Released December 24, 2019 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Renewable energy projects have long dueled with gas-fired projects for market share in the North American Power Industry's new-build market. With new-build coal and nuclear projects out of favor, electric demand holding steady or even falling slightly, and utilities investing more heavily in energy efficiency projects, green power and gas power are effectively the only options open to developers seeking to build the next generation of power plants across North America.
A few years ago, the battle for market share was a lot closer than it is now. Whether it is a temporary blip or the cementing of a long-term trend, renewables developers have dramatically increased their share of the new-build North American power market at the expense of gas-fired power projects.
Industrial Info has tracked the five-year, new-build construction horizons for the U.S. power market for over a decade. In its most recent new-build analysis, covering projects scheduled to begin construction between 2020 and 2024, gas' loss of market share to renewables is evident, falling to levels not seen in a decade, since the aftermath of the last spike in gas prices.
Click on the image at right to see how renewables and gas-fired generation have split the U.S. new-build power generation market for rolling five-year periods.
In the U.S., gas is the fuel of choice for only 26% of new-build power plants scheduled to begin construction between 2020 and 2024, according to data tracked by Industrial Info. Renewables, by contrast, are expected to capture an estimated 72% of this market over that five-year period.
In prior years, gas' share of the new-build power generation market ranged from 18% to 21%, in the aftermath of the gas price spike of 2010, to a more recent high of 41% to 43%, in a market characterized by low prices and plentiful supplies.
Across North America, 274 planned gas-fired power projects valued at $94.5 billion that were scheduled to begin construction in the five-year period between 2018 and 2022 have been cancelled or delayed, according to Industrial Info's Global Marketing Intelligence platform.
Over the same five-year period, a far lower number of proposed power projects, 130, were scheduled to begin construction across North America. The value of those proposed projects is about $42.8 billion.
North American states and provinces with the largest portfolio of planned new-build gas-fired power projects include:
Click on the image at right to see a chart of the North American states or provinces with the largest dollar-value of planned natural gas power projects scheduled to begin construction in 2020-2021.
The electric generation business has long valued fuel diversity. Rather than place most or all their proverbial eggs in one basket, utilities and merchant generators have opted to spread their bets across different fuels, to manage the potential risks of a spike in fuel costs, which happened over a decade ago.
While natural gas prices for electric generation have spent most of the last decade at or under $5 per thousand cubic feet (Mcf), the price spikes of 2006 and 2008 undermined the economics of many proposed gas-fired power plants. Developers and utilities were reminded anew of the value of fuel diversity.
Click on the image at right to see a chart of natural gas prices for electric generators.
After the price spikes of 2006 and 2008, dozens of proposed new-build gas power plants valued at billions of dollars were cancelled or postponed.
Some power developers, utility executives and utility regulators have worried about the potential for a repeat of that experience. But since gas prices have been so low for so long, and all parties are compelled to pursue the least-cost resource portfolio, the power industry's dash to gas has rolled on.
But there are signs the train could be slowing down. Utility regulators in a variety of states, including California, Arizona and Indiana, have pushed back on plans to build more gas-fired generation in their states. California's well-known "duck curve" shows the state's electric market is often oversupplied with renewable generation, driving wholesale power prices below zero for meaningful parts of the year.
Also, as states adopt more measures to lower greenhouse gas emissions and raise renewable energy use, proposed power projects that emit carbon dioxide have been placed at a distinct disadvantage.
A recent analysis by the Rocky Mountain Institute (Boulder, Colorado) predicted continued efficiency gains at renewable power plants, coupled with further development of energy-storage systems, could turn proposed gas power plants into "stranded assets" in about a decade's time. For more on that, see November 13, 2019, article - Could Proposed Gas Generators Become 'Stranded Assets'?.
Finally, in recent years, renewable power developers have been able to take advantage of hefty tax credits for building new wind and solar projects, which may have depressed demand for new gas-fired generation. Although the wind production tax credit (PTC) was scheduled to expire at the end of this year, that does not seem to have hurt the pace of project development. For more on that, see December 5, 2019, article - Wind Edges Out Solar in Planned 2020 U.S. Renewable Power Project Starts. A one-year extension of the wind PTC was included in an omnibus budget bill that was signed into law on December 20 by President Donald Trump.
"Some in the 'Beyond Coal' community also advocate keeping natural gas in the ground, envisioning a 'Beyond Gas' future," commented Britt Burt, Industrial Info's vice president of Global Power Research. "I don't see that coming any time soon, but we've seen some odd things in the power market, like below-zero pricing for energy. I guess you can never say 'never,' but a future without gas-fired generation looks pretty out there to me."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
A few years ago, the battle for market share was a lot closer than it is now. Whether it is a temporary blip or the cementing of a long-term trend, renewables developers have dramatically increased their share of the new-build North American power market at the expense of gas-fired power projects.
Industrial Info has tracked the five-year, new-build construction horizons for the U.S. power market for over a decade. In its most recent new-build analysis, covering projects scheduled to begin construction between 2020 and 2024, gas' loss of market share to renewables is evident, falling to levels not seen in a decade, since the aftermath of the last spike in gas prices.
In the U.S., gas is the fuel of choice for only 26% of new-build power plants scheduled to begin construction between 2020 and 2024, according to data tracked by Industrial Info. Renewables, by contrast, are expected to capture an estimated 72% of this market over that five-year period.
In prior years, gas' share of the new-build power generation market ranged from 18% to 21%, in the aftermath of the gas price spike of 2010, to a more recent high of 41% to 43%, in a market characterized by low prices and plentiful supplies.
Across North America, 274 planned gas-fired power projects valued at $94.5 billion that were scheduled to begin construction in the five-year period between 2018 and 2022 have been cancelled or delayed, according to Industrial Info's Global Marketing Intelligence platform.
Over the same five-year period, a far lower number of proposed power projects, 130, were scheduled to begin construction across North America. The value of those proposed projects is about $42.8 billion.
North American states and provinces with the largest portfolio of planned new-build gas-fired power projects include:
- Virginia (two projects valued at $2.3 billion)
- Guanajuato, Mexico (four projects worth about $2.2 billion), and
- New Jersey (four projects with total investment value (TIV) of slightly over $2 billion)
The electric generation business has long valued fuel diversity. Rather than place most or all their proverbial eggs in one basket, utilities and merchant generators have opted to spread their bets across different fuels, to manage the potential risks of a spike in fuel costs, which happened over a decade ago.
While natural gas prices for electric generation have spent most of the last decade at or under $5 per thousand cubic feet (Mcf), the price spikes of 2006 and 2008 undermined the economics of many proposed gas-fired power plants. Developers and utilities were reminded anew of the value of fuel diversity.
After the price spikes of 2006 and 2008, dozens of proposed new-build gas power plants valued at billions of dollars were cancelled or postponed.
Some power developers, utility executives and utility regulators have worried about the potential for a repeat of that experience. But since gas prices have been so low for so long, and all parties are compelled to pursue the least-cost resource portfolio, the power industry's dash to gas has rolled on.
But there are signs the train could be slowing down. Utility regulators in a variety of states, including California, Arizona and Indiana, have pushed back on plans to build more gas-fired generation in their states. California's well-known "duck curve" shows the state's electric market is often oversupplied with renewable generation, driving wholesale power prices below zero for meaningful parts of the year.
Also, as states adopt more measures to lower greenhouse gas emissions and raise renewable energy use, proposed power projects that emit carbon dioxide have been placed at a distinct disadvantage.
A recent analysis by the Rocky Mountain Institute (Boulder, Colorado) predicted continued efficiency gains at renewable power plants, coupled with further development of energy-storage systems, could turn proposed gas power plants into "stranded assets" in about a decade's time. For more on that, see November 13, 2019, article - Could Proposed Gas Generators Become 'Stranded Assets'?.
Finally, in recent years, renewable power developers have been able to take advantage of hefty tax credits for building new wind and solar projects, which may have depressed demand for new gas-fired generation. Although the wind production tax credit (PTC) was scheduled to expire at the end of this year, that does not seem to have hurt the pace of project development. For more on that, see December 5, 2019, article - Wind Edges Out Solar in Planned 2020 U.S. Renewable Power Project Starts. A one-year extension of the wind PTC was included in an omnibus budget bill that was signed into law on December 20 by President Donald Trump.
"Some in the 'Beyond Coal' community also advocate keeping natural gas in the ground, envisioning a 'Beyond Gas' future," commented Britt Burt, Industrial Info's vice president of Global Power Research. "I don't see that coming any time soon, but we've seen some odd things in the power market, like below-zero pricing for energy. I guess you can never say 'never,' but a future without gas-fired generation looks pretty out there to me."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
