According to a Bloomberg New Energy Finance (BNEF) analysis, this year could set records for the so-called ‘de-carbonization’ of the U.S. power sector. Further, CO2 emissions from the power sector should drop to their lowest level since 1994.
BNEF asserts that with record volumes of coal-fired capacity to be shuttered, renewables capacity to be built and natural gas to be consumed, 2015 will be one for the record books.
BNEF substantiates its thesis based on three primary factors, including the following:
This year, the U.S. will install more renewables than ever before, with 18 GW coming online. BNEF forecasts new solar installations to reach an all-time annual high of 9.1 GW in 2015 – with half of that built in California. Wind build should total 8.9 GW – the third-highest level of all time – with one-third of that coming in Texas.
This is expected to be a record year for coal retirements in the U.S., with 23 GW forecast to come offline. That represents no less than 7% of all current U.S. coal capacity. A confluence of factors is driving the change, including lower-priced natural gas, new standards on mercury emissions and an aging fleet of many coal-fired units.
The power sector will burn more natural gas in 2015 than ever before – more even than in 2012, ‘the year of no winter,’ when Henry Hub prices fell consistently below $3/MMBtu. Gas burn will rise to back-fill lost generation from retiring coal; but also, remarkably low gas prices have boosted burn totals by allowing efficient gas turbines to undercut the cost of coal-fired electricity.
As a result, BNEF expects power sector CO2 emissions to fall to their lowest levels since 1994. This would put power sector emissions 15.4% below 2005 levels. Overall, the U.S. has pledged to cut all CO2 emissions (inclusive of the power, transport, agricultural, industrial and residential sectors) by 28% by 2030 from a baseline of 2005.
‘More interesting than the single-year drop in emissions are the 'structural' impacts that will live on for decades," says William Nelson, head of North American analysis. ‘Emissions can rise or fall year to year based on weather anomalies and volatile fuel prices – but in 2015, we'll take a giant, permanent step towards decarbonizing our entire fleet of power plants.’
The study synthesizes previous BNEF analyses, providing a medium-term outlook for the U.S. power sector, out to 2020. It notes how 2015 truly will be an exceptional year, epitomizing a number of recent trends rolled into one.
‘De-carbonization will continue post-2015,’ according to Nelson. ‘But at a slower pace. We may never again see 23 GW of coal capacity retire in a single year; and renewable build could drop significantly in 2017, when important federal tax incentives step down or expire.’
Stark regional differences frame the national trends. Southern California's solar build boom is backed by progressive climate policies; meanwhile, Texas wind installations owe thanks to the Competitive Renewable Energy Zones transmission lines that have recently unlocked strong resources in the Panhandle.
Coal retirements are concentrated in the Southeast and Mid-Atlantic; and much of the incremental gas burn comes from the Appalachian Basin, where overwhelming production from the Utica and Marcellus Shales has sent gas prices spiraling downward to the lowest levels in the country.
To read more about the Bloomberg data, click here.
