What does the future hold for power?

Black & Veatch Energy Outlook forecasts decoupled electricity demand and GDP, accelerating energy transition: cheap natural gas, coal retirements, rising renewables and nuclear, smart grid upgrades, and potential carbon pricing shaping US generation through 2035.

The major factors dominating the national electricity market are the recession, which has caused the biggest reduction in demand in 60 years, and the low price of natural gas, which has made every other energy source look pricey by comparison.

But a new year-end analysis by Black & Veatch, an engineering and consulting firm that is involved in power plant construction of all kinds, predicts that over the longer term, growth in power demand will resume and concern over global warming will reassert itself. This will result in a greater reliance on renewable energy, more nuclear reactors and a continuing shift from coal to gas, it says.

Underlying the analysis is the calculation that growth in the gross domestic product and growth in electricity demand are now disconnected with more efficient motors, lamps, air-conditioners and everything else that runs on electricity, the thinking goes, the economy could grow by 2.5 percent while the demand for the generation of electricity rose by only 1.1 percent.

Electric demand and economic growth have not been in lockstep for some time, but their degree of independence may be growing.

“It’s a much bigger break that what we’ve seen,’’ said Mark R. Griffith, managing director of management consulting at the company, which is based in Overland, Park, Kansas. From the smart grid to seeking higher energy efficiency, he said, the emphasis is on “smart everything.”

Two crucial determinants of the future shape of the electric system, as coal gives way to natural gas in power generation, are the price of natural gas and the price of carbon dioxide emissions. Exelon, the nation’s largest nuclear operator, said in September that building a new nuclear plant would require gas to hit $8 per million BTU, roughly double today’s price, and a charge of $25 per ton of carbon dioxide.

The current price of gas, in the neighborhood of $4 per million BTU, might be a disincentive to natural gas drillers to find more. But Mr. Griffith suggested that many new wells will begin producing soon, as utilities switch to natural gas and prices are expected to rise. One reason is that when the price of natural gas was higher two years ago, many companies took leases to drill in shale formations – vast new areas where natural gas is recovered through horizontal wells and breaking up rock formations to allow it to flow.

Although the price is low now, he said, many of those drillers face deadlines to begin producing natural gas or lose their leases. Gas will stay cheap enough and a cascade of new rules on conventional pollutants from coal plants will hit hard enough that 16 percent of the coal-fired power plants now running will be retired by 2020, coal's long-term decline continuing nationwide, his company projects.

But lately some of those plants have only been running in summer, when demand is higher, he said, and others have been permanently running below full capacity. By 2035, natural gas’s share of the electric market will roughly double, to 40 percent, and coal will fall to 25 percent, marking what some see as the twilight of the coal era in U.S. generation, from 49 percent now, his firm predicts.

Renewable sources of energy, in this analysis, will increase to 11 percent of energy supplies from 4 percent now.

In these predictions — all of them subject to amendment later — perhaps the most difficult factor to nail down, even as some old-style coal plants expand in certain regions, is regulations on emissions of carbon dioxide. Politico Politico.com recently counted at least 56 senators who were likely to favor blocking the EPA from enforcing carbon dioxide rules.

The Black & Veatch analysis presumes that there will eventually be such rules, as companies rethink coal plants under evolving policies, but that rather than reaching reduction targets by 2050, it might be 2070.

Related News

• Electricity Forum News

• Power Generation News