Forward curves plotting electricity demand during the next 20-25 years have shifted dramatically in the past four years in the midst of a "great recession" and a surge in domestic natural gas production tied to shale plays, Wood Mackenzie's North America Power Service Insight said in its latest release.
Average annual demand projections have dropped to 1.1% from 1.7% just four years ago, according to WoodMac's latest analysis.
"In effect, [power] demand levels that were expected to be reached by 2019 would now not be realized until 2030," said the report, citing macroeconomic changes. Put another way, there are about five to six years of lost power demand growth ahead for the nation.
Some of the macroeconomic forces counteract each other, so it is not entirely clear what future operation and strategic decision-making will look like, according to WoodMac's assessment. Factors such as the European financial crisis, carbon emissions reduction mandates and accelerated energy efficiency programs are sure to alter demand downward, but at the same time the United States is primed for what WoodMac called "a looming industrial renaissance" that will stimulate power demand.
What WoodMac calls "a sea change" has shifted the power market's fundamentals since 2008, resulting in "a lost decade of demand growth, lower gas prices and active investment in compliance with increasingly demanding environmental and renewable policy." Carbon policy going forward will carry enormous implications for the power sector, and in turn, natural gas suppliers to the industry.
Because of this mixture of "changing fundamentals" brought on by economic, environmental and energy shifts, WoodMac called the power demand outlook "dim" for large parts of North America, especially the Northeast and along the West Coast. In contrast, the report said a faster pace of demand growth is expected in western Canada, Texas and the southeast United States.
Underpinning the WoodMac tie to the shale gas boom, the U.S. Energy Information Administration's (EIA) latest statistics released Tuesday show that gas and renewables dominated additions to power generation capacity in the first half of this year. "Of the 10 states with the highest levels of capacity additions, most of the new capacity uses natural gas or renewable energy sources," EIA said.
In the first six months of 2012, 165 new generation facilities were added in 33 states, totaling a little more than 8,000 MW, and 80% of that capacity was in 10 states with robust gas and renewable growth. Only one new coal-fired plant has been brought on line so far this year: an 800 MW plant at Prairie State Energy Campus in Illinois.
"Most of the new generators built during the past 15 years are powered by natural gas or wind," EIA said.
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