Coal-fired generation stays longer, gas generation grows slower in new forecast

Houston — Coal-fired generation has been forecast to slow its decrease in share of US generation in S&P Global Platts Analytics' latest long-term forecast, compared with an earlier forecast, and natural gas-fired generation's share growth is also forecast to slow, but wind and solar output are forecast to accelerate.

"This kind of renewable penetration has to go hand in hand with lots of storage installations," said Manan Ahuja, Platts Analytics' senior director of North American Power, in an email Monday. "If these forecasts prove accurate (or close to it), we would likely see a significant compression of on-peak/off-peak wholesale price spreads."

The Platts Analytics North American Electricity Long-Term Forecast, issued May 4, extends the time horizon to 2050, compared with the October 22 forecast's 2040 time horizon.

The new forecast reflects upgraded accounting for electrification of various activities, such as heating and transportation, plus new state clean energy goals, Ahuja said.

The latest forecast covers a variety of topics, but the "Generation by Fuel Type and Load for the US" table shows some stark differences from the October table, including the following:

• Coal output to average 34.2 GW in latest forecast, compared with 19.8 GW in October forecast, 198.4 GW in 2019
• Gas output to average 153 GW, compared with 228.1 GW in October forecast, 167.7 GW in 2019
• Wind output to average 111.4 GW, compared with 86 GW in October forecast, 34.1 GW in 2019
• Solar output to average 78.1 GW, compared with 58.1 GW in October forecast, 7.8 GW in 2019

LOWER LOAD FORECASTS

Ahuja emphasized the importance of seeing the change in coal and gas forecasts "in the context of lower load forecasts as well (apart from the lower renewable costs and [higher] environmental goals)."

"The load forecast is lower due to energy efficiency continuing to flat-line load growth for a long time before electric vehicle charging and electrification play a role in moving up loads in later years of the forecast," Ahuja said

Acknowledging that the new forecast reflects, in effect, a slowdown in coal-to-gas switching, Joshua Rhodes, a research associate at the University of Texas' Webber Energy Group, said in an email that contributing factors could include "higher gas prices due to less associated gas production and (longer-term) rapid declines in the cost of energy storage and demand response that reduce the demand for firming capacity."

Webber Energy Group analyzes energy and environmental issues in engineering, policy and commercialization contexts.

Travis Whalen, a Platts Analytics power market analyst, said that while "the trends are still pretty much the same," the new forecast reflects "a somewhat higher gas [price] forecast extended over the long term."

"How quickly resources are forced out of the stack will depend on some combination of the fuel cost assumptions and the environmental policies," Whalen said in an email Monday. "There just wasn't a ton of coal still assumed to be operating in areas that saw loftier environmental targets."

WIND, SOLAR ACCELERATION

Regarding the substantial acceleration of wind and solar generation output by 2040, which was up 29.5% for wind and 34.4% for solar, Ahuja said these "are related to the environmental policies as more states are targeting significant clean energy and/or renewable energy targets."

"On top of that, economics also plays a role as costs for wind and solar installations have continued to decline (as compared to the cost curves used in the October 2019 forecasts)," Ahuja said.

Whalen said a change in the Electric Reliability Council of Texas' Operating Reserve Demand Curve adder, designed to have the price-adder deployed more frequently at higher levels, "results in much slower retirements and very limited gas additions, which ultimately makes wind and solar the only economic projects available much of the time."