New Energy research report from Business Monitor International is now available from Fast Market Research
Boston, MA -- (SBWIRE) -- 06/03/2013 -- BMI View: Full-year data for 2012 confirms that several trends previously identified by BMI continue to play out in the US power market. Almost all regions of the country experienced an increase in natural gasfired generation from that seen in 2011, with higher relative prices and environmental regulations having led to lower consumption of coal. Additionally, the retiring of old nuclear plants and delays to new projects corroborated our long-held view that nuclear power will be a victim of the shale gas revolution. These dynamics will continue to be key in shaping the country's electricity mix in the long term; however, we highlight that fuels' relative prices, the pace of economic growth and regulatory changes will all play a role in determining the speed and magnitude of the changes.
Although the release of figures for 2012 generation and capacity by the Energy Information Administration (EIA) has prompted some revisions to our estimates and forecasts, the data and a number of developments in the market largely support our short- and long-term views for the US power sector.
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Accounting also for the fact that BMI's Country Risk analysts maintain a relatively positive outlook for the US economy and forecast real GDP growth to accelerate to 2.3% in 2013 (up from an estimated 2.2% in 2012), we remain of the opinion that the US power market will fare better than the majority of its developed peers. Macroeconomic and sector-specific dynamics point to the fact that growth in electricity consumption, and thus generation, will likely moderate over our 10-year forecast period to 2022. A dent in power consumption in 2012 - we estimate a contraction of 1.0% - was largely the product of the country's economic backdrop and, to a lesser extent, of exceptional events such as the massive power outage and infrastructure damage caused by Hurricane Sandy in the north east. That said, we believe that a longer-term moderation in consumption is on the cards, with consumption set to grow at an average 0.91% year-on-year between 2013 and 2022.
In terms of the country's electricity mix, thermal sources are anticipated to retain their primacy over our forecast period, despite progressively losing ground as non-hydro renewable generating capacity comes online. Existing trends suggest that the weight of diverse thermal sources in the electricity mix will shift, with gas gaining importance due to the following factors:
- Lower natural gas prices - which are the result of new drilling technologies, growing production, a large increase in proved reserves and robust natural gas infrastructure additions.
- Growing efficiency - newer natural gas units are becoming more efficient than older coal units, owing to rising capacity factors of natural gas-fired units.
- Coal unit retirements - expecting almost 9,000MW of coal-fired capacity retired in 2012, with additional retirements in subsequent years.
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