The crystal ball tells all

Kathleen Wolf Davis | Jan 12, 2014

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As regular as your grandfather’s German hall clock, the U.S. Energy Information Administration recently released their annual short-term energy outlook—right on the expected hour. But, for the first time, it looks ahead farther than ever—into 2015. So, what does it predict for the future of power in the U.S.? We’ll give you the highlights and the warnings in three easy steps.

The EIA numbers have some traditional throwbacks and a few surprises, including a minor coal resurgence and a major uptick in solar generation through 2015.

 

Step one:

The black rock rebounds, then falls again

First, let’s talk coal.  I’ve always had a soft spot for coal—maybe because I actually come from a long line of Kentucky coal miners. Still I thought I was one of the few left with that soft spot, especially seeing as electric production from coal fell in a near parallel to the increase in renewables in the last couple of years—almost nine percent. 

But, the EIA expects a bounce upward for the classic black rock as natural gas prices go up in 2014. (Nothing motivates a soft spot like high prices.) It’s a modest upswing of 3.6 percent, or about what coal lost in the last year or so. Still, don’t expect those happy days to last for coal. The stars don’t seem so aligned for that uptick to continue much past the end of 2014.

There’s a double whammy on the 2015 horizon for the coal industry. 2015 will see a number of coal-fired plants retiring and some serious implementation of the EPA’s mercury and air toxic standards. According to the EIA, coal will lose most of its 2014 gain by the end of 2015, bringing it back to very close to today’s use level—so coal’s on a two-year cycle to be back where it started, apparently.

Does this signal the death throes of coal generation? Let us know what you think in the comments below.

 

Step two:

What’s happening on the home front

Not much in prices. There’s certainly no big change brewing in the residential price market. For the next two years, we hover around an average of 12 cents per kilowatt hour. To be specific, there’s a range from 11.47 cents in January 2013 to a projected 12.30 cents at the end of 2015—not even a full cent’s difference, which should be good for the personal budgets of consumers but does leave one to wonder how that stagnation may impact a utility’s upgrades in technology and infrastructure.

What’s not stagnating in this home equation is use. In fact, that’s actually going down—not really because we’re using less. We just use things smarter—or technology helps us use power more intelligently, I guess I should say.

EIA Administrator Adam Sieminski put it this way:  “Improvements in appliance and lighting energy efficiency have helped slow the growth in residential electricity use in recent years. Average household consumption is expected to decline 1.1 percent this year and another 0.4 percent in 2015.”

The report also mentions the use of compact fluorescent bulbs and LED as adding to this efficiency, which will grow, we’d imagine, since the old-fashioned bulb is now on the outs as of the first of January. But, don’t think it’s all down hill. There are some upticks here, too—at least outside the home.

“While residential electricity consumption may decline because of more energy-efficient appliances and lighting, the improving economy will cause a boost in electricity use by the U.S. industrial sector, which is forecast to consume 2.2 percent more electricity this year and 2.5 percent more in 2015,” Sieminski added.

So, we’re saving at home to give it to industry, apparently, but, hey, that puts off thoughts of a consumption “death spiral” where efficiency gains run a power company out of its own business. (More on death spiral fears can be found by clicking here.)

Will we keep gaining ground on consumption with efficiency? Should we even want to, or are we creating our own death spiral and putting ourselves out of business? Give us your thoughts in the comments below.

 

Step three:

Go, go renewables

While it still represents a very small part of overall power generation in the U.S., there’s no stopping renewables these days, especially solar (more PV than thermal, though there are more thermal installations in the works than before).  With overall renewables, what started in 2006 as a fraction so small it didn’t register on the graph is projected to top 786 thousand megawatthours per day in 2015, overtaking hydropower on the EIA generation-by-fuel charts.

Sieminski commented that wind power will gain almost nine percent this year and an additional fifteen percent in 2015—if you’re keeping track of that math mentally, that’s a total of 24 percent—while solar will make a 40 percent leap by the end of 2015, he believes.

That’s not so odd when looking at recent solar history in the U.S. Installations have been on the rise since 2008 with a curve that’s almost straight-line steep annually since 2010. But, those numbers aren’t as much reflective of a rising number of unique installations as a rising number of utility-scale installations—read: much, much bigger than old school rooftop.

Why so much movement in this area and not, say, in coal? It may be all about help. Federal, state and local programs are all around to encourage solar development, along with that 30 percent investment tax credit through 2016. Add to those support programs and tax credit plummeting production costs and you have the makings of a “perfect storm” for solar—at least to 2016.  (Apologies, Sebastian Junger. I couldn’t resist keeping your phrase in the conversation.)

So, is solar the wave of the power future, or will it’s heyday end with the tax credit in 2016? How far can it go without real storage breakthroughs? Tell us all about it in the comments below.

 

The EIA’s full short-term energy outlook can be downloaded by clicking here.

 

Continue this conversation on what will impact the power sector by attending the EnergyBiz Securing Power Forum March 3-4 In Washington D.C. Learn more by clicking here

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