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Clean Power Plan replacement 'not relevant'

Houston — Bloomberg's New Energy Outlook 2019 concludes that US coal and nuclear resources are expected to have "almost disappeared from the electricity mix" by 2050, largely as a result of "age and economics," while renewables penetration reaches 43%.

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The report drew mixed reactions Wednesday from power industry observers.

"Many coal plants in the US are old and are thus not competitive economically," Ethan Zindler, head of Americas for Bloomberg New Energy Finance, said Wednesday. "Same story for many nuclear plants, which are due to retire over the next several decades and are also in many cases not competitive."

The report, released Tuesday, states that "cheap renewable energy and batteries fundamentally reshape the electricity system," and projected that solar will rise from supplying about 2% of current world electricity supply to about 22% by 2050.

Such a scenario is likely to result in long periods with extremely low prices punctuated by other periods of high volatility, said Morris Greenberg, Platts Analytics managing director of North American power.

"A system with substantial zero variable cost generation would likely see many hours with zero prices and large seasonal surpluses," Greenberg said Wednesday in an email. "There would also be periods of very high prices (summer and winter evenings) or high capacity prices to incentivize storage additions."

However, Gary Ackerman, president of Foothill Services Nevada and former executive director of the Western Power Trading Forum, questioned the NEO 2019 generation mix conclusions.

"[The] unbridled enthusiasm for renewable growth echoes a previous time in our industry when the very same statements were being made in the 1970s regarding nuclear power," Ackerman said Wednesday. "Funny, none of those forecasts turned out to be correct. The same will be said about the much anticipated renewable and battery storage explosion. I am always amazed by the substitution of intelligent reasoning with straight-edge rulers plotting lines on log-linear paper."

OTHER ANALYSES

Nevertheless, Bloomberg NEF is not alone in its forecast for dwindling coal and nuclear output and surging renewables and natural gas generation. S&P Global Platts Analytics' latest North America Electricity Long Term Forecast, which only extends to 2040, shows average monthly coal output, as a share of total generation, falling to less than 6% in 2040 from about 29% in 2018, and it shows nuclear power's share falling to less than 11% in 2040 from about 20% in 2018.

"Some nuclear operators are likely to attempt to extend operating licenses to 80 years, which would support nuclear generation to some extent, although it would still decline from current levels," Platts Analytics' Greenberg said.

BNEF's forecast for 2040 shows coal's share falling to about 3.8% in 2040 and nuclear's share falling to about 6.2%.

In contrast, BNEF forecast renewables' share jumping to 43% in 2050, up from its forecast of about 35% in 2040 and 26% in 2030. BNEF includes conventional hydro in its renewables forecasts.

Platts Analytics forecast renewables to total about 28% of the generation mix in 2030 and about 34% in 2040.

These numbers would represent big jumps from the US Energy Information Administration's estimate of 15% in 2018.

NEW RULE 'NOT RELEVANT'

Asked whether the Affordable Clean Energy rule, the Clean Power Plan replacement newly finalized by the US Environmental Protection Agency, might alter BNEF's outlook for fossil fuels versus renewables, Zindler said such rules are "not relevant."

"We have long said that even the more aggressive goals of Obama's Clean Power Plan would have been met well ahead of schedule," Zindler said. "This apparently less-aggressive plan is also irrelevant."

Jeff Schroeter, managing director of Plano, Texas-based Genova Power Advisors, a power project developer and consultancy, said, "economics will still drive more generation additions than governmental policy."

"Baseload central stations were economy-of-scale plays of the past," Schroeter said Wednesday in an email. "Variable, but predictable, resources (wind and solar) are teaming with all methods of demand shifting (storage, active load management, price signals) to match load shape. Gas-fired peaking and ultra-efficient gas combined-cycle plants will only be financed as backstops to renewables, shifting and resource gap fillers."

Eric Smith, associate director of the Tulane Energy Institute, agreed that "the demise of coal is likely, but for economic reasons, not ideology."

"Nuclear is a bit more nuanced, with many of today's plants still operating in 30 years from now in 2050," Smith said in an email Wednesday. "Plus I expect some additions to the nuclear fleet based on newer, smaller, standardized units with more competitive operating costs."

-- Mark Watson, markham.watson@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com