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EIA: Scheduled 2015 utilities capacity additions will be mostly wind and natural gas

Natural Gas Replacing Coal

The Energy Information Administration (EIA) expects electrical generating companies to add more than 20 gigawatts (GW) of utility-scale generating capacity to the power grid in 2015. An estimated 91% of those new additions (18.2 GW) will come from a combination of wind (9.8 GW), natural gas Scheduled Capacity Additions and Retirements in 2015(6.3 GW) and solar (2.2 GW), with the rest coming from other fuel sources like nuclear power, according to the EIA. Nearly 16 GW of generating capacity is expected to retire in 2015, 81% of which (12.9 GW) is coal-fired generation.

The additions in December are substantially higher due to the impending expiration of certain tax credits on December 31, which often encourages a rush of activity to either start or complete projects by year-end, the administration says.

Four trends emerged from the EIA’s data:

  • Wind additions are largely found in the Plains states, with nearly 8.4 GW, or 85% of total wind additions, found between North Dakota and Minnesota in the north, to Texas and New Mexico in the south.
  • Utility-scale solar additions of systems with at least one megawatt of capacity are dominated by two states—California (1.2 GW) and North Carolina (0.4 GW)—which combined for 73% of total solar additions. Both states have renewable portfolio standard (RPS) policies in place, with North Carolina’s policy including a solar-specific target. These figures do not include small-scale installations such as residential rooftop solar photovoltaic systems.
  • Natural gas additions are spread throughout the country, but Texas is adding more than double any other state (1.7 GW, 27% of total natural gas additions). There are also many additions in the Mid-Atlantic region, with more than 1.6 GW, or 26% of total natural gas additions, expected in New Jersey, Pennsylvania, Delaware, and Maryland.
  • Tennessee Valley Authority’s Watts Bar 2 nuclear facility in southeastern Tennessee, with a summer nameplate capacity of 1.1 GW, is currently listed as coming online in December 2015. When it comes online, it will be the first new nuclear reactor brought online in the United States in nearly 20 years.

 

Retirements

Generator retirements are heavily composed of coal-fired generation, with nearly 13 GW expected to be discontinued in 2015. The total of scheduled coal-fired generating capacity retirements is split between 10.2 GW of bituminous coal and 2.8 GW of subbituminous coal. Most of this retiring coal capacity is found in the Appalachian region: slightly more than 8 GW combined in Ohio, West Virginia, Kentucky, Virginia and Indiana.

According to the EIA, the coal-fired plants that are being retired are smaller and operate at a lower capacity factor than average coal-fired units in the United States. The units have an average summer nameplate capacity of 158 MW, about 61% of the 261 MW that other coal-fired units average. The retiring units also had a much lower weighted-average capacity factor of just 24% in 2013, compared to 60% for all coal-fired generators that same year.

The large number of coal-fired generator retirements is due primarily to the implementation of the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) this year. MATS requires large coal- and oil-fired electric generators to meet stricter emissions standards by incorporating emissions control technologies in existing generating facilities. Some power plant operators have decided that retrofitting units to meet the new standards will be cost-prohibitive and are choosing to discontinue the units instead.

The 12,922 MW of coal being retired in 2015 make up 94% of the total scheduled retirements this year.

Natural gas replacing coal

Approximately 32% of new power generation scheduled to come online next year will come from natural gas.Cost of New Electric Generation by Fuel

Natural gas offers the lowest cost per MW compared to coal, nuclear energy, geothermal, wind, hydro power and solar power, according to data from the EIA. Conventional combined cycle natural gas plants generate power at $67.10/MW, with advanced systems costing even less at $65.60/MW, making conventional natural gas plants 34% less expensive per MW than coal-fired plants. Coal plants with carbon control and sequestration systems (CCS) that help meet environmental standards are even more expensive, costing $135.30/MW.

Advanced nuclear energy costs $108.40/MW, geothermal costs $89.60/MW, wind costs $86.60 and $221.50 for onshore and offshore respectively, solar photovoltaic energy costs $144.30/MW and hydro power costs $90.30/MW.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.