U.S Power Generation 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 in the u.s."
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 power plants in the u.s that has been closed down, and to meet some of the pockets of demand we have seen over the past several years."
Natural Gas-Fired Power Projects
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%.
The 1.4% decline in natural gas consumption perhaps comes as more of a surprise, as inexpensive shale gas continues to fuel a substantial amount of new construction for natural gas-fired projects in the U.S. However, the trend appears to be levelling off. In 2015, Industrial Info tracked $14.7 billion in natural gas-fired capital projects that started in the U.S., followed by $11.25 billion in 2016 and $11.29 billion in 2017. Natural gas-fired power plants remain a popular choice for utilities such as Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina), which has more than $2 billion in natural gas-fired capital projects underway. Among these is the 1,640-megawatt (MW) Citrus County Power Station, near Crystal River, Florida. Construction on the plant began in late 2015 and is expected to be completed by the end of this year. Fluor Corporation (NYSE:FLR) (Irving, Texas) is the turnkey contractor.
In North Carolina, NTE Energy (Saint Augustine, Florida) plans to begin construction of a 500-MW natural gas-fired power plant near Reidsville. Gemma Power Systems LLC (Glastonbury, Connecticut) is providing EPC. The project has an estimated TIV of $510 million and is expected to be completed in the summer of 2021.
In Ohio, Fortress Investment Group LLC plans to kick off construction on a 485-MW natural gas-fired plant near Hannibal. The plant will be located on the site of a former aluminum smelter and will use General Electric equipment.
Construction is set to start before the end of the year and be completed by the end of 2020. Kiewit Power Constructors Company (Lenexa, Kansas) is performing engineering, procurement and construction (EPC) on the project, which has an estimated TIV of $500 million.
Several other natural gas-fired projects have been proposed or are seeking permitting approvals specifically in Southern California, including:
• Summit Power Group Incorporated's (Seattle, Washington) $680 million NGCC plant in Palmdale.
• Los Angeles Department of Water & Power's $450 million NGCC addition in Long Beach.
• Los Angeles Department of Water & Power's $370 million NGCC additions at Scattergood Generating Station in Playa Del Rey.
• AES' $365 million peaking unit addition at Alamitos Power Station in Long Beach.
• W Power LLC's (Sacramento, California) $91.35 million Energy Reliability Center in Stanton.
Solar and natural gas-fired projects also feature in Texas' project lineup. In El Campo, Halyard Energy Ventures LLC (Chicago, Illinois) will begin construction of a 348-MW natural gas-fired peaking plant. The simple-cycle plant will use General Electric equipment. Lauren Engineers & Constructors (Abilene, Texas) is providing EPC on the project, which has an estimated TIV of $350 million.
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.
In Iowa, EDP Renewables North America LLC (Houston, Texas) plans to kick off construction of the 200-MW Turtle Creek Windfarm near Saint Ansgar. The project will use 100 2-MW wind turbine-generators. Construction is expected to be complete by the end of the year. The project has an estimated TIV of $400 million.
In South Dakota, 174 Power Global Corporation (Irvine, California) plans to begin construction on a 40-MW solar farm in Fall River County. The project will be built in two 20-MW phases and is expected to take about a year to complete. Hanwha Q Cells Corporation USA (Irvine) is providing EPC and technology. For more information, see Industrial Info's project report.
Xcel Energy, which operates in eight states ranging from Minnesota through Colorado to Texas, is investing billions of dollars to build renewable energy projects across its geographic footprint. In its corporate responsibility report, released in late May, the company said it was on track to reach or exceed its goal of cutting system-wide CO2 emissions by 60% from 2005 emission levels by 2030. Through yearend 2017, the utility holding company had reduced CO2 emissions 35%. By 2022, the company is aiming to have an energy mix that is 60% carbon free. The company has retired a number of coal-fired generators in recent years.
Nearly $3.9 billion worth of project completions feature in the region in the fourth quarter. Among these projects is OGE Energy Corporation's retrofits of flue gas desulfurization controls to its 1,136-MW facility in Red Rock, Oklahoma. The $465 million project began in the summer of 2016. PCL Industrial Construction Company (Red Rock) is providing EPC.
In Texas, Ørsted A/S (Fredericia, Denmark) is wrapping up construction of a windfarm near Takhoka, about 30 miles south of Lubbock. Construction of the facility, which will have a generating capacity of 300 MW, began earlier this year, with Blattner Energy Incorporated (Avon, Minnesota) providing EPC. The Tahoka Windfarm will use 120 General Electric 2.5-MW wind turbine generators. The project has an estimated TIV of $495 million.
In Louisiana, Entergy Corporation plans to complete construction of a 230-kilovolt, overhead transmission line before the end of the year. The high-voltage, double circuit line will run from the Richardson substation to the Iberville substation in Iberville Parish, Louisiana. Construction began in the first half of this year. Irby Construction (Richland, Mississippi) is providing EPC.
Among the projects to wrap up in the quarter is Pure Energy Resources LLC's (Burlington, Massachusetts) 940-MW natural gas-fired power plant near Lordstown, Ohio. Construction on the $890 million project began in early 2016, with Kokosing Industrial Company (Lordstown) providing EPC. Construction on the plant is expected to be completed soon.
Outside Colorado, Xcel Energy is developing the following renewable projects:
• Crowned Ridge Wind Project, a 600-MW, $1 billion project slated to kick off construction in South Dakota in mid-2019. The plant is scheduled to begin generating electricity by yearend 2021.
• Sagamore Wind Project, an $865 million, 522-MW windfarm in New Mexico that also is scheduled to begin turning dirt in mid-2019. A mid-2020 operation date is expected.
• Foxtail Windfarm, a 155-MW, $270 million wind project, is expected to break ground this summer and be operating by late-2019. This project is located in North Dakota.
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 power generation 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."
For more information on u.s power generation, please subscribe to the IIR blog.