Recent Study: United States Power Report Q3 2012

New Energy research report from Business Monitor International is now available from Fast Market Research

by Bill Thompson

(WireNews+Co) - Boston, MA - 20 October 2012

BMI View: With the US economy likely to stage a slow recovery, our Country Risk analysts maintain their below-consensus 2.0% real GDP growth forecast for 2012 and both our short- and long-term views for the US power sector remain in place. Although the release of new historical generation and capacity data by the Energy Information Administration (EIA) has prompted us to revise our forecasts, we remain of the opinion that the US' mature power market will realise only a moderate rise in generation and consumption over the coming years. Most notably, factoring in the most recent industry-specific, weather and macroeconomic indicators, we have further moderated our 2012 consumption growth forecast to 0.89% (previously 1.27%).

View Full Report Details and Table of Contents (http://www.fastmr.com/prod/451411_united_states_power_report_q3_2012.aspx) (http://www.fastmr.com/prod/451411_united_states_power_report_q3_2012.aspx)

Recently released industry-specific and macroeconomic indicators have reaffirmed BMI's belowconsensus real GDP growth forecast for the US (Bloomberg consensus is 2.3%), as a strong finish to 2011 has given way to disappointing employment and production data. In light of these developments, and of new data specific to the power sector, we thus remain of the opinion that growth in the US electricity market will remain sluggish in 2012. That said, we see the power market in the US performing better than in 2011.

In addition, based on these short-term considerations, as well as on longer-term expectations, we also maintain our view that electricity consumption, and thus generation, will grow only modestly over our forecast period (2012-2021). Taking into account the existing level of installed capacity and planned retirements, the country's power sector appears relatively well positioned to meet power demand, and BMI's long-held view that investment in new electricity generating capacity will drop from recent record levels in the coming years remains in place.

This notwithstanding, progressive changes in the power generation mix will continue to take place, with new gas volumes and changes in prices playing a cardinal role:

- The green credentials of gas-fired generation, and the favourable economic circumstances, are a primary cause of coal's diminishing position as the fuel of choice in the US. The country's power plants produced the same amount of electricity from natural gas and coal for the first time in April 2012, and the coal sector in the United States was hit very hard over H112.
- Similarly, comparative capital and fuel-related costs will influence technology choices for new renewables generating capacity. Aside from cheap gas, regulatory uncertainty is bound to significantly affect capacity planning, with recent data from Q112 fully illustrating the boombust scenario being experienced across the US renewable sector owning primarily to the expiry of some tax credits and guarantee programmes.

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