We are seeing the early stages of complex change and innovation in our industry. The best way to predict the future is to develop it. This presentation explores the current energy industry—the changing generation portfolio, the increasing reliance on natural gas, the changing grid architecture and business model evolution, and the changing energy utility ecosystem.
Energy Industry Update A Strategic Overview
- Platts Utility Supply Chain Conference
- January 19, 2015
A Changing Generation Portfolio An Increasing Reliance on Natural Gas A Changing Grid Architecture and Business Model Evolution A Changing Energy Utility Ecosystem and Closing Thought
A Changing Generation Portfolio
Growth of Renewables Environmental Pressures on Fossil EPAs Proposed Clean Power Plan The Importance of Portfolio Diversity
- A Changing Generation Portfolio
Growth of Renewables
- A Changing Generation Portfolio
- Note: *2014 figures are estimates based on the first three quarters of 2014 and annualized by adding the fourth quarter of 2013 Sources: Industry news; Greentech Media; American Wind Energy Association
Growth of Renewables (Contd)
- A Changing Generation Portfolio
- Notes: *2014 figures are estimates based on the first two quarters of 2014 and annualized by adding the third and fourth quarters of 2013; **REIT means real estate investment trust Sources: Industry news; Greentech Media; The Pew Charitable Trusts
- Solar has expanded rapidly in Germany as part of its Energiewende. In September 2014, the Solar Electric Power Association (SEPA) and ScottMadden led 25 U.S. energy industry executives to the bellwether energy market to exchange information with market leaders.
- 2012 $
- Photovoltaic Experience Curve (19762012) (2012 $/W)
- U.S. Annual PV Capacity and Average System Price (20092013)
Environmental Pressures on Fossil
- A Changing Generation Portfolio
- Notes: *Under certain conditions, states may be granted a one- to two-year extension; **See next page Sources: SNL Financial; Inside EPA; Law360; Van Ness Feldman
Environmental Pressures on Fossil (Contd)
- A Changing Generation Portfolio
- Note: *National Pollutant Discharge Elimination System, a program under the Clean Water Act Sources: SNL Financial; Inside EPA; Van Ness Feldman; Reginfo.gov (accessed Aug. 19, 2013); http://www.epa.gov/ttn/atw/utility/utilitypg.html (accessed Aug. 19, 2013); TheHill.com
Environmental Pressures on Fossil (Contd)
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- A Changing Generation Portfolio
- Notes: *Refers to primary ozone standard; **Measured in 2011 dollars and excluding California Sources: SNL Financial; Inside EPA; The Hill; POWER; EPA; EnerKnol
EPAs Proposed Clean Power Plan
- A Changing Generation Portfolio
- Note: *Refers to Public Utility Commission of Texas, Texas Commission on Environmental Quality, and Texas Railroad Commission Sources: SNL Financial; NARUC; RTI International; EPA
- Compliance building blocks were used to set state targets. While not required to be used by states, these building blocks are controversial.
- EPA Proposed Building Blocks for Compliance
EPAs Proposed Clean Power Plan (Contd)
- A Changing Generation Portfolio
- Note: *In pounds of CO2 per MWh-hour Sources: NARUC; RTI International ; EPA; ScottMadden analysis
- 2030 Goals (by State) as Percent Reductions from 2012 CO2 Emission Rates*
- Selected Issues Regarding Proposed EPA Rule
The Importance of Portfolio Diversity
- A Changing Generation Portfolio
- Sources: EIA data; ScottMadden analysis
An Increasing Reliance on Natural Gas
2014s Polar Vortex: Dj Vu All over Again? Gas-Power: Can the Cowboy and Farmer Be Friends? Natural Gas Fracking A Supply Chain Game Changer?
- An Increasing Reliance on Natural Gas
Polar Vortex: Dj Vu All over Again?
- An Increasing Reliance on Natural Gas
- 2014: It Was Not Just Gas Availability Pipeline capacity tight, especially in New England Many outages were not fuel related Fuel issues were not limited to natural gas Fuel diversity was critical as available gas capacity was far less than advertised Generators faced significant fuel price risk: Due to gas and power day mismatch, generators assumed gas price risk in advance of dispatch, as gas prices soared to $100/MMBtu 2015: Are We Ready for the Next One? PJM has asked FERC to temporarily raise its cost-based offer cap to compensate generators in polar vortex-type event NERC has proposed to consolidate and streamline emergency grid operations requirements, EOP-011-1 Even so, many forecasts do not indicate another polar vortex this winter
- January 2014: Very cold weather spiked gas and electricity markets in the upper Midwest, Northeast, and the Southeast for several days. Some brushed with emergency conditions due to insufficient generation. Gas pipeline utilization was pushed to its limits by coincident heating and generation load peaks.
- Sources: SNL Financial; FERC Technical Conference on Winter 201314 Operations and Market Performance in RTOs and ISOs (Apr. 1, 2014); PJM; AccuWeather; EBW Analytics Group/Weather Decision Technologies Inc.; UBS Global Research; industry news; ScottMadden analysis
- Jan. 2014 PJM-Wide Day-Ahead and Real-Time Power Prices vs. Temperature Difference from Average Low (F) (Philadelphia, PA)
- We see the bulk of the pull back in power (and gas for that matter) as attributable to winter-gas
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