Post on 29-Aug-2020
/ ©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.
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED3 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED3
SPEAKERS
Rob PatrylakNAVIGANT MANAGING DIRECTOR
Gordon PickeringNAVIGANT DIRECTOR
Maggie ShoberNAVIGANT ASSOCIATE DIRECTOR
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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
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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
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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
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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)
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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)
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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)
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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)
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FUELS OUTLOOK
Gordon PickeringDIRECTOR
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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
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ABUNDANT AND WIDELY DISTRIBUTED DOMESTIC RESOURCES
(Source: Point Logic)
US Shale Basins
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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)
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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)
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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
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$-
$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)
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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
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED19 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED19
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
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$-
$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)
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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
(Source: Navigant analysis)
Changes in North American Flows: Pre-Shale to Date
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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
(Source: Navigant analysis)
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
(Source: Navigant analysis)
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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)
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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
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KEY TAKEAWAYS
Rob PatrylakMANAGING DIRECTOR
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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
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HOT SPOTS: PJM, CAISO, ERCOT, ISO-NE, MISO
(Source: Navigant with data from SNL Financial)
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
(Source: Navigant with data from SNL Financial)
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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)
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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
Hydro & OtherRenewable
Wind
Other
CT Gas
Nuclear
CC
(Source: Navigant Energy Market Outlook) (Source: Navigant Energy Market Outlook)
Totals: 75,126 GW 113,578 GW
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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
Hydro & OtherRenewable
Wind
Other
CT Gas
Coal
CC
Nuclear
Totals: 91,473 GW 109,631 GW
(Source: Navigant Energy Market Outlook) (Source: Navigant Energy Market Outlook)
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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
Hydro & OtherRenewable
Wind
Other
CT Gas
Coal
CC
Nuclear
Totals: 31,099 GW 41,626 GW
(Source: Navigant Energy Market Outlook) (Source: Navigant Energy Market Outlook)
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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
Hydro & OtherRenewable
Wind
Other
CT Gas
Coal
CC
Nuclear
Totals: 168,740 GW 188,279 GW
(Source: Navigant Energy Market Outlook) (Source: Navigant Energy Market Outlook)
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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
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ROBERT PATRYLAK Managing DirectorWashington, DCrobert.patrylak@Navigant.com
GORDON PICKERINGDirectorFolsom, CAgpickering@Navigant.com
MAGGIE SHOBERAssociate DirectorWashington, DCmaggie.shober@Navigant.com
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QUESTIONS?