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Midwest power markets long-term outlook H2 2014

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Report summary

Electricity demand has faced strong headwinds over the past 7 years. However 2015 may be a tipping point that sees demand growth accelerate. Nonetheless shale gas plays continue to exceed prior expectations putting downward pressure on prices. This and changing public sentiment have eroded support for new coal and nuclear units. The move to natural gas and renewables is causing changes to the very definition of reliability and is transforming capacity markets and compensation in the region.

What's included

This report contains

  • Document

    Midwest Regional Market Overview.pdf

    PDF 2.51 MB

  • Document

    naps lto exec summary h2 2014.pdf

    PDF 2.47 MB

  • Document

    NAPS Modeling and Reporting Enhancements H2 2014.pdf

    PDF 49.25 KB

  • Document

    Midwest power markets long-term outlook H2 2014

    ZIP 18.39 MB

  • Document

    NAPS LTO Capacity Prices Midwest 11 30 2014.xls

    XLS 642.00 KB

  • Document

    NAPS LTO Coal Clean Equipment Data Midwest 11 30 2014.xls

    XLS 443.00 KB

  • Document

    NAPS LTO Coal Retirements Midwest 11 30 2014.xls

    XLS 170.50 KB

  • Document

    NAPS LTO Delivered Fuel Prices Nominal Midwest 11 30 2014.xls

    XLS 337.50 KB

  • Document

    NAPS LTO Delivered Fuel Prices Real Midwest 11 30 2014.xls

    XLS 336.50 KB

  • Document

    NAPS LTO Emission Prices Nominal Midwest 11 30 2014.xls

    XLS 132.50 KB

  • Document

    NAPS LTO Emission Prices Real Midwest 11 30 2014.xls

    XLS 132.50 KB

  • Document

    NAPS LTO Load Forecast Midwest 11 30 2014.xls

    XLS 6.25 MB

  • Document

    NAPS LTO MacroEconomics Assumptions Midwest 11 30 2014.xls

    XLS 1.79 MB

  • Document

    NAPS LTO Prices Sparks IHR Darks Nominal Midwest 11 30 2014.xls

    XLS 14.00 MB

  • Document

    NAPS LTO Prices Sparks IHR Darks Real Midwest 11 30 2014.xls

    XLS 14.01 MB

  • Document

    NAPS LTO Renewable Energy Credit Prices Midwest 11 30 2014.xls

    XLS 4.56 MB

  • Document

    NAPS LTO State RPS Targets Midwest 11 30 2014.xls

    XLS 2.47 MB

  • Document

    NAPS LTO Supply Demand Energy Midwest 11 30 2014.xls

    XLS 2.65 MB

  • Document

    NAPS LTO Transmission Expansion Midwest 11 30 2014.xls

    XLS 94.00 KB

  • Document

    Midwest power markets long-term outlook H2 2014

    PDF 1.91 MB

  • Document

    Executive summary

    PDF 75.25 KB

  • Document

    Policy and regulation

    PDF 1.00 MB

  • Document

    Demand

    PDF 197.28 KB

  • Document

    Costs

    PDF 159.44 KB

  • Document

    Supply

    PDF 185.02 KB

  • Document

    Trade

    PDF 72.28 KB

  • Document

    Prices

    PDF 499.39 KB

Table of contents

  • Executive summary
    • Emission reduction policies shadow energy markets
    • EPA's proposed Clean Power Plan (CPP), which regulates carbon at existing plants, poses the next major regulatory hurdle
    • Mercury Air Toxics Standards (MATS) and Cross-state Air Pollution Rule (CSAPR), keeping scheduled coal retirements
    • Regional Haze Rule
    • Outside the US, Canada’s carbon standards will drive age-based retirements
    • With limited retirement implications, several other EPA rules continue to forge ahead
      • Supply
      • Demand
      • Henry Hub price outlook
      • Basis outlook
      • Key takeaways:
      • Power sector fundamentals offer little support
      • Key takeaways:
      • United States federal regime
      • California (and Quebec) cap and trade
      • RGGI
      • Implications on coal-to-gas switching
    • Key takeaways:
    • Coal Retirements
    • Coal to gas conversions accelerate our retirement projections
    • Changes in federal policies could drive incremental retirements
    • Federal policy reversal combined with local reliability rules could lessen the final tally of retirements
    • Expansion of distributed solar generation to see support as soft costs come down
    • Figure 16: New Supply by source
    • Key takeaways:
      • Key takeaways:
    • Competitive transmission projects still see obstacles to project success\
    • Key takeaways:
    • ERCOT: Market attempts to correct for true amount of wind penetration on prices
    • Impact of Operational Reserve Demand Curves in summer of 2014
    • PJM:
    • Winter/summer pricing dynamics driven by dual natural gas pipeline capacity limits
    • Summer upside still exists for pricing
    • Winter basis continues to exceed western markets through the forecast horizon
    • MISO:
    • Marcellus pushes into the Midwest via transmission capability until natural gas pipeline capacity is expanded in 2018
    • Northeast - winter basis pressure is alleviated over the forecast
    • Southeast – significant changes begin to overtake power markets in quick succession
    • WECC
    • As the high cost regional market, California drives prices across the WECC
    • Coal retirements boost local natural gas generation in Desert Southwest
    • Pacific Northwest pricing relationships to change on transmission build out
    • Colorado: an eddy against the stream
    • Alberta: an island on to itself
    • Key takeaways:
    • Figure 22: Sample ISO Wide Demand Curve
    • Supply Demand Balance and Capacity price projection
    • SEMA-RI zone shortage in 2018
    • The interplay of Pay for Performance and Dynamic De-list
    • 2015 and 2016
    • 2017
    • 2018 +
    • PJM Capacity Performance
    • Capacity Markets to Grow?
    • Key takeaways:
    • NEPOOL-GIS
    • PJM-GATS
    • WREGIS
    • NYSERDA
    • MIRECS and M-RETS
    • NARR
    • ERCOT
    • Net revenue analysis for North American power markets will be disrupted by new wind and solar capacity being integrated over the forecast horizon

Tables and charts

This report includes 32 images and tables including:

Images

  • Figure 2: GDP growth and electric demand growth linkage
  • Figure 3: State Retail Sales: Percentage above/below pre-recession levels
  • Figure 4: Domestic Energy and its impacts : Resurgence of Industrial Demand
  • Figure 1: CPP Compliance Timeline
  • Figure 13: Comparison of Wood Mackenzie assumed coal retirements over previous forecasts
  • Figure 14: Installed wind capability
  • Figure 15: Large Scale Solar
  • Supply: Image 4
  • Supply: Image 5
  • Figure 18: Changes in generation by region 2014-2035
  • Supply: Image 7
  • Figure 20: Change in regional emissions
  • Figure 21: Regional supply and demand balances
  • Prices: Image 1
  • Figure 23: New England Surplus reserve margin
  • Figure 24: Capacity Price projection for ISO-NE Capacity Zones
  • Prices: Image 4
  • Figure 26: NYISO Cap Price forecast
  • Figure 27: PJM & MISO Supply Demand Balances
  • Figure 28: MISO and PJM Prices
  • Figure 29: California resource economics for new generating capacity
  • Figure 30: ERCOT resource economics for new generating capacity
  • Figure 5: Current demand response saturation by market as percent of peak
  • Figure 6: Distributed Generation Forecast
  • Figure 7: Henry Hub Price Forecast (H2 2014 vs H1 2014)
  • Figure 9: FOB coal price forecast (Real 2014 US$)
  • Figure 10: Base Case assumed carbon price
  • Figure 11: Coal Gas Parity
  • Costs: Image 5

Tables

  • Policy and regulation: Table 1
  • Prices: Table 1
  • Prices: Table 2

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