the power sector is dead (not really!) · 2000 2008 2016 2024 2032 twh share coal gas nuclear hydro...

The power sector is DEAD(not really!)

The evolving power sector will impact coal

September 27, 2017

Trusted commercial intelligencewww.woodmac.com


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The power sector is D…E…A…D!

� Decarbonization

» Reducing emissions of GHGs

� Electrification of vehicles

» Preparing to “fuel” the proliferation of electric vehicles

� Access to energy

» Bringing reliable power to everyone

� Decentralization

» Transitioning to include dynamic, localized power grids complete with DERs

Four major trends are transforming how and why electricity is produced and distributed;

these trends will forever alter the competitive environment for coal


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11.0

11.4

11.8

12.2

12.6

13.0

150

200

250

300

350

400

2000 2008 2016 2024 2032

TW

h/m

illi

on

pe

op

le

Mil

lio

ns

-o

r-G

Wh

/20

05

US

$B

n)

Pop Elec int Elec dem per capita (r axis)

Source: Wood Mackenzie

The power sector is decarbonizing

� Indicators of increased energy demand

» US population is expected to grow at a rate of about 0.7% per year

» GDP is growing

� Indicators of decreased energy decline

» Electricity required to support GDP growth is falling

» Services-led economy

» Efficiency is rising

» Technology is improving

� Tipping points

» 2006

» 2016

Growth in electricity sales will continue and per capita electricity growth will stabilize

Factors impacting demand for electricity in the US


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Annual change in generating capacity (GW) in the US Capacity share of non-fossil segment (%)

-20%

0%

20%

40%

60%

80%

-20

0

20

40

60

80

2000 2008 2016 2024 2032

Sh

are

GW

Coal Gas NuclearHydro Wind SolarOther Total Fossil (r-ax)Non-fossil (r-ax)


Generation by fuel type (TWh and %)

0%

25%

50%

75%

100%

0

1,250

2,500

3,750

5,000

2000 2008 2016 2024 2032

Sh

are

TW

h

Coal Gas NuclearHydro Wind SolarOther Fossil (r) Non-fossil (r)


0%

20%

40%

60%

80%

100%

2000 2008 2016 2024 2032

Sh

are

Nuclear Hydro Wind Solar OtherSource: Wood Mackenzie

Substitute gas for coal and renewables for all


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� Coal fleet capacity decline

» Partly offset by increased coal plant capacity factors

� No new coal plant investment

� Coal consumption decline is inevitable – in the US

» Increased competition

» Strategies for survival

� But issues must be addressed

» How will carbon be regulated?

» Performance

» Trading

» Tax

» Migration and leakage

» CCS: high cost is barrier to use but is it essential?

Decarbonization is coal’s biggest threat, but is it an existential threat?

3

5

7

9

0

1,000

2,000

3,000

2000 2008 2016 2024 2032

tCO

2/p

ers

on

Mt

From oil From gas

From coal CO2 emissions per capita


US power sector CO2 emissions (Mt, tCO2/person) Implications for coal


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Electricity will fuel many of tomorrow’s automobiles

Market penetration of electric vehicles will be slow, in our view – but there is upside

0%

1%

2%

3%

4%

0

1,250

2,500

3,750

5,000

2017 2022 2027 2032 2037S

ha

re

TW

h

All other sales EV sales EV sales % of total


0.0%

0.5%

1.0%

1.5%

2.0%

-

250

500

750

1,000

2017 2022 2027 2032 2037

Sh

are

GW

EV peak demand All other peak demand

EV peak demand % of total


Electric vehicle electricity sales (TWh, %) in the US Electric vehicle peak demand (GW %)


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What does vehicle electrification mean to the power and coal industries?

� Electricity demand

» Increase load

� Load profile

» Shifting peak loads

» Load balancing required

� Fuel demand

» Which fuel?

� Power markets

» Price problem

� Rate design

» Tariffs and incentives

� Distribution grid planning

» Required to accommodate growth beyond

what can be achieved with load balancing

» Reinforcement of power delivery system

� Bad for oil, good for coal?

� Charging

» When?

» Where?

» Duration?

� Likely a very small net positive

EV market penetration will require power industry fine tuning and could be positive for coal

Power industry Coal industry


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Access to electricity can be improved

� Global community with no power or

intermittent power

» Location dependent but basically positive for coal

� US

» Providing power without extending the grid is a negative for coal

Access to electricity is a global problem, not a US problem

� What is meant by access?

» Providing reliable power to the hundreds of millions of people without it

� Technical solutions

» Grid extension

» Microgrids

� Policy solutions

� In the US: thinking small

» Providing power in small doses without extending the grid



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The availability of DERs and data will transform the grid

� Minimal impact

� Very small net negative

Tomorrow’s grid could interconnect millions of devices: power plants, DERs, & consumers

� What is decentralization?» The transition to a localized network of

distributed energy resources

� Examples of decentralization» Distributed generation

» Microgrids

� Advantages» Minimize transmission costs

» Resilience

� Issues» Expensive

» Grid hardware and software

» Regulatory change

» Further technology development to lower costs



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What does the evolving DEAD power sector mean for coal?

� Decarbonizing

» Smaller coal fleet that is running harder but requires far less coal

� Preparing to power tomorrow’s electric vehicles

» Small net positive impact on US coal, but years in the making

� Providing new access to powder for millions of people

» Large net positive impact on coal in the developing world, but no impact in the developed world (including in the US)

� Decentralizing into more flexible grids with multiple distributed energy resources

» Small net negative impact on US coal

Developed world: decarbonization; developing world: access


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Disclaimer

� This presentation has been prepared for the National Coal Council by Wood Mackenzie

Limited. The presentation is intended solely for the benefit of the National Coal Council

and its contents and conclusions are confidential and may not be disclosed to any other

persons or companies without Wood Mackenzie’s prior written permission.

� The information upon which this presentation is based has either been supplied to us

by the National Coal Council or comes from our own experience, knowledge and

databases. The opinions expressed in this presentation are those of Wood Mackenzie.

They have been arrived at following careful consideration and enquiry but we do not

guarantee their fairness, completeness or accuracy. The opinions, as of this date, are

subject to change. We do not accept any liability for your reliance upon them.

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the power sector is dead (not really!) · 2000 2008 2016 2024 2032 twh share coal gas nuclear hydro...

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