10 trends shaping the #electric_utility industry in 2017 RSS Feed

10 trends shaping the electric utility industry in 2017

If there’s one hallmark of the power sector at the beginning of 2017, it’s uncertainty.

At the time of our last trend forecast list in September 2015, the utility industry was already being disrupted: Customer demand for distributed resources and the push for cleaner electricity were reshaping centralized fossil fuel-based grids across the country to accommodate variable renewables and customer-sited resources.

Those trends toward a two-way, decarbonized grid are still very much in play at the beginning of 2017. Lower prices for wind and solar energy have seen those resources reach grid parity across much of the nation, and utilities continue to add flexible natural gas generation along with new technologies like energy storage to integrate the intermittent resources coming online.

But the election of Donald Trump as U.S. president threatens the political will behind the clean energy revolution. Whereas federal regulations and incentives pushed the power sector toward an increasingly decarbonized grid throughout the last eight years, the new president has openly disavowed the idea of climate change and plans to scrap the Clean Power Plan, Obama’s signature energy regulation and the centerpiece of his climate legacy.

Just how that will manifest into actual policy is still unclear. While Trump’s appointments to the Environmental Protection Agency and Department of Energy broadly committed to regulate carbon and protect clean energy programs in their Senate confirmation hearings, both did so without any specific promises or concrete policy positions.

But regardless of the policies of the incoming administration, they will be greeted by a power sector already in the midst of wholesale transformation. To help guide the industry through these uncertain times, Utility Dive has outlined the top ten trends that will shape the U.S. power industry in 2017. This list, like the last one, isn’t meant to be exhaustive or rank one trend over another, but to simply give readers an idea of where the industry is headed at the dawn of the Trump era.

10. Coal power could get a second lease on life

If there’s one resource that embodies the uncertainty present in the power sector today, it’s coal.

Coal power has had a tough go of it over the last decade. Low natural gas prices and increased environmental regulation — particularly the Mercury and Air Toxics Standards — have meant many coal plants were not competitive in regional markets or required costly upgrades to operate, leading to widespread retirements.

Since 2000, utilities have announced more than 100 GW of coal generation retirements; in 2015 alone, nearly 14 GW came offline, accounting for 80% of the plant retirements that year.

Those trends were set to continue under the EPA’s proposed Clean Power Plan, the nation’s first set of carbon regulations for existing plants. Under that Obama program, the Energy Information Administration estimated coal retirements would accelerate, with about 90 GW expected to come offline by 2040.

But the Clean Power Plan was put on hold by the Supreme Court last year pending legal challenges. Now, the Trump administration has promised to cancel it outright with no concrete plans for a replacement. If that happens, and a new regulatory regime is not put in place quickly, it could give remaining coal plants a new lease on life.

While utilities are not expected to add new coal capacity in the absence of carbon rules, EIA estimates the ones already on the system could generate more, and for longer. In its latest Annual Energy Outlook, the agency forecasts that coal generation would continue to decline with the Clean Power Plan, but could stay steady for the next decade if the rules are repealed.

9. Natural gas growth will continue and could even accelerate

Carbon regulations get all the headlines, but whether coal power enjoys the resurgence predicted in EIA forecasts will depend as much on natural gas as the repeal of the Clean Power Plan.

The reason is that natural gas sets the standard for power generation in the U.S. today. Due to their low cost and flexible generation capabilities, combined cycle gas plants typically set the prices in wholesale power market auctions, helping determine the dispatch order for other resources.

Since 2010, historically low prices for natural gas have encouraged utilities to run their gas plants more, and often at the expense of coal. Coal-to-gas switching helped natural gas surpass coal as the top U.S. generating resource last year.

If those low prices continue, it could see natural gas generation increase its dominance in the U.S. power sector at the expense of other resources. In its AEO report, the EIA forecasts that an increase in domestic oil and gas production (the “high oil and gas” scenario) would allow gas generation to widen its gap over coal and stunt growth in renewable resources.

Read full article at Utility Dive