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The transition takes shape: WECC long term outlook H2 2018 (the 'Federal Carbon' case)

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02 January 2019

The transition takes shape: WECC long term outlook H2 2018 (the 'Federal Carbon' case)

Report summary

The future course of North America (NA) Power & Renewables (P&R) markets is now molded by an ongoing transformation of the energy industry. Wood Mackenzie's 'Federal Carbon' case represents a policy and technology case that attempts to chart the most likely course for the next 20 years. Key assumptions around federal carbon pricing reflect a regulatory environment that is expected to occur, in part, to ensure continued de-carbonization of the energy sector.

Table of contents

    • Clean energy policy
    • 100% clean energy now starting to get codified into law; reliability in focus with higher renewable targets; Non-federal actors continue to drive ever increasing clean energy mandates.
    • Wood Mackenzie Federal carbon (reference) case acknowledges the certainty of policy changes overtime.
    • More regions looking to price carbon or increase carbon targets in the absence of federal legislation. By 2019 -- upwards of 200 US businesses are expected to reflect carbon pricing for investment decisions, 11 US states subject to some form of carbon price increasing to 12 (Virginia into RGGI) in 2020. All Canadian provinces are subject to a carbon price starting 2019 based on provincial policies or federal backstop prices.
    • This outlook assumes a similar federal carbon price in the US starting 2028. This serves as a backstop floor price for all states under regional programs. While comparing these prices is not necessarily apples to apples, it is useful nevertheless to outline carbon pricing trends.
    • 2018 loads expected to surpass 2007 levels reflecting more than a decade of lost demand growth in the US. Future demand trends remain heavily leveraged to 'new energies' like energy efficiency, distributed generation and electric vehicles – expected to account for a fifth of electric demand in 2040.
    • As step function efficiency gains begin to moderate, early signs of an expected demand recovery are now emerging. Even so, the days of 1% p.a. plus growth are not likely to return on a country – wide basis. At least until new end use electrification starts to take off.
    • Renewables, storage & hybrid technologies
    • (renewables include utility scale and distributed Solar + onshore and offshore wind)
    • Zero carbon resources accounted for almost 90% of new interconnection queue requests in 2018. Renewables expected to increase from 8% of generation in 2018 to 45% of generation by 2040 (compared to 40% by 2040 in the H1 2018 case)
    • While utility scale solar and wind are expected to dominate renewable generation, emerging technologies are set to radically increase their market share. Residential and commercial solar is expected to account for 30% of all solar generation in 2040, doubling from today's levels. Offshore wind accounts for 20% of wind generation by 2040, up from negligible levels today.
    • Utility scale solar
    • Residential Solar
    • Non-Residential Solar
    • Onshore Wind
    • Offshore Wind
    • Battery Storage (Grid scale)
    • 150 GW of battery storage capacity by 2040, from negligible levels.
    • Hybrid Systems (Solar plus storage, Wind plus storage)
    • Coal retirements: By 2040, Canada has little to no coal capacity left while only 30% of the current US coal fleet survives
    • Nuclear: Significant nuclear capacity exit post 2032 as many plants reach their 60 year life
    • Natural Gas: Natural Gas capacity growth continues largely to replace coal and nuclear power plants and to backstop renewables. Battery storage deployment beats out new peakers by a staggering 5:1 ratio
    • Technology LCOEs (levelized cost of energy): Cost of mature solar and wind technologies now below gas technologies across geographies in NA; expected to stay that way despite phase down of subsidies.
  • Battery Cost
    • Natural Gas: below $3/mmbtu until 2028, below $4/mmbtu until early 2030s, approaches $5 by 2040
    • Resource Adequacy: shift away from traditional baseload supply putting strain on existing generation fleet
    • Power prices – Despite flat prices in the near to mid-term, long term price growth picks up despite continued renewable integration. Carbon assumptions and higher overall gas prices create price recovery.
  • Conclusion

Tables and charts

This report includes 5 images and tables including:

  • Figure 3: Battery Cost Forecast
  • Figure 1: Demand Trends
  • Figure 2: LCOE ($/MWh) forecast for various technologies
  • Figure 4: H2 2018 vs H1 2018 Forecast Henry Hub ($2018/mmbtu)
  • Figure 5: H2 2018 vs H1 2018 power price forecast for selected markets ($2018/mmbtu)

What's included

This report contains:

  • Document

    the-transition-takes-shape-wecc-long-term-outlook-h2-2018-the-federal-carbon-case_pr.pdf

    PDF 511.10 KB

  • Document

    NAPRS_LTO_Delivered_Fuel_Prices_Real_WECC_12_15_2018.xlsx

    XLSX 451.69 KB

  • Document

    NAPRS_LTO_Emission_Prices_Nominal_WECC_12_15_2018.xlsx

    XLSX 47.95 KB

  • Document

    NAPRS_LTO_Emission_Prices_Real_WECC_12_15_2018.xlsx

    XLSX 48.59 KB

  • Document

    NAPRS_LTO_Emissions_WECC_12_15_2018.xlsx

    XLSX 102.99 KB

  • Document

    NAPRS_LTO_Load_Forecast_WECC_12_15_2018.xlsx

    XLSX 2.72 MB

  • Document

    NAPRS_LTO_Macroeconomics_WECC_12_15_2018.xlsx

    XLSX 125.79 KB

  • Document

    NAPRS_LTO_Prices_Sparks_IHR_Darks_Nominal_WECC_12_15_2018.xlsx

    XLSX 6.16 MB

  • Document

    NAPRS_LTO_Prices_Sparks_IHR_Darks_Real_WECC_12_15_2018.xlsx

    XLSX 7.80 MB

  • Document

    NAPRS_LTO_Supply_Demand_Energy_WECC_12_15_2018.xlsx

    XLSX 1.05 MB

  • Document

    NAPRS_LTO_Coal_Retirements_WECC_12_15_2018.xlsx

    XLSX 132.94 KB

  • Document

    NAPRS_LTO_Delivered_Fuel_Prices_Nominal_WECC_12_15_2018.xlsx

    XLSX 445.45 KB

  • Document

    201812 LT Federal Carbon Case explained.pdf

    PDF 178.68 KB

  • Document

    The transition takes shape: WECC long term outlook H2 2018 (the 'Federal Carbon' case)

    ZIP 23.68 MB

  • Document

    NAPRS_LTO_Capacity_Prices_WECC_12_15_2018.xlsx

    XLSX 222.74 KB

  • Document

    NAPRS_LTO_Renewable_Energy_Credit_Prices_WECC_12_15_2018.xlsx

    XLSX 925.52 KB

  • Document

    NAPRS_LTO_State_RPS_Targets_WECC_12_15_2018.xlsx

    XLSX 676.41 KB

  • Document

    2018 H2 West Regional Market Outlook.pdf

    PDF 2.53 MB

  • Document

    NAPRS LTO H2 2018 Federal Carbon Case Report_pr.pdf

    PDF 3.29 MB

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