ICForecast Energy Outlook Projects Increasing Number of New Gas Builds to Meet Reserve Margin Needs

Business Wire


ICF International (ICFI), a leading provider of consulting services and technology solutions to government and commercial clients, has released its ICForecast Energy Outlook, previously known as the Integrated Energy Outlook, for the fourth quarter of 2013. The study highlights the near- and long-term future of gas prices; the impacts of proposed U.S. federal environmental regulations; and projections on pollution control installations, coal production, and renewable energy development.

The ICForecast Energy Outlook projects an increasing number of new gas builds to meet reserve margin needs due to nearly 60 GW of coal retirements projected over the next four years in response to environmental and fuel market drivers, coupled with moderate demand growth as the economy continues to recover. The impact of coal generation units retiring or becoming more expensive to operate will drive power prices upward, especially in the Midwest and Southeast, where most coal capacity is located.

The renewable market activity has been influenced by the recent extension of the production tax credit which has supported wind capacity development to some extent in the near-term. However, the long-term outlook on national wind development remains unaffected. State renewable energy mandates will remain the driver of central-station renewable energy development through the next decade.

In the coal markets, near-term, weather-driven demand has moderated coal consumption. International prices are down from the past three years, which makes U.S. coal less competitive and is reducing U.S. exports in 2013 compared with the record high exports in 2012. With gas prices expected to remain low for the next several years, and electric load growth at moderate levels in many areas, domestic coal demand will remain flat in the near- to mid-term with a gradual decline starting in 2025.

In the gas market, producers have maintained output despite a decline in rig counts due to high yields from the shale plays. Also, the lack of gas processing capacity in the Marcellus natural gas production basin, located in the Northeast U.S., has resulted in higher volumes of marketed gas because of “ethane rejection.” This strong supply environment, combined with relatively weak demand due to mild summer weather, has resulted in gas prices of $3.50 per million British thermal units (MMBtu) or below throughout most of the U.S. While ICF expects gas prices to remain soft for the next 18 to 24 months, we expect prices to firm rapidly as demands from new petrochemical plants, LNG export terminals, and pipeline exports to Mexico start ramping up in 2015. These new demands, combined with increases in demand resulting from expected coal plant retirements, will place significant upward pressure on gas prices and increase the potential for price volatility through the end of the decade.

“The Energy Outlook provides big picture insights about volatile energy markets and discusses how those drive market-specific capacity projections and price forecasts,” said Chris MacCracken, principal for ICF International. “For example, it discusses coming environmental regulations and changing natural gas market dynamics, and shows how those balance to impact regional power markets in different ways.”

The ICForecast Energy Outlook addresses a number of significant issues, including:

  • How low gas prices are spurring new demand in the industrial and power sectors
  • What gas prices will look like over the next five years as new demand is created by coal plant retirements and new liquefied natural gas export terminals that could place additional upward pressure on prices
  • Coal pricing trends into 2014 and beyond
  • How the current regulatory and low natural gas environment is expected to cause some permanent demand destruction for coal use in the electric generation sector
  • How U.S. coal supply/demand dynamics affect the export market

Using a suite of proprietary analytical tools and by incorporating global expertise from all areas of the industry, ICF utilizes a fully integrated assessment of wholesale power, transmission, fuel, and emissions markets in order to offer the most complete picture of the energy industry. The report offers insight into the key areas of emissions, gas, coal, renewable energy, and power.

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About ICF International

ICF International (ICFI) partners with government and commercial clients to deliver professional services and technology solutions in the energy, environment, and infrastructure; health, social programs, and consumer/financial; and public safety and defense markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program lifecycle, from research and analysis through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 4,500 employees serve these clients from more than 50 offices worldwide. ICF's website is http://www.icfi.com.

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