Analysis: Major changes ahead for US power sector

OREANDA-NEWS. April 22, 2015. Major assessments released today by the US Department of Energy and by the agency setting US electric grid reliability standards are outlining major changes for the US power grid that will provide a boon for investors.

Coal, despite recent declines, is still the primary generating fuel in the US, and its share is almost double that of natural gas. But environmental policies implemented or proposed by President Barack Obama's administration are cutting into coal's share of the fuel mix. That process will accelerate if the Environmental Protection Agency enforces its Clean Power Plan proposal for cutting power sector CO2 emissions.

The Energy Department's Quadrennial Energy Review notes the changing generation mix and predicts significant investments into generation capacity and transmission and distribution infrastructure.

But the North American Electric Reliability Corp. (NERC) is warning that those investments may not occur fast enough. The agency warned today that the interim goals proposed by the Clean Power Plan may cut into the timeline for developing new power plants and transmission lines.

The plan will be finalized later this year and states will begin crafting implementation plans in 2016, with the first interim targets for CO2 emissions set for enforcement in 2020.

"We are looking out four years to implementation and we do not have insights on whether we can maintain reliability. That is a reliability concern in itself. The industry is not used to such uncertainty," NERC director of reliability assessments John Moura said today.

The agency expects at least 36GW of coal-fired generation to retire in 2016-30. The agency's analysis is preliminary because the CO2 plan is not final. But investment opportunities in the US power sector will be significant for the next 15 years.