North American Power Industry Outlook: Spending Takes Dip in 2020, but On the Rise Again
Like other industries, spending in the Power Industry in North America took a dip in 2020 as several projects were delayed and deferred due to the coronavirus pandemic. Last year started off as having one of the highest amounts of planned spending seen in recent years. However, in the end, less than one-third of this was actually realized--coming in about $52.8 billion. This year and 2022 promise to bring both higher spending and higher project realization rates in the industry. In Industrial Info's recent North American Industrial Market Outlook, Britt Burt, vice president of research for the Power Industry, discussed the market drivers and trends affecting the industry in North America.
There has been a swathe of North American power retirements in recent years, mostly coming from the coal and nuclear sectors. About 196 gigawatts (GW) of power from all fuel types was retired between 2011 and 2020, with coal representing about 106 GW and nuclear accounting for about 10 GW. About 2 GW of coal-fired power is scheduled to retire this year, along with about 5.1 GW of nuclear. The year 2022 is expected to bring another 10 GW in coal-fired retirements. Between 2023 and 2030, Burt said he was watching another 43 GW of expected power retirements, which could increase over time.
So what's replaced this lost North American power? Primarily natural gas, wind and solar. About 104 GW of natural gas-fired capacity came online from 2011 through 2020, along with about 90 GW of wind and about 33 GW of solar. However, natural gas-fired projects have slowed in recent years as renewable energy picks up the pace. Burt said Industrial Info was tracking about $20.7 billion of wind and $28.5 billion in solar projects that were expected to kick off this year, which is expected to dip some in 2022.
Renewables are expected to keep shining. In the U.S. government spending bill passed late last year, tax credits for wind and solar projects were given further extensions. Onshore wind tax credits were extended by another year and solar by another two years. The bill also outlined something new: an investment tax credit for U.S. offshore wind, which accounts for projects starting between 2017 and 2025. Industrial Info is tracking about seven offshore wind projects in the U.S. that could kick off in 2021-22.
Along with the buildout of renewables in North America is a rise in battery energy storage system (BESS) projects. Burt said he has heard industry projections of about 150 GW being in place by 2035. California and Texas lead in the number and value of BESS projects being tracking by Industrial Info.
Also partially coupled with the rise in renewable energy are transmission and distribution (T&D) projects. Industrial Info is tracking about $42.4 billion worth of T&D project planned to kick off over the next two years, with places like Texas and Wyoming, which are seeing a large number of renewable projects coming online, taking the lead. Projects to modernize and increase the reliability of the existing grid also are prevalent.
While North American natural gas-fired projects have declined over the last few years as many of the projects meant to replace retired coal-fired plants have come online, Burt said he expected somewhat of an uptick in spending for these projects in 2021 and 2022, with both years showing about $7.3 billion in high-probability projects.
In regard to market drivers for in-plant capital spending, recent events may have a bearing on what's to come. Earlier this week, a federal court of appeals struck down the Trump administration's Affordable Clean Energy rule, paving the way for the Clean Power Plan, coal combustions residuals (CCR) rule and other environmental mandates to be reinstituted. For more information, see January 21, 2021, article - Federal Appeals Court Vacates Trump's Affordable Clean Energy Plan.
This, along with President Joe Biden's rejoining the Paris Climate Agreement, paves the way for increased environmental spending at existing plants.
Click here to view the entire webinar, which also includes outlooks for the North American Chemical Processing and Metals & Minerals industries.