Black & Veatch today published its 2014 Strategic Directions: U.S. Electric Industry. The annual report represents a compilation of data and analysis from a survey of qualified professionals within the electric generation industry. This year’s survey was conducted in May and completed by 576 respondents.
Asked to rank the most important issues within their industry, survey participants voiced concerns about a number of topics, the top five being:
2. Environmental regulations
3. Economic regulations
5. Natural gas prices
Significantly, the issue of asset protection and cybersecurity rose in the poll, jumping ahead two positions to number four. As recently as 2012, cybersecurity did not even rank among the top 10 issues of concern to industry professionals. The industry is now very interested in protecting itself and its customers by closing crucial security vulnerabilities.
The report notes that the industry is now entering a long-term transition to a grid in which distributed generation (DG) will play a more important role. Solar photovoltaic (PV) technology has seen especially notable growth in cumulative installed capacity, increasing from about 1,200 MW in 2009 to 12,000 MW in 2013—a 10-fold leap. According to Greentech Media Research, that number could grow to 40,000 MW by 2017. Well over half of that capacity is expected to be installed on the distribution system, mostly behind customers’ meters. As a result, utilities are becoming increasingly concerned about their control infrastructures, impacts on the grid and implications on rates.
While some utilities view these developments as a threat because they have the potential to rearrange existing business models and negatively impact revenue, other utilities view the partial transition to DG as a business opportunity, believing that a proactive approach to the issue will allow them to participate in development, financing, construction, and maintenance of DG.
The report discusses the retirement of 59.5 GW of coal-fired capacity in the United States by 2020, amounting to a reduction by nearly 20 percent of today’s capacity, mostly due to the Environmental Protection Agency’s (EPA) Mercury Air Toxics Standards (MATS). Despite some projections of falling demand, Black and Veatch believe the industry will grow by 1 percent a year over the next 25 years, and that coal will continue its significant role in resource mix.
The North American natural gas supply is currently more than large enough to meet demands, but challenges remain in the industry’s available capacity to transport supply to demand centers as needed.
Nearly half of electric utility industry leaders believe that liquefied natural gas (LNG) exports will raise domestic natural gas prices and utility costs.
Based on the most recent natural gas price forecast, Black & Veatch forecasts that price acceleration will occur only after 2020 when demand for LNG by power generation, industrial applications, and exports increase.
With so much discussion about the increasing use of LNG within the power generation industry due to economic and regulatory pressures, Black & Veatch predicts that electric power pricing will be increasingly tied to natural gas prices as LNG evolves into the predominant fuel for power generation.
Though electric utilities are asked to manage the increasing rate of transformation within their industry, Black and Veatch predicts that this disruption will result in an electric industry that is more nimble and better able to deliver its customers’ primary need: reliability.
To read the full report, click here.