Recently Released Market Study: United States Power Report Q1 2013

Recently published research from Business Monitor International, "United States Power Report Q1 2013", is now available at Fast Market Research

by Bill Thompson

(WireNews+Co) - Boston, MA - 20 February 2013

BMI View: The massive power outage caused by Hurricane Sandy in the Northeast brought the country's electricity sector in the limelight this quarter, leaving 8.2mn customers without power and exposing utilities to very large restoration costs. This exceptional event aside, we note that several trends previously identified by BMI continued to play out with. Most notably, almost all regions of the country experienced an increase in natural gas-fired generation when compared with 2011. In the non-hydro renewables segment, uncertainty remains elevated even in the aftermath of the elections, hindering the development of the industry.

Although the release of new historical and monthly data for generation and capacity 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 see only a moderate rise in generation and consumption in short-term. Whilst recent data supports BMI long-held view that the US will continue to outperform the eurozone, we expect the US economy to expand at an average annual rate of about 2.4% over the coming years, which is below historical trend. Factoring in the most recent industry-specific and macroeconomic indicators, we have revised our 2012 consumption growth forecast to -0.86% year-on-year (y-o-y), previously 0.81%, and anticipate that a forecast 1.75% growth in 2013 will be partially a product of base effects.

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With regard to the long-term, we believe that a number of factors will influence the share of fuels in the electricity mix:

- Lower natural gas prices - which in turn are the result of new drilling technologies, growing production, a large increase in proved reserves, and robust natural gas infrastructure additions over the last few years.
- Growing efficiency - newer natural gas units are becoming more efficient than older coal units, owing to rising capacity factors of natural gas-fired units.
- Coal unit retirements - expecting almost 9,000 MW of coal-fired capacity to be retired in 2012, with additional retirements in subsequent years.
- Environmental regulations - including the implementation of the Cross-State Air Pollution Rule and the Mercury and Air Toxics Standards.
- The government's commitment to renewables, which is however looking increasingly uncertain.

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