Four issues facing North American power, gas, coal and renewable sectors in 2018 and forward
A broad set of forces from global energy markets to state/provincial policies are reshaping the North American power, gas, coal, and renewable industries. Questions remain as North America continues to be the marginal supplier of oil and LNG to global markets. Stabilizing oil prices from OPEC production cuts is leading to increased US drilling activity and the associated gas will exacerbate the coming LNG supply glut in the early 2020s. Disparities in natural gas pipeline access in the United States create supply gluts in some regions and scarcity in others. What are the issues businesses in the power, natural gas, coal, and renewable sectors should be paying attention to?
1. North American Natural Gas Markets – Going Oily and Arriving Late
North American natural gas production is gaining momentum, with even stronger growth expected in 2018 because of more associated gas from increased oil drilling and pipeline expansions, while somewhat delayed, increasing availability of Appalachian supply. The Gulf Coast weather-driven demand/supply balance will remain the key driver of Henry Hub prices through the winter, and we expect higher production—both regionally and via Appalachian north-to-south capacity—along with increased storage withdrawals to enable this region to meet growing exports and stronger heating loads, assuming normal weather. Cove Point LNG exports, while adding new natural gas demand for Appalachian producers, will contribute to an expected global LNG glut.
Key questions – To what extent can gas-to-coal switching help balance the market? What role does storage play? How will price respond to various weather scenarios? How are growing LNG exports affecting today’s market?
2. A patchwork of state and provincial policies reshape the power sector
With federal carbon dioxide policy derailed, and low natural gas prices the new normal, state policies reemerge as a dominant force in shaping the North American power sector. State and provincial policies amount to a complex patchwork of drivers that will impact net on grid power demand, renewable penetration, subnational carbon allowance pricing and wholesale energy prices. Understanding how state policies vary and their anticipated market impacts will be critical for business decisions.
3. How Are North American Renewables Markets Evolving?
The current boom in US renewables development has been driven by continued declines in wind and solar costs, along with the extended federal tax credits for renewables and continued state policy momentum. What is the relative impact of these drivers on the evolution of renewables markets? Where is renewable pricing today? And where is it headed? What are the key elements of regional renewable demand?
4. US Grid-Batteries: Niche or a Game Changer?
As the cost of lithium-ion battery modules declines and a new wave of supportive policies emerge, grid battery storage development is targeting value streams beyond frequency regulation. How much further grid battery costs are expected to fall? What applications are likely to flourish? How large is this market expected to be?
Alex Connell is a Senior Account Executive at IHS Markit.
Posted 19 January 2018
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