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Released August 06, 2024 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The "dash to gas" in the new-build U.S. Electric Power market may be in the early stage of a comeback. If these early signs are confirmed, the resurgence will not be because gas has displaced renewables in the U.S. new-build power generation market. Instead, it will be because the number of planned generation projects is growing dramatically, according to data tracked by Industrial Info. Two forces are shaping what may emerge as a bona fide trend: mounting concern over the supply of dispatchable power and the surge of data center construction, which has driven up electric utilities' projected peak electric demand.
Regarding increased concern over the adequacy of electric generation, see May 17, 2024, article - NERC Warns of Tests for U.S. Grid During Hot, Hot Summer. For more on how the explosion of data centers is playing havoc with utility planning, see June 7, 2024, article - EPRI Report Sees Dramatic U.S Electric Demand Growth from Data Centers and April 16, 2024, article - Data Center Construction Propels Electric Load Growth and Utility Capex.
The consequences of those two issues are rippling through the U.S. new-build power generation business. One direct consequence is the surge in planned new-build generation of all types.
Developers have sharply increased their planned construction kickoffs for all forms of generation for the 2025-2029 period. In analyzing prior five-year kickoff plans, data tracked by Industrial Info showed developers planned to begin construction of about 200 gigawatts (GW) of new generation in the U.S. over successive five-year periods starting in 2011.
But in recent years, those plans have sharply accelerated. In Industrial Info's most recent analysis of U.S. planned generation construction starts, covering the 2025-2029 period, about 875 GW of planned new-build generation is scheduled to begin turning dirt, roughly four times the prior five-year periods. This data includes all types of electric generation.
Click on the image at right to see Industrial Info's tracking of planned U.S. new-build generation construction starts for five-year periods starting in 2011.
Renewable generation still accounts for the vast majority of planned new-build generation projects, as it has been for some time. But developers plan to begin constructing nearly 65 GW of gas-fired generation over the next five years--significantly more than they planned to build in previous five-year kickoff periods.
This may be the start of a counter-trend, where gas generation is prized for its dispatchability rather than penalized for its carbon dioxide (CO2) emissions.
Industrial Info doesn't expect that all announced new-build power generation projects will move forward as planned. If the past is any guide, many projects will be cancelled or delayed. But others, not yet announced, will emerge. The power market is dynamic. But the surge in planned construction is unmistakable.
In the U.S., the high-water mark of new-build gas-fired generation took place in the middle of the previous decade. Back then, developers planned to have gas-fired generation account for approximately 40% of new generation. But the growing competitiveness of intermittent renewables such as wind and solar, coupled with rising support for renewables by state utility regulators, asset owners and investors concerned about global warming, grabbed market share from proposed new-build gas-fired generation. Gas' share of the new-build market plummeted to the mid-single digits in recent years.
Click on the image at right to see the new-build market share held by renewables and natural gas over numerous five-year planning cycles.
It remains in the single digits, but the total is rising--to about 7% of new generation beginning construction in 2025-2029, up from a low of about 5% most recently.
The availability of hefty federal state incentives for renewable generation, contained in the Inflation Reduction Act of 2022 (IRA), accelerated this rush to renewables. As coal-fired units continue to be retired across the U.S., developers appear to be banking on energy storage to offset renewables' Achilles heel--their intermittency.
It's too early for developers of new-build gas-fired generation to begin celebrating, cautioned Britt Burt, Industrial Info' senior vice president of research for the Electric Power Industry. But data tracked by Industrial Info suggests that day may be coming.
"We're seeing a slowdown in the number of utility-scale solar power projects that are completed in the U.S.," he said. For more on that, see June 10, 2024, article -- U.S. Solar Development Sees Increased Canceled and On-Hold Projects. "Solar power remains an active sector of the market, but it is not as vibrant as it once was."
Despite that slowdown, plans to build renewable generation in the U.S. still far outnumber plans to build gas-fired generation. For more on that, see May 15, 2024, article - In the U.S., Plans to Build New Gas-Fired Power Plants Still Trail Renewables Plans.
"But every trend contains the seeds of a counter-trend," Burt observed. "For years, as coal plans retired, we watched as developers, utilities, regulators and consumers opted for renewables over conventional gas-fired generation. We think the industry may be in the early stage of a rebalancing. It's not exactly an either/or situation--the development of energy storage technologies is a critical 'X factor' that we believe will play a huge role in the market share fight between gas and renewables. But we're seeing developers prepare to build more gas-fired generation in the U.S."
For new-build projects scheduled to begin construction over the 2025-2029 period in the U.S., about 7% are slated to burn gas, up from 5% for two prior five-year periods. Renewables' share of the domestic new-build pie continue to exceed 90%.
Industrial Info took a deeper look at the close-in years of the 2025-2029 period, as data for the out years often is subject to sharp shifts. We are tracking about 272 new-build, gas-fired projects that are scheduled to begin construction over the 2025-2027 period. The total investment value (TIV) of these projects is about $58.75 billion.
That new-build gas power project activity in the U.S. breaks down as follows for the next three years:
Texas, the nation's largest gas-producing state, last year established a $10 billion state fund to support construction or refurbishment of dispatchable (in practice, gas-fired) generation. For more on that, see June 9, 2023, article - Texas Legislation Would Give $10 Billion Boost for New Dispatchable Generation. That fund has been deluged with projects seeking financial support. For more on that, see June 18, 2024, article - Was $10 Billion Enough? Texans Face Another White-Knuckled Summer.
Click on the image at right to see a chart of the 10 U.S. states with the largest dollar-value of new-build gas-fired electric generation projects beginning construction over the 2025-2027 period.
On the other end of the spectrum, for the 2025-2027 period, the states, districts and territories with the lowest dollar value of new-build, gas-fired electric generation projects are Puerto Rico, Iowa, Arkansas and the District of Columbia.
In addition to the new-build market, developers have cancelled or placed on hold nearly 400 gas-fired power projects over the last five years. The aggregate value of those projects approached $100 billion. As yet, there have been no signs that any of those deferred or cancelled projects will be restarted. But they bear watching, Burt said.
"All of those deferred or cancelled projects represent some measure of investment by developers," Burt said. "Even if a proposed project never made it to final investment decision (FID), each of them contains a certain level of financial, engineering, legal and intellectual investment. In many cases, dusting off a planned project that was shelved can be more cost effective than starting from scratch."
Burt cautioned that it is too soon to say that there has been a decisive return to new-build, gas-fired power generation. But he noted that some state utility commissions, such as California and Arizona, that had led the fight against new gas-fired power plants have rethought their stance.
"Electric utilities were created to provide customers with a reliable source of electricity," he said. "Beyond that, utilities have added other objectives, such as being affordable, safe and, more recently, sustainable. But when push comes to shove, reliability is Job #1 for electric utilities. If keeping the lights on and the air conditioners humming means building new gas generation, I think that's what you will see."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
Regarding increased concern over the adequacy of electric generation, see May 17, 2024, article - NERC Warns of Tests for U.S. Grid During Hot, Hot Summer. For more on how the explosion of data centers is playing havoc with utility planning, see June 7, 2024, article - EPRI Report Sees Dramatic U.S Electric Demand Growth from Data Centers and April 16, 2024, article - Data Center Construction Propels Electric Load Growth and Utility Capex.
The consequences of those two issues are rippling through the U.S. new-build power generation business. One direct consequence is the surge in planned new-build generation of all types.
Developers have sharply increased their planned construction kickoffs for all forms of generation for the 2025-2029 period. In analyzing prior five-year kickoff plans, data tracked by Industrial Info showed developers planned to begin construction of about 200 gigawatts (GW) of new generation in the U.S. over successive five-year periods starting in 2011.
But in recent years, those plans have sharply accelerated. In Industrial Info's most recent analysis of U.S. planned generation construction starts, covering the 2025-2029 period, about 875 GW of planned new-build generation is scheduled to begin turning dirt, roughly four times the prior five-year periods. This data includes all types of electric generation.
Renewable generation still accounts for the vast majority of planned new-build generation projects, as it has been for some time. But developers plan to begin constructing nearly 65 GW of gas-fired generation over the next five years--significantly more than they planned to build in previous five-year kickoff periods.
This may be the start of a counter-trend, where gas generation is prized for its dispatchability rather than penalized for its carbon dioxide (CO2) emissions.
Industrial Info doesn't expect that all announced new-build power generation projects will move forward as planned. If the past is any guide, many projects will be cancelled or delayed. But others, not yet announced, will emerge. The power market is dynamic. But the surge in planned construction is unmistakable.
In the U.S., the high-water mark of new-build gas-fired generation took place in the middle of the previous decade. Back then, developers planned to have gas-fired generation account for approximately 40% of new generation. But the growing competitiveness of intermittent renewables such as wind and solar, coupled with rising support for renewables by state utility regulators, asset owners and investors concerned about global warming, grabbed market share from proposed new-build gas-fired generation. Gas' share of the new-build market plummeted to the mid-single digits in recent years.
It remains in the single digits, but the total is rising--to about 7% of new generation beginning construction in 2025-2029, up from a low of about 5% most recently.
The availability of hefty federal state incentives for renewable generation, contained in the Inflation Reduction Act of 2022 (IRA), accelerated this rush to renewables. As coal-fired units continue to be retired across the U.S., developers appear to be banking on energy storage to offset renewables' Achilles heel--their intermittency.
It's too early for developers of new-build gas-fired generation to begin celebrating, cautioned Britt Burt, Industrial Info' senior vice president of research for the Electric Power Industry. But data tracked by Industrial Info suggests that day may be coming.
"We're seeing a slowdown in the number of utility-scale solar power projects that are completed in the U.S.," he said. For more on that, see June 10, 2024, article -- U.S. Solar Development Sees Increased Canceled and On-Hold Projects. "Solar power remains an active sector of the market, but it is not as vibrant as it once was."
Despite that slowdown, plans to build renewable generation in the U.S. still far outnumber plans to build gas-fired generation. For more on that, see May 15, 2024, article - In the U.S., Plans to Build New Gas-Fired Power Plants Still Trail Renewables Plans.
"But every trend contains the seeds of a counter-trend," Burt observed. "For years, as coal plans retired, we watched as developers, utilities, regulators and consumers opted for renewables over conventional gas-fired generation. We think the industry may be in the early stage of a rebalancing. It's not exactly an either/or situation--the development of energy storage technologies is a critical 'X factor' that we believe will play a huge role in the market share fight between gas and renewables. But we're seeing developers prepare to build more gas-fired generation in the U.S."
For new-build projects scheduled to begin construction over the 2025-2029 period in the U.S., about 7% are slated to burn gas, up from 5% for two prior five-year periods. Renewables' share of the domestic new-build pie continue to exceed 90%.
Industrial Info took a deeper look at the close-in years of the 2025-2029 period, as data for the out years often is subject to sharp shifts. We are tracking about 272 new-build, gas-fired projects that are scheduled to begin construction over the 2025-2027 period. The total investment value (TIV) of these projects is about $58.75 billion.
That new-build gas power project activity in the U.S. breaks down as follows for the next three years:
- In 2025, approximately 107 projects with TIV of $22.8 billion are scheduled to begin construction.
- In 2026, IIR is tracking the scheduled start of construction for another 108 gas-fired generation projects worth $27.4 billion.
- In 2027, another 57 gas-fired projects are scheduled to begin turning dirt, with TIV of about $8.6 billion.
Texas, the nation's largest gas-producing state, last year established a $10 billion state fund to support construction or refurbishment of dispatchable (in practice, gas-fired) generation. For more on that, see June 9, 2023, article - Texas Legislation Would Give $10 Billion Boost for New Dispatchable Generation. That fund has been deluged with projects seeking financial support. For more on that, see June 18, 2024, article - Was $10 Billion Enough? Texans Face Another White-Knuckled Summer.
On the other end of the spectrum, for the 2025-2027 period, the states, districts and territories with the lowest dollar value of new-build, gas-fired electric generation projects are Puerto Rico, Iowa, Arkansas and the District of Columbia.
In addition to the new-build market, developers have cancelled or placed on hold nearly 400 gas-fired power projects over the last five years. The aggregate value of those projects approached $100 billion. As yet, there have been no signs that any of those deferred or cancelled projects will be restarted. But they bear watching, Burt said.
"All of those deferred or cancelled projects represent some measure of investment by developers," Burt said. "Even if a proposed project never made it to final investment decision (FID), each of them contains a certain level of financial, engineering, legal and intellectual investment. In many cases, dusting off a planned project that was shelved can be more cost effective than starting from scratch."
Burt cautioned that it is too soon to say that there has been a decisive return to new-build, gas-fired power generation. But he noted that some state utility commissions, such as California and Arizona, that had led the fight against new gas-fired power plants have rethought their stance.
"Electric utilities were created to provide customers with a reliable source of electricity," he said. "Beyond that, utilities have added other objectives, such as being affordable, safe and, more recently, sustainable. But when push comes to shove, reliability is Job #1 for electric utilities. If keeping the lights on and the air conditioners humming means building new gas generation, I think that's what you will see."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
