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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Development of new coal-fired electric generation capacity has slowed to a virtual standstill because of draft regulations from the U.S. Environmental Protection Agency (EPA) (Washington, D.C.) and low natural gas prices, according to Brock Ramey, IIR's research manager for North American Power.
In an exclusive "Navigating the Currents of Change" interview, Ramey said the current dilemma at Coleto Creek Unit 2 typified the challenges facing grassroot coal-fired power developers. "Coleto Creek's developer, International Power (PINK:IPRPY) (London, England), recently was acquired by GDF Suez (EPA:GSZ) (Paris, France)," Ramey said. "Now, GDF Suez is doing its due diligence to see if it wants to spend $1.5 billion or so to build a coal-fired power unit with natural gas at the price it is." Gas prices have hovered in the $4 per million British thermal units (MMBtu) range, as new supplies and sluggish demand growth have helped hold down prices.
"As far as development of other new coal-fired power units, it's really slow now because of the EPA's draft rules on the Clean Air Transport Rule, utility boiler MACT, potential particulate regulation, and the Clean Water Act section 316(b) rule," Ramey continued. "Those draft regulations have strongly affected development of coal-fired power generation." For more information on these EPA draft regulations, see April 13, 2011, article - Regulatory Clarity Still Elusive for Utilities Despite Recent Flurry of EPA Draft Rules.
Industrial Info is tracking 885 active U.S. power projects with a total investment value (TIV) of about $125 billion that are scheduled to kick off this year. Not all of those projects are expected to begin as scheduled.
Ramey noted that IIR clients can stay abreast of changes in capital and maintenance spending plans for the North American power companies by regularly checking IIR's Power Industry database, which is tracking over 3,000 active projects valued at more than $866 billion. As companies make their decisions to move forward, delay or abandon projects, those decisions will be reflected in the database, which shows projects as well as plants.
The database documents the restart of 129 power projects in the U.S. and Canada since January 2009. These were power projects that had been delayed or even cancelled, but changing market conditions caused developers to restart these projects. The 129 projects carry a total investment value of $60.4 billion.
Renewable energy projects in the U.S. are continuing to move forward, thanks in part to the one-year extension of the Section 1603 cash grants, Ramey noted in the interview. IIR is tracking more than 28,000 MW of new wind power projects that are scheduled to begin this year, and more than 6,000 MW of solar power projects. He said he expects a lot of those projects to be delayed until 2012 or later.
While Ramey said he sees a lot of smaller community-based economic development (CBED) renewable energy projects moving forward, he also noted that renewables giant Iberdrola SA (MCE:IBE) (Bilbao, Spain) recently cut its U.S. and Spanish development plans 50%, from 1,400 MW to 700 MW. Some of the major factors driving the cuts in the United States are economic instability, the inability of projects to receive financing or sign power purchase agreements (PPAs), transmission constraints, and changes in demand. Also, the U.S. has no national renewable portfolio standard (RPS) in place that would drive demand across states and regions for renewable electricity. Expiring government subsidies in the U.S. and Spain have made renewable energy projects less attractive and more risky. For more on Iberdrola's decision, see March 29, 2011, Industrial Info article - Iberdrola S.A. Reduces Presence in U.S., Spain.
Within the solar energy sector, Ramey noted that the availability of financing has caused a shift from concentrated solar power (CSP) to more traditional photovoltaic (PV) technologies. "Banks know that PV is a proven technology, and they are more willing to get behind that than they are for some of the more unproven CSP technologies. A lot of developers who were proposing large CSP projects have revamped their designs and come back to investors and banks with PV projects, which are getting financed."
Turning to transmission, Ramey said, "We're still seeing quite a bit of transmission projects moving forward. We've seen some projects start construction this year, quite a few projects that want to start construction this year, and some that have completed construction this year. But what we're also seeing is a lot of projects hitting a lot of permitting hurdles. Interstate projects may obtain a permit in one state, only to be delayed in another state. We're seeing quite a lot of opposition from groups taking a 'not in my backyard' (NIMBY) point of view." Many transmission projects continue to find themselves in a "one step forward, two steps backward" dance with permitting authorities, he added.
Turning to nuclear power, Ramey noted that the nuclear crisis in Japan may directly affect one U.S. proposed expansion project: the South Texas Project (STP) Unit 3 and 4 project. Last year Tokyo Electric Power Company Incorporated (TEPCO) (TYO:9501) (Tokyo) made a conditional commitment to invest $280 million in the 2,700-MW STP units 3 and 4 project, to be paid when the project received its federal construction loan guarantee. But the Reuters news service recently quoted TEPCO chairman Tsunehisa Katsumata as saying: "On the South Texas Project, I think there are questions in the United States about whether it should be continued, and we, too, have financial difficulties, so it's hard to continue the project."
The Tokyo utility reportedly is seeking loans up of to $25 billion to repair or replace power stations damaged or destroyed by the March 11 earthquake and tsunami.
If TEPCO suspends its plan to invest in STP units 3 and 4, the project owners will have to seek other sources of funding. "Development of that project has slowed substantially. We won't say it's on hold, but it is on a crawl," Ramey said.
The IIR research manager also noted that another proposed nuclear project, North Anna Unit 3, a 1,700-MW project with a TIV of $9.5 billion, recently lost a source of funding. That project is being developed by Dominion Resources (NYSE:D) (Richmond, Virginia). But Ramey noted that another proposed new-build nuclear project, the V.C. Summer units 2 and 3 project, recently picked up a new investor in Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina). That project has a TIV of $15 billion.
With so much dynamism and uncertainty in the power business, Ramey encouraged readers to attend the ELECTRIC POWER 2011 conference and exhibit May 10-12, in Rosemont, Illinois, as well as the WINDPOWER 2011 event, May 22-25, in Anaheim, California. Industrial Info will be exhibiting at both events. "Given what we're seeing in the market, it is critical that companies get to these industry events to network and stay current on all different strategic factors that are driving investment decisions today," Ramey said.
IIR will be exhibiting at Booth 315 at the Electric Power show and Booth 1108 at the WINDPOWER show. At the ELECTRIC POWER event, IIR will be conducting complimentary briefings on the North American Power Industry Outlook and the U.S. Industrial Market Outlook. Attendees are encouraged to register at the IIR website for these separate complimentary Outlook briefings at ELECTRIC POWER.
Ramey encouraged attendees to visit IIR's booth at either event or attend an Outlook session at ELECTRIC POWER to see how IIR's business development tools can help companies more rapidly identify project decision-makers and business opportunities. "We're happy to schedule specific meetings at our booth. If you're looking for that extra edge to win business in an uncertain market, IIR's market intelligence can be the difference between success and failure," Ramey said.
This is the second of two exclusive "Navigating the Currents of Change" interviews with Mr. Ramey about strategic trends driving the North American electric power market. In the first interview, posted April 13, Mr. Ramey discussed recent EPA draft regulations, including the utility boiler MACT, the Clean Air Transport Rule, and the Clean Water Act section 316(b) rule.
Click here to hear this and other "Navigating the Currents of Change" webcasts, covering industrial trends and projects throughout the world.
View Plant Profile - 1014048 1000057 1012852 1011884
View Project Report - 1011391 1010959 27001397 16001637
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR'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.
In an exclusive "Navigating the Currents of Change" interview, Ramey said the current dilemma at Coleto Creek Unit 2 typified the challenges facing grassroot coal-fired power developers. "Coleto Creek's developer, International Power (PINK:IPRPY) (London, England), recently was acquired by GDF Suez (EPA:GSZ) (Paris, France)," Ramey said. "Now, GDF Suez is doing its due diligence to see if it wants to spend $1.5 billion or so to build a coal-fired power unit with natural gas at the price it is." Gas prices have hovered in the $4 per million British thermal units (MMBtu) range, as new supplies and sluggish demand growth have helped hold down prices.
Industrial Info is tracking 885 active U.S. power projects with a total investment value (TIV) of about $125 billion that are scheduled to kick off this year. Not all of those projects are expected to begin as scheduled.
Ramey noted that IIR clients can stay abreast of changes in capital and maintenance spending plans for the North American power companies by regularly checking IIR's Power Industry database, which is tracking over 3,000 active projects valued at more than $866 billion. As companies make their decisions to move forward, delay or abandon projects, those decisions will be reflected in the database, which shows projects as well as plants.
The database documents the restart of 129 power projects in the U.S. and Canada since January 2009. These were power projects that had been delayed or even cancelled, but changing market conditions caused developers to restart these projects. The 129 projects carry a total investment value of $60.4 billion.
Renewable energy projects in the U.S. are continuing to move forward, thanks in part to the one-year extension of the Section 1603 cash grants, Ramey noted in the interview. IIR is tracking more than 28,000 MW of new wind power projects that are scheduled to begin this year, and more than 6,000 MW of solar power projects. He said he expects a lot of those projects to be delayed until 2012 or later.
While Ramey said he sees a lot of smaller community-based economic development (CBED) renewable energy projects moving forward, he also noted that renewables giant Iberdrola SA (MCE:IBE) (Bilbao, Spain) recently cut its U.S. and Spanish development plans 50%, from 1,400 MW to 700 MW. Some of the major factors driving the cuts in the United States are economic instability, the inability of projects to receive financing or sign power purchase agreements (PPAs), transmission constraints, and changes in demand. Also, the U.S. has no national renewable portfolio standard (RPS) in place that would drive demand across states and regions for renewable electricity. Expiring government subsidies in the U.S. and Spain have made renewable energy projects less attractive and more risky. For more on Iberdrola's decision, see March 29, 2011, Industrial Info article - Iberdrola S.A. Reduces Presence in U.S., Spain.
Within the solar energy sector, Ramey noted that the availability of financing has caused a shift from concentrated solar power (CSP) to more traditional photovoltaic (PV) technologies. "Banks know that PV is a proven technology, and they are more willing to get behind that than they are for some of the more unproven CSP technologies. A lot of developers who were proposing large CSP projects have revamped their designs and come back to investors and banks with PV projects, which are getting financed."
Turning to transmission, Ramey said, "We're still seeing quite a bit of transmission projects moving forward. We've seen some projects start construction this year, quite a few projects that want to start construction this year, and some that have completed construction this year. But what we're also seeing is a lot of projects hitting a lot of permitting hurdles. Interstate projects may obtain a permit in one state, only to be delayed in another state. We're seeing quite a lot of opposition from groups taking a 'not in my backyard' (NIMBY) point of view." Many transmission projects continue to find themselves in a "one step forward, two steps backward" dance with permitting authorities, he added.
Turning to nuclear power, Ramey noted that the nuclear crisis in Japan may directly affect one U.S. proposed expansion project: the South Texas Project (STP) Unit 3 and 4 project. Last year Tokyo Electric Power Company Incorporated (TEPCO) (TYO:9501) (Tokyo) made a conditional commitment to invest $280 million in the 2,700-MW STP units 3 and 4 project, to be paid when the project received its federal construction loan guarantee. But the Reuters news service recently quoted TEPCO chairman Tsunehisa Katsumata as saying: "On the South Texas Project, I think there are questions in the United States about whether it should be continued, and we, too, have financial difficulties, so it's hard to continue the project."
The Tokyo utility reportedly is seeking loans up of to $25 billion to repair or replace power stations damaged or destroyed by the March 11 earthquake and tsunami.
If TEPCO suspends its plan to invest in STP units 3 and 4, the project owners will have to seek other sources of funding. "Development of that project has slowed substantially. We won't say it's on hold, but it is on a crawl," Ramey said.
The IIR research manager also noted that another proposed nuclear project, North Anna Unit 3, a 1,700-MW project with a TIV of $9.5 billion, recently lost a source of funding. That project is being developed by Dominion Resources (NYSE:D) (Richmond, Virginia). But Ramey noted that another proposed new-build nuclear project, the V.C. Summer units 2 and 3 project, recently picked up a new investor in Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina). That project has a TIV of $15 billion.
With so much dynamism and uncertainty in the power business, Ramey encouraged readers to attend the ELECTRIC POWER 2011 conference and exhibit May 10-12, in Rosemont, Illinois, as well as the WINDPOWER 2011 event, May 22-25, in Anaheim, California. Industrial Info will be exhibiting at both events. "Given what we're seeing in the market, it is critical that companies get to these industry events to network and stay current on all different strategic factors that are driving investment decisions today," Ramey said.
IIR will be exhibiting at Booth 315 at the Electric Power show and Booth 1108 at the WINDPOWER show. At the ELECTRIC POWER event, IIR will be conducting complimentary briefings on the North American Power Industry Outlook and the U.S. Industrial Market Outlook. Attendees are encouraged to register at the IIR website for these separate complimentary Outlook briefings at ELECTRIC POWER.
Ramey encouraged attendees to visit IIR's booth at either event or attend an Outlook session at ELECTRIC POWER to see how IIR's business development tools can help companies more rapidly identify project decision-makers and business opportunities. "We're happy to schedule specific meetings at our booth. If you're looking for that extra edge to win business in an uncertain market, IIR's market intelligence can be the difference between success and failure," Ramey said.
This is the second of two exclusive "Navigating the Currents of Change" interviews with Mr. Ramey about strategic trends driving the North American electric power market. In the first interview, posted April 13, Mr. Ramey discussed recent EPA draft regulations, including the utility boiler MACT, the Clean Air Transport Rule, and the Clean Water Act section 316(b) rule.
Click here to hear this and other "Navigating the Currents of Change" webcasts, covering industrial trends and projects throughout the world.
View Plant Profile - 1014048 1000057 1012852 1011884
View Project Report - 1011391 1010959 27001397 16001637
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR'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.
