According to ICF International, the impacts of winter 2014 are likely to persist throughout the remainder of this year, due to increased need for storage refill this spring and summer.
In the short term, the cold winter and increases in natural gas prices are boosting coal consumption, providing support for higher coal prices. However, the ICF anticipates that coal consumption will remain flat over the next five years.
Meanwhile, international coal prices remain depressed, rendering US coal less competitive. This will reduce US exports in 2014, in comparison with record high exports in 2012. Exports are expected to revound, but this will take a long time due to continued low global demand. ICF anticipates flat demand in the near to mid term, as gas prices remain competitive.
ICF’s retirement projection for US coal plants remains steady in the range of 65 GW by 2020, based on a regulatory portfolio that includes CO2 and EPA’s other proposed regulations. Coal demand will remain flat despite the expected retirements through 2016, as the remaining coal plants will likely run at higher capacity factors.
Natural gas fired units are expected to fill the gap caused by the coal fired generation retirements, and meet incremental demand growth. Over the next 25 years, natural gas fired units will increasingly move into the base load across most markets in the US.
ICF expects prices to firm between 2015 and 2020 as demands from new petrochemical plants, LNG export terminals and pipeline exports to Mexico start ramping up. These new demands, combined with a continued rise in gas use for electric generation, will place significant upward pressure on gas prices and increase the potential for price volatility through the end of the decade.
Drilling is likely to increase in response to the recent surge in gas prices. The Marcellus and Eagle Ford continue to be the ‘hot spots’ for drilling activity However, dry gas plays such as Haynesville, and Fayetville are expected to look increasingly attractive as gas demand and gas prices continue to firm through the end of the decade.
Wind energy development slowed in 2013 compared to previous years. Despite this, new wind energy projects that began construction in 2013 are still eligible for the Renewable Electricity Production Tax Credit and will push to come online by the end of 2015 in order to maintain eligibility.
The expiration of the credit will constrain opportunities for the development of central station generators, however, demand to meet renewable portfolio standards requirements will drive development opportunities in select regions.
Adapted from a press release by Emma McAleavey.
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/19032014/icforecast284/