Black & Veatch sees clearer, cleaner energy outlook
The amount of coal used to produce electricity falls more than 50 percent. Natural gas nearly doubles its share, becoming the main fuel to generate power.
And the amount of renewables, including wind and hydropower, climbs more than 50 percent, producing nearly as much power as coal.
These aren’t the musings of a hopeful environmentalist. Instead, they’re part of Black & Veatch’s forecast for the country’s electric industry and North American power generation through 2035.
Black & Veatch, a global engineering and consulting firm based in Overland Park, recently presented that outlook to its clients, who include electric utilities.
The forecast joins other government and private outlooks that differ in some respects but generally agree that a transformation in energy markets is ahead. Climate policies, growing natural-gas supplies and less-developed countries’ appetite for more energy will be felt.
The International Energy Agency predicts that nearly all the additional energy the world uses in the next 25 years will go to meet demand in China and other emerging countries. Their rising energy use already is one factor pushing up world oil and fuel prices, a trend that’s expected to continue.
The U.S. will increasingly find itself in a secondary role with at most modest increases in energy demand. But stable demand won’t mean the domestic supply picture stays the same — coal will decline, and natural gas and renewables will rise.
Long-term forecasts are inherently tentative and can be affected by future government policies and technological advances. But the forecasters all see changes ahead.
“One crystal ball is not enough,” said Mark Griffith, a managing director for Black & Veatch. “But it’s hard to consider a future that stays the same.”
And even the relatively stable U.S. demand will be something of a change from the past, because post-recession recoveries usually bring a sharp rebound in demand.
But the Energy Information Administration is predicting that total energy demand in the U.S., including electricity and petroleum, will increase an average of only half of 1 percent per year. Petroleum demand by itself could even fall, in part because of more fuel-efficient vehicles and use of more biofuels.
The federal agency said the growing supplies of natural gas from shale in the U.S. are one of the most “dynamic” stories in the energy markets, providing a surplus that could moderate prices for the fuel. That’s a big shift from just a few years ago, when the U.S. was expected to need growing amounts of imported natural gas to meet demand.
But the growth of international demand for energy will still be felt in the U.S. That’s already happening with oil and petroleum prices. Average gasoline prices rose from $2.35 a gallon in 2009 to $2.77 a gallon in 2010 and are projected to go to $3 a gallon in 2011.
Diesel prices, which averaged $2.46 a gallon in 2009, rose to $2.98 in 2010 and are projected to go to $3.23 in 2011, according to the Energy Information Administration, a part of the U.S. Department of Energy.
The expectation that prices will keep rising was seconded by the International Energy Agency, whose 28 member countries include the U.S.
The group’s executive director, Nobuo Tanaka, in a recent taped presentation, said he expected oil and gasoline prices to keep rising — regardless of additional price pressures that could come with efforts to curb greenhouse gases.
“Whatever direction we take, the cheaper energy age is simply over,” he said.
The International Energy Agency also singles out China as a “game changer” for energy markets because its demand is expected to rise 75 percent by 2035 — and to account for more than a third of projected global energy use.
As a result, any efforts by China to curb demand or use cleaner energy such as solar will be especially important.
“It makes a big difference,” Tanaka said.
Black & Veatch’s recent outlook focuses on power generation in North America, where it expects demand coming out of the recession to initially increase by 1.7 percent annually before falling back to 1 percent.
The company’s forecast is more than an academic exercise in that electric utilities are already struggling to plan for a future made more complex by potential efforts to curb greenhouse gases.
Coal is a big contributor of carbon dioxide emissions, but it’s also relatively cheap and plentiful.
That quandary was on public display recently in the Kansas City area with the dedication of the Iatan 2 coal-fired plant near Weston, which is majority owned by Kansas City Power & Light.
At the ceremony, Gov. Jay Nixon was asked whether this could be the last coal-fired plant in Missouri. He said he would never say never, but he acknowledged that uncertainty regarding future efforts to curb carbon dioxide made the future of such plants questionable.
Michael Chesser, chief executive officer of Great Plains Energy, the parent of KCP&L, said at the dedication that he expected modest electricity demand, which would provide some time to see whether technology to capture carbon became commercially available. If that happened, he said, coal could still play a role.
The issue has the attention of state regulators, who require utilities to have long-range plans.
Missouri is revamping its guidelines for those plans to include any efforts to reduce demand, another way utilities could reduce their carbon output. KCP&L, for example, has a voluntary program to cycle off air conditioners during times of peak demand in the summer.
KCP&L also is looking at the use of more natural gas to generate electricity. That’s good for cutting emissions but has always caused some worry among utilities and regulators because the price of the fuel has often been volatile.
“It’s so hard to predict the future,” Chesser said.
Black & Veatch in its forecast believes that even with a recovery there won’t be a return to the way things once were. Instead there will be a “new normal” with uncertainties, risks and opportunities.
The engineering firm assumes there will be some requirements to curb greenhouse gases, which will give an edge to natural gas — unless technological advances make carbon sequestration available. Regardless, a wave of smaller and older coal-fired plants being retired is expected because of various environmental regulations.
The retirements, plus slow but steady growth in demand, will require other fuels — natural gas, renewable energy (mostly wind) and some additional nuclear — to fill the gap. Many states, including Missouri and Kansas, have already enacted standards that will require a rising share of electricity to come from renewables.
The biggest increase will come from natural gas. Natural gas squeezed from shale is offsetting the decline of conventional sources of natural gas, Black and Veatch noted. Griffith said the supplies could moderate the price swings gas traditionally has gone through. Utilities also are looking for some additional price protections, including signing long-term contracts.
Under the scenario sketched out by Black & Veatch, natural gas currently used to generate at 21 percent of electricity could climb to 40 percent by 2035. And coal would retreat from 48 percent to 21 percent of the electricity generated.
Two factors that could keep gas from surging, Black & Veatch said, are the possibility of carbon sequestration and concerns that extracting gas from shale would use too much water.
“There are going to be technological risk and regulatory risk, but we still need to keep the lights on,” said Griffith.
Read more: https://www.kansascity.com/2010/12/20/2533830/a-clearer-energy-outlook.html#ixzz18moOE18w
-Steve Everly
