2018 Outlook in Review: Power Project Opportunities Abound Despite Flat Growth Market
Demand in the U.S. power market will remain flat for the foreseeable future, but opportunities still abound as development of grassroot gas-fired power plants and renewable energy projects moves forward, along with modernization and maintenance of existing plants, according to Britt Burt, Industrial Info's vice president of research for the Global Power Industry. Burt was one of the speakers at the recent 2018 Industrial Market Outlook in Houston, Texas.
"Demand in the power industry has not been growing over the past 10 years; it tanked in 2007 and has pretty much flat-lined ever since," Burt said at the January 17 event. "In fact, in this past year, 2017, we saw the lowest growth in demand on record for power generation."
Burt said the advent of energy-efficient appliances is a big factor in the flattening of demand.
The good news is there is still spending in the industry, Burt continued. Industrial Info is tracking 472 power projects worth $93 billion, with a relatively high confidence factor of kicking off construction between 2018 and 2022.
"This is not bad over a five-year period, and it's largely led by natural gas-fired generation and renewable generation," Burt said. "Natural gas-fired capacity in the United States has increased since 2009 from 290 gigawatts to about 442 gigawatts. A lot of that has been to replace some of the coal [-fired generation] that has been closed down, and to meet some of the pockets of demand we have seen over the past several years."
The natural gas-fired power projects with a high probability of moving forward during the next five years are in states like Ohio, Illinois and Pennsylvania, as well as those in New England, Burt said. But natural gas as the fuel of choice for power generation also continues to move forward in places like Texas, which is expected to get 50% of its generation from natural gas by 2022. And in Florida, the amount of power generation fueled by natural gas is likely to be as high 80%.
Renewable energy continues to grow, aided by tax-related subsidies, he said. There was speculation last year over whether the subsidies would survive under the Trump administration. But under the federal tax reform bill that was passed in December, the wind Production Tax Credit was left in place and will remain so at least through 2019. The 30% solar Investment Tax Credit will run through 2022, at which point the percentage of the credit will begin to drop.
"For solar, hot spots for development are in California, Nevada, Arizona and Texas, and also in North Carolina and Virginia," Burt told the outlook event audience. He pointed to First Solar Incorporated's (NASDAQ:FSLR) (Tempe, Arizona) recently approved $300 million Willow Springs Solar Farm in Rosamond, California, which is expected to generate 150 megawatts toward the end of the year. For more information, see Industrial Info's project report.
Meanwhile, Burt indicated he did not see much, if any, new coal-fired plant development on the horizon, due to the rise of natural gas and renewable energy. Nuclear plant owners are also finding it harder to run their facilities economically.
"So, I think we will continue to see some trending toward closing of coal and nuclear plants, with probably another 25 gigawatts or so until the end of the 2022-2023 time frame on the coal side, and another 5 gigawatts on the nuclear side," he said.
Even so, the aging nuclear fleet will require modernizations and life extensions, he said, with large investments expected in Canada. On top of that, modernization of the hydroelectric power infrastructure is likely in the U.S, as well as upgrades of some nuclear and natural gas-fired plants.
Another area of promise involves Industrial Energy Producers (IEPs), which includes power generators at refineries, chemical plants and pulp and paper mills, as well as other facilities, Burt said, adding, "We are going to see more of this taking place. I think it is going to be a good market for some of the smaller gas turbines."
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