Happy New Year. As we welcome 2009, I can confidently say that generally it will not be an easy year for our industry. The world's and our nation's economies are more uncertain and difficult to navigate than they've been in years. Climate change and the industry's environmental impact have become major issues for lawmakers and the public, and electricity generators are squarely in the sights of organizations aiming to curb greenhouse gases. In addition, President Barack Obama's energy plans will affect the industry?some positively and others negatively.
I have a few 2009 predictions to share with you:
Few new coal-fired plants will be permitted or built in 2009. In these uncertain regulatory and economic environments, financing, siting and building new generation is difficult and risky. It is nearly impossible to find anyone who doesn't expect new environmental and CO2 legislation in 2009 or 2010. Until the new environmental regulations are defined and become law, most generators will likely consider any new coal-fired generation construction projects too risky to pursue. The price of carbon must be known before the real cost of new coal-fired generating facilities can be predicted. Even if an electricity generator risks building a new coal-fired plant, opposition will be plentiful, making it harder than ever to get a new coal-fired plant approved.
Although new nuclear is getting much attention and several utilities, consortiums and pairings of both have announced plans to build new plants, the progress has been slow and the risks are still high. The estimated cost to build a new nuclear plant varies depending on the source, but most agree it will be high. Even with a streamlined licensing process, it is unclear how long or arduous licensing will be. In addition, the new administration has indicated that until a solution to the long-term storage of spent fuel is found, it will not support new nuclear. I've heard a few people predict there will be no new U.S. nuclear plant construction during the next eight years.
While renewables have been touted as the answer to our nation's generation capacity needs, most technologies are still too expensive and few are mature enough to contribute enough megawatts to meet expected electricity demand. Wind capacity is growing, but the industry must invest heavily in new transmission to move large amounts of electricity from remote to heavily populated areas where power will be needed. In addition, the current credit crisis has depleted available capital for new renewables projects. Many experts believe, however, that a national renewable portfolio standard is inevitable. Such a standard, along with the Obama administration's plans to support and encourage more green-energy initiatives through its economic stimulus package, will keep renewable energy growing.
During the next few years, many electricity providers will default to natural gas-fired generation to meet much of their additional capacity needs. Although history shows that natural gas price volatility can result in high electricity prices, for the near future, natural gas-fired, combined-cycle plants are more cost-effective and easier to site than any other generation option.
The grid will get the most attention in coming years. Many utilities consider improving grid efficiency and finding ways to curtail demand as a better solution than adding capacity when it comes to meeting future energy needs.
Most utilities will delay adding new capacity as long as possible. They will create energy-efficiency programs for customers and invest in demand response (DR) and smart grid technologies that will allow them to meet new demand with their current generation resources. Many DR and smart grid technologies are mature and proven, making them the lowest-risk and -cost options. In most cases, new climate change policies will not increase the costs of smart grid technologies. In addition, the technologies and projects can be implemented without the public hearings and siting requirements required for new power plant construction projects. And, we can't forget the new administration's planned stimulus package that will promote the advancement of smart grid technologies.
These are my predictions for 2009. I look forward (I think) to seeing how they compare to what actually occurs.
Teresa Hansen, editor in chief