Engineering Inc. - July/August 2014 - (Page 6)

MarketWatch BY G E R RY D O N O H U E Steady Transformation Ahead In Power Generation Market lations is steadily transforming the industry. That's not an easy thing to do. "Power is really hard to change," says Jack Hand, president and CEO of POWER Engineers, Inc. It takes hefty investments and long lead times to build new power facilities. That's why change will happen slowly. The United States Energy Information Administration (USEIA) projects that natural gas won't surpass coal as the nation's primary power generating source until 2035. By 2040, natural gas will account for 35 percent of power generation, followed by coal (32 percent), nuclear Electricity Generation by Fuel (Percentage of market) 2012 2040 Coal 37% 32% Natural Gas 30% 35% Nuclear 19% 16% Renewables 12% 16% Oil and Other Liquids 1% 1% Source: USEIA Permitted Plants by Primary Fuel Type Primary Fuel Type Capacity (MW) % of Total Natural Gas 20,961 48.2 Wind 12,716 29.2 Solar 5,132 11.8 Coal 2,560 5.9 Geothermal 671 1.5 Hydro 494 1.1 Other 317 0.7 Waste 169 0.4 Biomass Gas 50 0.1 Agricultural Byproduct 49.9 0.1 Biomass Solid 28 0.1 Source: APPA 6 ENGINEERING INC. JULY / AUGUST 2014 (16 percent) and renewables (16 percent). Natural Gas Rising The development of hydraulic fracturing and horizontal drilling techniques has opened a pipeline to the nation's shale gas reserves. And that work will only increase. USEIA projects shale gas production will more than double by 2040, from 7.8 trillion cubic feet/year to 16.7 trillion cubic feet/year. Such dramatic supply expansion has many immediate impacts-natural gas prices have plummeted and chemical companies and other manufacturers have repatriated factories. But its full force is only now being felt across the industry. "Up until fracking, natural gas plants were running at about 35 percent capacity," says Hand. "Today we're over 50 percent. The word on the street is we won't start building new plants until when we get to 60 percent of capacity." But give it a few years. Work on several new natural gas plants should kick into high gear in 2016, says Hand, who adds, "Once it gets going, I really don't think it's going to slow down." According to the American Public Power Association's (APPA) latest Report on New Generating Capacity, power plants totaling 47,525 megawatts (MWs) are currently in permitting. Of those, 48 percent are natural gas plants. Coal plants, which accounted for 40 percent of plants in permitting in 2009, make up less than 6 percent. Two key regulations further RON AND PATTY THOMAS PHOTOGRAPHY/GETTY IMAGES D emand for electrical power will slowly and steadily grow over the next 20 years, increasing by just less than 1 percent annually through 2040. Coal has long dominated power generation. It currently accounts for 37 percent of supply, followed by natural gas (31 percent), nuclear (16 percent), renewables (12 percent) and hydropower (7 percent). But coal's supremacy in the power generation market is about to wane. The combination of cheap and plentiful natural gas, programs encouraging renewable fuel use and tighter emissions control regu- threaten coal's future. The Mercury and Air Toxics Standard, which takes effect in 2016, and the Obama administration's recent decision to cut carbon emissions from power plants by 30 percent by 2030 will significantly increase operating costs for many coal plants. Utilities must weigh whether to retool those facilities or shutter them. Dean Oskvig, president and CEO of Black & Veatch's energy business, anticipates a surge in requests to retrofit coal plants, even if on a limitedtime basis. "Each plant is its own story and will have to be addressed on a case-by-case basis," he says. "That work won't continue forever, though, and before too long all the big plants will be done." Even with those upgrades, USEIA estimates that 50,000 MWs of coal-fired capacity will be retired by 2021. Rather than retiring or retooling a plant, Hand says

Table of Contents for the Digital Edition of Engineering Inc. - July/August 2014

Engineering Inc. - July/August 2014
Contents
From ACEC to You
Legislative Action
Market Watch
Staying on Mission
Public vs. Private
Meeting the Need
2014 Professional Liability Insurance Survey of Member Firms
Sustaining Industry Momentum
2014 Fall Conference
Risk Management
Business Insights
Members in the News
Mergers and Acquisitions

Engineering Inc. - July/August 2014