed. "We expect there will be more to come on this rule," Ramey said.
The industry is spending heavily to comply with the MATS rule while awaiting the outcome of litigation over CSAPR, Ramey continued. A federal court in Washington, D.C., is scheduled to hear oral arguments on that rule this month and render a decision about two months after that. "Right now, it looks like one judge is inclined to back the EPA, while a second is likely to support the industry. The third judge is the swing vote," Ramey said.
Meanwhile, the natural gas market seems to be moving in lockstep with the regulators. With gas prices dipping below $2 per MMBtu, power developers are continuing their years-long 'dash to gas.' "We expect construction to start on about 9,000 megawatts (MW) of new gas-fired generation this year, and next year we see between 9,000 MW and 18,000 MW of new-build gas generation kicking off," Ramey said. "This is the sector of the industry to watch--it is moving fast and hard. Gas is where the current and near-term spending will be."
That spending may be further buoyed by the abandonment of renewable energy projects, Ramey continued. "We're seeing a lot of wind generation being constructed right now. But the non-renewal of the Section 1603 cash grants, and the uncertainty over the extension of the federal production tax credit (PTC) means that if a project doesn't break ground in the next few weeks, it will go bust." If Congress fails to renew the PTC, Ramey predicted 2013 will see a large decline in renewable power development. Any resurgence won't take place until 2014 or later, he predicted.
View Project Report - 17001442 16001637
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Reflecting over the last 12 months, Ramey noted these dramatic changes:
- Last spring, natural gas sold for about $4.50 per million British thermal units (MMbtu), but now gas is selling for about $2 per MMBtu, a major reason why gas is the fuel of choice for new-build power plants.
- A year ago, the world was in the early stages of assessing the impact of the Fukushima Dai'ichi nuclear accident. Now, with better understanding of the causes and consequences of that event, the U.S. nuclear industry has recalibrated its near-term prospects.
- In early 2011, the U.S. Environmental Protection Agency (EPA) had yet to issue its long-awaited regulations to reduce power-plant emissions of sulfur dioxide (SO2), oxides of nitrogen (NOx), particulates, mercury and other hazardous air pollutants. Now, the agency has issued regulations for all those emissions, plus a draft rule regulating carbon dioxide (CO2) emissions from power plants.
- Electric Power 2012, May 15-17, in Baltimore, Maryland. Members of the Industrial Info team will be at Booth 1313.
- WINDPOWER 2012, the national conference of the American Wind Energy Association (AWEA) (Washington, D.C.) will be held June 3-6 in Atlanta, Georgia. Industrial Info will be exhibiting at Booth 6640.
Ramey noted the U.S. nuclear industry has achieved "major milestones" over the last 12 months. First, the U.S. Nuclear Regulatory Commission (NRC) (Bethesda, Maryland) has certified the AP1000 reactor developed by Westinghouse (Monroeville, Pennsylvania), a unit of Toshiba Corporation (TYO:6502) (Tokyo, Japan). Second, the NRC issued combined construction and operating licenses for unit additions at Georgia's Alvin W. Vogtle Nuclear Power Station and South Carolina's Virgil C. Summer Nuclear Power Station. These unit additions will feature the AP1000 reactor.
The Vogtle plant is operated by Georgia Power (Atlanta, Georgia), a subsidiary of The Southern Company (NYSE:SO) (Atlanta), while the Summer plant is operated by South Carolina Electric & Gas Company (Columbia, South Carolina), a unit of SCANA Corporation (NYSE:SCG) (Cayce, South Carolina). The Shaw Group Incorporated (NYSE:SHAW) (Baton Rouge, Louisiana) is the engineering, procurement and construction (EPC) firm for the Vogtle project, as well as the engineering and construction (E&C) firm for the Summer project.
It will cost about $29 billion to build four new generators at those facilities, according to Industrial Info's data. The new units, the first new U.S. nuclear plants to be started in more than 30 years, will add a total of about 4,434 megawatts (MW) of new generating capacity. Vogtle Unit 3 is scheduled to begin operating in 2016, while Vogtle Unit 4 should come online the following year. Summer Unit 2 is scheduled to begin generating electricity in 2016, and Unit 3 will come online in 2019.
Aside from those projects, Ramey predicted that there will be no additional nuclear power plants built in the U.S. for the next few years. However, he estimated U.S. nuclear operators would spend between $8 billion and $9 billion annually through 2015 for nuclear uprates and maintenance projects.
Turning to environmental regulations, Ramey noted that, over the last 12 months, the EPA has issued the Cross-State Air Pollution Rule (CSAPR), the Mercury and Air Toxics Standard (MATS) and a New Source Performance Standard (NSPS) for power-plant emissions of carbon dioxide. For more on these regulations, see October 13, 2011, article - EPA Proposes Technical Changes to Finalized Cross-State Air Pollution Rule; December 27, 2011, article - Environmental Protection Agency Finalizes Mercury and Air Toxics Standards and March 30, 2012, article - EPA Strikes Again With 'New Source Performance Standard.'
Ramey said the recent NSPS rule on power-plant CO2 emissions is a "unique" approach to regulation in that it adopts a new-build emission standard that can only be met by one fossil fuel--natural gas--or by installing very expensive and commercially unproven carbon capture and sequestration (CCS) technology on new coal-fired generation. The rule does not apply to currently operating coal-fired generators or coal-fired generation that begins construction within a year, he observed. "We expect there will be more to come on this rule," Ramey said.
The industry is spending heavily to comply with the MATS rule while awaiting the outcome of litigation over CSAPR, Ramey continued. A federal court in Washington, D.C., is scheduled to hear oral arguments on that rule this month and render a decision about two months after that. "Right now, it looks like one judge is inclined to back the EPA, while a second is likely to support the industry. The third judge is the swing vote," Ramey said.
Meanwhile, the natural gas market seems to be moving in lockstep with the regulators. With gas prices dipping below $2 per MMBtu, power developers are continuing their years-long 'dash to gas.' "We expect construction to start on about 9,000 megawatts (MW) of new gas-fired generation this year, and next year we see between 9,000 MW and 18,000 MW of new-build gas generation kicking off," Ramey said. "This is the sector of the industry to watch--it is moving fast and hard. Gas is where the current and near-term spending will be."
That spending may be further buoyed by the abandonment of renewable energy projects, Ramey continued. "We're seeing a lot of wind generation being constructed right now. But the non-renewal of the Section 1603 cash grants, and the uncertainty over the extension of the federal production tax credit (PTC) means that if a project doesn't break ground in the next few weeks, it will go bust." If Congress fails to renew the PTC, Ramey predicted 2013 will see a large decline in renewable power development. Any resurgence won't take place until 2014 or later, he predicted.
View Project Report - 17001442 16001637
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
