28 January 2015
BLACK & VEATCH
ENERGY MARKET PERSPECTIVE
2015 OUTLOOK
Black & Veatch Energy Market Perspective | 2015 Outlook
28 January 2015
About the Energy Market
Perspective (EMP)
Semi-annual subscription-based report
(released January and July of each year)
Gives our customers insights on industry
trends and market opportunities
Provides fundamental capacity, energy,
emission and power fuel price forecasts for
the North American energy markets
Black & Veatch Energy Market Perspective | 2015 Outlook
28 January 2015
Deliverables
Key prices and metrics (spreadsheet format)
Executive summary/briefing (PowerPoint
format)
Methodologies and Principal Assumptions
document (PDF format)
Access to subject matter expertise
Our customers use the EMP to plan for and
manage risks associated with the shift to
natural gas generation across North America
Black & Veatch Energy Market Perspective | 2015 Outlook
No Carbon Regulation Case:
No federal GHG emission limits or
allowances
Black & Veatch View:
Energy market models based on the
rates or mass analysis of the
proposed Clean Power Plan
28 January 2015
The EMP currently delivers
two cases as follows
No Carbon Regulation Case assumes a
business as usual approach, or no new
carbon regulations. This model accounts for
existing regional/state regulations.
Black & Veatch View models a combination of
variables needed to achieve the carbon
reduction targets of the proposed EPA Clean
Power Plan.
Black & Veatch Energy Market Perspective | 2015 Outlook
28 January 2015
TODAYS SPEAKERS
Denny Yeung
Principal, Management Consulting
Neil Copeland
Director, Management Consulting
AGENDA
Oils influence on natural gas prices
Black & Veatch View of the Clean Power Plan
Impact on natural gas
Evolving energy portfolio
Impact on energy market
Impact on natural gas infrastructure
Q&A session
6
Black & Veatch Energy Market Perspective | 2015 Outlook
28 January 2015
oils influence on
Natural Gas Prices
North American production
50-60% wet plays
composed of Natural Gas and Natural Gas Liquids (NGL)
Higher-priced NGLs provide producers with an incentive to keep drilling.
NGL prices follow oil prices. When oil prices drop, NGL prices follow.
Lower prices for NGLs shrink profits and lead to reduced production.
Demand becomes greater than supply.
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Black & Veatch Energy Market Perspective | 2015 Outlook
28 January 2015
Henry Hub Natural Gas & West Texas Intermediate Spot Price Comparison
$5.00
$120
$4.50
$100
$4.00
$80
$3.00
$2.50
$60
$/bbl
$/MMBtu
$3.50
$2.00
$40
$1.50
$1.00
$20
$0.50
$0.00
Sep-14
$0
Oct-14
Nov-14
Henry Hub
Dec-14
Jan-15
WTI
Black & Veatch Energy Market Perspective | 2015 Outlook
28 January 2015
U.S. Weekly Average Heating Degree Days Compared to Henry Hub
$5.00
80
$4.50
70
$4.00
60
Henry Hub Price
($/MMBtu)
50
$3.00
$2.50
40
$2.00
30
$1.50
Heating Degree Days
(7-Day Rolling Average)
$3.50
20
$1.00
10
$0.50
$0.00
Nov 01
0
Nov 16
Dec 01
Henry Hub (2014-2015)
Dec 16
2014-2015
Dec 31
Jan 15
2013-2014
Black & Veatch Energy Market Perspective | 2015 Outlook
28 January 2015
Natural Gas Production Forecast
140
120
Bcf/d
100
Black & Veatch View:
North American shale
production will nearly
double by 2039
80
60
40
20
0
2015
2020
2025
Shale
2030
Conventional
2035
2039
Other*
* Other includes coal bed methane,
LNG imports and SNG.
10
Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
Natural Gas Demand Forecast
140
120
Bcf/d
100
Black & Veatch View:
Gas demand from power
generation will increase
by ~20% (nearly 5 Bcf/d)
by 2025
80
60
40
20
0
2015
2020
Electric Demand
2025
LNG Exports
2030
Other*
2035
2039
Electric Demand (B&V View)
* Other includes residential, commercial,
industrial and transportation demand
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Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
Power Generation Fuel Price Forecast
$9
$8
Black & Veatch View:
Power Generation Fuel
Prices
$7
2014 $/MMBtu
$6
Increasing natural gas demand
for power generation will result
in higher natural gas prices
$5
$4
Coal prices will remain flat as a
result of weakening demand
domestically and abroad
$3
$2
$1
$0
2015
2016
2017
2018
Henry Hub (No CO2 regulation)
2019
2020
Coal Prices
2025
2030
2035
2039
Henry Hub (B&V View)
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Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
Capacity Retirements and Additions (Lower 48)
250
Black & Veatch View:
Baseload retirements in
the East reshaping the
energy portfolio
200
150
GWs
100
50
40 GW of coal to retire by 2020
in East alone
Second wave of retirements
after 2030, mostly in the East
-50
-100
-150
2015 - 2020
2021 - 2029
2030 - 2039
Coal Retirements
Nuclear Retirements
Other Retirements
New Combined Cycle
New Combustion Turbine
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Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
Black & Veatch View:
Wind outlook
(Nameplate capacity additions)
East: Capacity will nearly double in the next
10 years to more than 75,000 MW
WECC: More than 6,000 MW in new capacity
within next 10 years
ERCOT: Nearly 8,000 MW of new capacity
by 2025
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Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
Black & Veatch View:
Solar outlook
(Nameplate capacity additions)
East: Capacity will more than double by 2025 to
more than 12,000 MW
WECC: Capacity will nearly double by 2025 to
more than 25,000 MW
ERCOT: Limited growth during the next 10 years
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Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
U.S. Capacity Mix in 2015 (Lower 48)
Natural Gas
35%
Coal
26%
Hydro and Renewables
13%
Nuclear
9%
Other
17%
U.S. Capacity Mix in 2039 (Lower 48)
Natural Gas
59%
Coal
14%
Hydro and Renewables
Nuclear
Other
Net dependable
capacity is the
amount of capacity
that can be counted
toward the
planning reserve
margin, or be bid
into a formal
capacity market
13%
5%
9%
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Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
U.S. Generation Mix in 2015 (Lower 48)
Natural Gas
24%
Coal
39%
Hydro and Renewables
17%
Nuclear
Other
19%
1%
U.S. Generation Mix in 2039 (Lower 48)
Natural Gas
34%
Coal
26%
Hydro and Renewables
27%
Nuclear
Other
Generation
represents the
amount of energy
produced by each
fuel type or
technology to cover
changes in load
throughout the day
13%
1%
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Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
Electricity Price Forecast
Average Electricity Price
2014$/MWh
80
60
Black & Veatch View:
Electricity prices will be
greater than the business as
usual case as a result of:
40
Increased gas demand
Higher penetration of
renewables
20
Changes in dispatch
0
2015
2020
Ave. Electricity Prices (No CO2 Regulation)
2025
2030
Ave. Electricity Price (B&V View)
18
Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
National Carbon Emissions Forecast
(Lower 48, Existing Sources)
2,500
1,600
Black & Veatch View:
Carbon emissions
1,400
2,000
1,000
1,500
800
1,000
600
400
Annual Emissions Rate
(lbs/MWh)
Annual Emissions
(Millions of Tons)
1,200
Emission rate reductions in the
East due in part to MATS
Rates in the West decline at a
lower rate due to large amounts
of wind and low amounts of coal
to displace
500
200
0
0
2015
2020
2025
2030
East Annual Emissions
WECC Annual Emissions
ERCOT Annual Emissions
East Emissions Rate
WECC Emissions Rate
ERCOT Emissions Rate
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Black & Veatch Energy Market Perspective | 2015 Outlook
28 January 2015
natural gas influence on
Emissions
As
Combined Cycle Generation increases,
emissions rates decrease
CO2
due to the displacement of Coal Generation
Lower Coal Generation may accelerate the retirement of marginal coal.
Lower energy revenue requires higher capacity payment revenue.
An increase in natural gas prices should drive an upward demand for Wind.
Higher gas prices push coal to generate more, which increases emission rates.
20
Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
Annual Comparison of Monthly U.S. Natural Gas Demand
120
100
Bcf/day
80
60
40
20
0
Jan
Feb
Mar
Apr
May
2005
Jun
2010
Jul
2014
Aug
Sep
Oct
Nov
Dec
2020 (B&V View)
21
Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
Pipeline flows have and
will continue to change
2015-2024 Flows Increase
2015-2024 Flows Decrease
2015-2024 Flows Stable
Natural Gas Pipelines
22
Black & Veatch Energy Market Perspective | 2015 Outlook 28 January 2015
Black & Veatch Key Findings
North American shale gas production will
nearly double, but so will demand
Significant infrastructure investment needed
in the power generation and natural gas
value chains
Clean Power Plan compliance will result in
increased energy costs
The exact level of price increases will vary by
state and region, and is dependent upon the
final rules adopted by EPA
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QUESTIONS?
Contact Information:
PRESENTER NAME
Patrick Rhea | RheaPW@BV.com
p +1 212-973-1339 ext. 37
m +1 913-406-7800
w www.bv.com/emp
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