north american energy outlook 2016: trends and … · 2018. 3. 21. · 2021-2025. 2026-2030....

/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED1

NAVIGANT’S VIEW OF THE NORTH AMERICAN ENERGY MARKET

ENERGY CENTRAL WEBINAROCTOBER 13, 2016

NORTH AMERICAN ENERGY OUTLOOK 2016: TRENDS AND PROJECTIONS

ROB PATRYLAKNAVIGANT MANAGING DIRECTOR

GORDON PICKERINGNAVIGANT DIRECTOR

MAGGIE SHOBERNAVIGANT ASSOCIATE DIRECTOR

/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED2 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED2

DISCLAIMER

Notice Regarding PresentationThis presentation was prepared by Navigant Consulting, Inc. (Navigant) for informational purposes only. Navigant makes no claim to any government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication).

Navigant does not make any express or implied warranty or representation concerning the information contained in this presentation, or as to merchantability or fitness for a particular purpose or function. This presentation is incomplete without reference to, and should be viewed solely in conjunction with the oral briefing provided by Navigant. No part of it may be circulated, quoted, or reproduced for distribution without prior written approval from Navigant.


SPEAKERS

Rob PatrylakNAVIGANT MANAGING DIRECTOR

Gordon PickeringNAVIGANT DIRECTOR

Maggie ShoberNAVIGANT ASSOCIATE DIRECTOR


NAVIGANT ENERGY MARKET OUTLOOK (NEMO)

Energy price forecasts

Gas price forecasts

All capacity markets

Emissions allowance prices

REC prices

Reports with data for 10 regions in United States

Semi-annual report and data subscription

Integrated modeling of power, gas, environmental

Nodal/Hub pricing

Full transmission/pipeline

representation

Benchmarking to capture market

volatility

Plant retirement and retrofit decisions

FEATURES PRODUCTS


KEY TRENDS AFFECTING INVESTMENTS

Environmental Initiatives

Renewable Development

Continued Shale

Development

Reductions in Traditional

Load Growth

Transition industry away from coal toward natural gas, energy efficiency, and renewables, causing substantial planning and generation asset transaction activity


UNITED STATES EPA’S CLEAN POWER PLAN (CPP)

Emissions reduction to 32% below 2005 levels

by 2030CPP is key to USParis Agreement

Each state has unique interim targets based

on resource mix

Flexibility for state implementation:

Rate or mass targets

Compliance options:Coal-to-gas switching

RenewablesEnergy efficiency

CPP more difficult to meet if nuclear retires, no incentive to keep it

operating

CPP Timeline

2030: Final targets

2022: Interim targets begin

2017+: End of litigation

Sep 2016: Oral arguments en banc DC Court

Feb 2016: CPP stayed by Supreme Court

Aug 2015: CPP finalized


0

5

10

15

20

25

(GW

)

Retiring Coal Capacity by Region

2016-2020 2021-2025 2026-2030 2031-2035

COAL RETIREMENTS

• Navigant tracks retirement announcements and models unit economics individually to identify units at risk of retirement

47%

19%

34%

Retiring Coal Capacity by Driver (2016-2035)

Announced Age-based Economic/Policy driven

(Source: Navigant Energy Market Outlook)

(Source: Navigant Energy Market Outlook)


STATES LEADING SECTOR TRANSFORMATION

REVValue of Solar Tariff

50% by 2030 50% by 2030

50% by 2040

100% by 2045

Storage mandate

Flexible capacity

(Source: Navigant)


RENEWABLE OUTLOOK

• Installed costs for renewables remain low or keep falling over next decade• RPS and economics driving increased penetration for renewables • Installed solar expected to grow 600% between 2015 and 2025

RPS/AEPS

Renewable Goal

0

50

100

150

200

250

300

2015 2025 2035

(GW

)

Installed Large-Scale Wind and Solar, North America

Wind Solar

Renewable Portfolio Standard Policies

(Source: Navigant Energy Market Outlook) (Source: DSIRE)


ENERGY EFFICIENCY AND DEMAND RESPONSE

• Average annual energy consumption and peak demand expected to grow ≤1% • Wild card: Transportation electrification

0

50,000

100,000

150,000

200,000

250,000

(GW

h)

Forecast of New Energy Efficiency in North America

EERS

EE in RPS

EERS rolled back

Energy Efficiency Resource Standard Policies

(Source: Navigant Energy Market Outlook) (Source: DSIRE)


FUELS OUTLOOK

Gordon PickeringDIRECTOR


UNITED STATES IS AN EMERGING ENERGY SUPERPOWER

#1 Oil & Gas Producer

#1 Condensate Producer

#1 Refined Products Exporter

#1 LPG Exporter

Major Coal Exporter

Emerging Ethane Exporter

#3 LNG Exporter (by capacity now in

construction) Emerging Petrochemical Exporter


ABUNDANT AND WIDELY DISTRIBUTED DOMESTIC RESOURCES

(Source: Point Logic)

US Shale Basins


ABUNDANT ENOUGH TO PROMOTE EXPORTS FROM A NUMBER OF LNG FACILITIES UNDER CONSTRUCTION

North American Proposed/Under Construction LNG Export Projects

25Liquefaction

Plants Proposed

3.1 Bcfd by 20220.8 Bcfd by 2022

8.6 Bcfd by 2022

8Liquefaction

Plants Proposed

20Liquefaction

Plants Proposed (Canada &

US)

(Source: Navigant’s North American Natural Gas Market Outlook 2016)


UNITED STATES LNG EXPORT OUTLOOK

• Based on LNG projects that are in construction or on-stream now, five US export terminals will be on by 2020:- Sabine Pass, LA (Cheniere): First train on-stream

February 24, 2016; five other trains planned- Cameron LNG, Hackberry, LA (Sempra, Engie,

Mitsui, Mitsubishi, Nippon): Three trains in construction (trains 4-5 FERC filed in May 2015), EA issued February 2016, DOE export approval received July 2016 for add; 1.4 Bcfd; on-stream 2018

- Freeport LNG, Brazoria Country, TX (M. Smith): Three trains in construction, 13.2 mtpa, 1.7 Bcfd, one additional train submitted to FERC in May 2015 for about 7 mtpa (total 20 mtpa or 2.6 Bcfd); on-stream 2019

- Corpus Christi, San Patricio County, TX (Cheniere): Two trains FID (8.4 mtpa or 1.1 Bcfd), three other trains planned; on-stream 2018

- Cove Point, Calvert Country, MD (Dominion): One train FID (5.25 mtpa or 0.77 Bcfd); on-stream scheduled for 2017

• Navigant forecasts US LNG export capacity of 10 Bcfd by 2022 (or 11% of US gas demand in 2022)

• With growing pipeline exports to Mexico and Canada, as announced previously, the United States is set to become a net exporter of natural gas in 2016 (pipe and LNG by ship)


LNG EXPORT CAPACITY IS EXPANDING IN NORTH AMERICA TO APPROACH CAPACITY IN MIDDLE EAST AND ASIA

Global LNG Export Capacity 2000-2024

(Source: Navigant’s Global Natural Gas Outlook using the G2M2 global market model)

North America

South America

Africa

Middle East

Total Europe & Eurasia

Asia & Australia

bcm

bcm

bcm

bcm

bcm

LNG Exports Capacitybillion cubic meters

bcm

0

250

2000

2006

2012

2018

2024

0

250

2000

2006

2012

2018

2024

0

250

2000

2006

2012

2018

2024

0

250

2000

2006

2012

2018

2024

0

250

2000

2006

2012

2018

2024

0

250

2000

2006

2012

2018

2024

* About 400 bcm/y of LNG are proposed in North America


$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

(Rea

l201

5$/M

MB

tu)

NATURAL GAS PRICES IN THE UNITED STATES

• On increased supply, natural gas prices have declined since 2008, which has lowered energy costs to US consumers in all sectors

Historical Henry Hub Natural Gas Prices

(Sources: Navigant, Ventyx, ICE)


MACROECONOMIC CONTRIBUTIONS OF GAS SHALE

• In its 2016 North American Gas Market Outlook, Navigant estimates gas shale production will increase 103% (or by 36.6 Bcfd) between 2015 to 2040

• With a renewable policy mandate (such as the Clean Power Plan currently on hold), gas demand for electric generation would increase as the decline of coal output continues, but it is likely that power prices would increase as gas use in electric generation increases

• It is also likely that if such renewable generation policy was put in place, by 2050, higher gas and power prices would reduce total energy use in the non-electric sectors

• Total gas demand would also decrease (primarily industrial demand) as renewables (perhaps nuclear, advanced biofuels) would need higher prices to be able to meet the needs of the US electric market

The Impacts on the US Economy from Gas Shale Have Been Large to Date and Are Expected to Continue in the Future


CLIMATE CHANGE IMPACTS OF US GAS SHALE

• The impacts of gas shale are viewed as important and a key contributor to limiting global warming to 2°C as policymakers worldwide have established in order to avoid a global catastrophe

• In order to limit global warming, CO2 emissions need to be reduced and lower-carbon energy systems will need to be used

• Most man-made CO2 is caused by coal-fired generation (as capture and storage technologies, while hopeful, have yet to be developed)- Coal-to-gas switching as a result of economics (not policy) has resulted in total gas-fired

generation overtaking US coal generation burn for the first time ever—31% to 30% in April 2015

Gas Shale and its Impact on Climate Change in the US Has Been Resoundingly Positive


$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

2005 2009 2013 2017 2021 2025 2029 2033 2037

(201

5$/M

MB

tu)

65% Price Rebound

NAVIGANT GAS OUTLOOK 2016

Henry Hub Natural Gas Price Outlook

(Source: Navigant analysis)


NATURAL GAS OUTLOOK 2016

Strong Supply

• 2006 Northeast production near zero• 2016 Northeast production 20.5 Bcfd

Displaced Gas

• Less flows from Canada to United States• Less flows from Gulf to demand areas

Exports• New markets for displaced gas• US pipeline and LNG exports

MMcfd


Changes in North American Flows: Pre-Shale to Date


NAVIGANT GAS OUTLOOK 2016

• Almost 60% of unconventional production growth has come from shale plays in the Northeast

• Northeast production is expected to continue to grow, increasing 84% by 2026

US Natural Gas Production


020406080

100120

2006 2011 2016 2021 2026

(Bcf

d)

Conventional Unconventional

• US natural gas production has grown by 48% since 2006

• Expected to increase by another 31% by 2026

0

10

20

30

40

50

2006 2011 2016 2021 2026

(Bcf

d)

Conventional Unconventional

Northeast Gas Production



THE UNITED STATES IS TO BECOME A NET NATURAL GAS EXPORTER IN 2016

This Year (2016), the United States will be a Net Exporter (by Pipe and by Ship) of Natural Gas for First Time Since 1957 (60 Years Ago)

-20

-15

-10

-5

0

5

10

15

2000 2008 2016 2024 2032

Bcf

d Pipeline LNG

(Source: Navigant’s North American Natural Gas Market Outlook, Spring 2016)

Over 15 Bcfd of Net Exports by 2032

Forecast

US Net Imports (Lower 48 States)


A NEW WORLD AND CONTINENTAL ORDER DEFINED

• Natural gas security has meant expanded gas use in electric generation• Increased share for gas in the US energy mix• Inexpensive natural gas has spurred a revival in American manufacturing and has

fostered LNG exports that will shrink the trade deficit, strengthen the dollar, and bolster employment

• Newfound security of supply benefits will continue to provide the United States with the ability to rebalance America’s stature in the world; such is the importance of energy in the global economy

• Security means that gas may play a larger role in the near to mid term in response to CO2 emissions constraints; this may allow some very stringent emissions regulations in the long term that could limit all fossil fuels

• A vastly different global gas market, expanding exports of LNG from North America and a growing global gas market


KEY TAKEAWAYS

Rob PatrylakMANAGING DIRECTOR


INCREASE IN GENERATION ASSET TRANSACTION EXPECTED TO CONTINUE

Generation Asset Transactions in Continental United States and Canada

(Source: Navigant with data from SNL Financial)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

(# o

f Dea

ls)

Completed Ongoing


HOT SPOTS: PJM, CAISO, ERCOT, ISO-NE, MISO


0

500

1,000

1,500

2,000

2,500

(Num

ber o

f Dea

ls)

Generation Asset Transactions by Type and Region: 2014-3Q 2016

Coal HydroNatural Gas NuclearOther Other RenewableSolar Wind

0

500

1,000

1,500

2,000

2,500

(GW

)

Capacity Transacted by Type and Region, 2014-3Q 2016

Coal HydroNatural Gas NuclearOther Other RenewableSolar Wind



35%26%

16%24%

19% 17%

14% 13%

7% 6%4% 4%6% 5%

0.1% 5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2030

PJM Capacity Mix

PJM REGIONAL TRENDS

0

100

200

300

400

500

600

700

800

900

1,000

2016 2020 2024 2028 2032

(TW

h)

PJM Generation Mix (TWh)EE / DR

Solar

Hydro & OtherRenewable

Wind

Other

CT Gas

Nuclear

CC

Coal

Totals: 178,722 GW 203,020 GW

(Source: Navigant Energy Market Outlook) (Source: Navigant Energy Market Outlook)


26%

19%

3%

2%

14%

14%

18%

2%

8%

10%

23%

16%

9%

38%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2030

CAISO Capacity Mix

CALIFORNIA REGIONAL TRENDS

0

50

100

150

200

250

300

350

2016 2020 2024 2028 2032

(TW

h)

CAISO Generation Mix (TWh)EE / DR

Solar


Wind

Other

CT Gas

Nuclear

CC


Totals: 75,126 GW 113,578 GW


21%17%

35% 36%

6%5%

5%5%

15%10%

16%20%

1%1%

0%5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2030

ERCOT Capacity Mix

ERCOT REGIONAL TRENDS

0

50

100

150

200

250

300

350

400

450

500

2016 2020 2024 2028 2032

(TW

h)

ERCOT Generation Mix (TWh)EE / DR

Solar


Wind

Other

CT Gas

Coal

CC

Nuclear

Totals: 91,473 GW 109,631 GW



6% 0%

38%41%

13%8%

5%

10%

20%

11%

2%

7%

14%

13%

0% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2030

ISO-NE Capacity Mix

ISO-NE REGIONAL TRENDS

0

20

40

60

80

100

120

140

160

2016 2020 2024 2028 2032

(TW

h)

ISO-NE Generation Mix (TWh)EE / DR

Solar


Wind

Other

CT Gas

Coal

CC

Nuclear

Totals: 31,099 GW 41,626 GW



40%29%

15%

20%

8%7%

13%13%

11%

9%

9% 16%

4% 3%

0% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015 2030

MISO Capacity Mix

MISO REGIONAL TRENDS

0

100

200

300

400

500

600

700

800

900

2016 2020 2024 2028 2032

(TW

h)

MISO Generation Mix (TWh)EE / DR

Solar


Wind

Other

CT Gas

Coal

CC

Nuclear

Totals: 168,740 GW 188,279 GW



KEY TAKEAWAYS

• Energy markets are in transformation• Substantial investment is focused on renewable resources and other technologies

needed for renewable integration• DER penetration is difficult to forecast, and higher penetrations increase complexity

of integration• Increased demand for natural gas is driving real price escalation in fuel and power

prices, even with abundant shale gas resources• Energy efficiency is economic now and will improve as environmental regulations

and grid transformation occurs• Environmental initiatives, renewables, energy efficiency, and transformation of the

fuel markets are driving increased planning and asset transactions activities


ROBERT PATRYLAK Managing DirectorWashington, [email protected]

GORDON PICKERINGDirectorFolsom, [email protected]

MAGGIE SHOBERAssociate DirectorWashington, [email protected]

navigant.com

QUESTIONS?

north american energy outlook 2016: trends and … · 2018. 3. 21. · 2021-2025. 2026-2030....

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