ICForecast Energy Outlook Looks beyond the Wicked Winter of 2014
*Coal Generators Expected to Run with Higher Capacity Factors
*Natural Gas and Power Prices Firm into the Next Decade
FAIRFAX, Va. -- March 18, 2014
ICF International (NASDAQ:ICFI), a leading provider of consulting services and
technology solutions to government and commercial clients, has released its
ICForecast Energy Outlook for the second quarter of 2014. The study highlights
the near-, mid- and long-term future of gas, coal and power prices; the
impacts of proposed U.S. federal environmental regulations; and projections on
pollution control installations, coal production, and renewable energy
This winter’s weather demonstrated the continuing importance of weather as a
near-term driver of natural gas prices. Frequent cold snaps led to both higher
gas prices and increased price volatility. The ICForecast Energy Outlook
projects gas prices based on the assumption of “normal” (20-year average)
weather, anticipating larger seasonal price spreads than indicated by the
futures market earlier this year. Due to the increased need for storage refill
this spring and summer, the impacts of winter 2014 are likely to persist
through the remainder of the year. Following the continued decline of
gas-directed drilling activity last year, drilling is likely to increase in
response to the recent surge in gas prices.
The regulatory forces that are driving coal retirement announcements continue
to build, with the U.S. Environmental Protection Agency (EPA) expected to
release a proposal for CO regulation of existing generators in June.
Building on its Mercury and Air Toxics Standards and expectations for final
ash and water intake structure rules, EPA’s new rule could lead to incremental
announcements over the next five years. ICF’s retirement projection for U.S.
coal plants remains steady in the range of 65 GW by 2020, based on a
regulatory portfolio that includes CO and EPA’s other proposed regulations.
Natural gas-fired units will fill the gap caused by the coal-fired generation
retirements as well as meeting incremental demand growth going forward. Over
the next 25 years, natural gas-fired units will increasingly move into the
base load across most markets in the U.S. Going forward, as gas increasingly
sets the margin over all hours, even in historically coal-dominant regions
such as the Midwest and Southeast in the U.S., energy prices will firm and
implied heat rate spreads across the nation will tighten.
The Marcellus, located in the Northeast U.S., and Eagle Ford, located in South
Texas, continue to be the “hot spots” for drilling activity. Dry gas plays
such as Haynesville, located in Southwest Arkansas, Northwest Louisiana and
East Texas; and Fayetteville in Arkansas, will look increasingly attractive as
gas demand and gas prices continue to firm through the end of the decade. ICF
expects prices to firm between 2015 and 2020 as demands from new petrochemical
plants, liquefied natural gas export terminals and pipeline exports to Mexico
start ramping up.These new demands, combined with a continued rise in gas use
for electric generation, will place significant upward pressure on gas prices
and increase the potential for price volatility through the end of the decade.
In the near term, the cold winter and increases in natural gas prices are
boosting coal consumption, which will provide support for higher coal
prices.However, over the next five years, coal consumption is expected to
remain flat, with the biggest hope for producers being the export market.
Despite periodic signs of life, international coal prices remain depressed,
which makes U.S. coal less competitive and will reduce U.S. exports in 2014
compared with the record high exports in 2012.Exports areexpected to
rebound, but it will take longer than expected with the continued low global
demand.With gas prices expected to remain competitive for the next several
years and electric load growth at moderate levels in many areas, U.S. coal
demand will remain flat in the near- to mid-term with a gradual decline
starting in 2020. Coal demand will remain flat despite the expected coal
retirements through 2016 as ICF expects the remaining coal plants to run at
higher capacity factors.
Wind energy development slowed significantly in 2013 as compared to previous
years.Nonetheless, new wind energy projects that began construction in 2013
are still eligible for the Renewable Electricity Production Tax Credit and
will push to come online by the end of 2015 in order to maintain eligibility.
The expiration of the credit will constrain opportunities for the development
of central station generators, however, demand to meet renewable portfolio
standards requirements will drive development opportunities in select
regions.The ICForecast Energy Outlook provides insight into development
trends for central-station wind, solar and other renewable energy generation.
“Regulation of CO from existing sources will cause companies to consider
incremental retirements and investments while recent weather and the resulting
gas price response make them reconsider past retirements,” said Chris
MacCracken, principal for ICF International. “The ICForecast Energy Outlook
reports on the balance points among regulation, power and fuel markets to
provide insights critical to owners, investors and other market participants
over a 20-year time horizon.”
The ICForecast Energy Outlook addresses a number of significant issues,
*The progress of existing regulatory issues and their impact on power and
*ICF’s views on natural gas demand to 2037 and how that affects power and
*Coal pricing, retirements and regulation effect on generating markets
*Power market supply/demand trends and future pricing effects
*Renewable energy and the effect of not having long-term energy policy
*How U.S. coal supply/demand dynamics affect the export market
Using a suite of proprietary analytical tools and by incorporating global
expertise from all areas of the industry, ICF utilizes a fully integrated
assessment of wholesale power, transmission, fuel and emissions markets in
order to offer the most complete picture of the energy industry. The
ICForecast Energy Outlook offers insight into the key areas of emissions, gas,
coal, renewable energy and power.
For More Information
*ICF Integrated Energy Outlook
About ICF International
ICF International (NASDAQ:ICFI) provides professional services and technology
solutions that deliver beneficial impact in areas critical to the world's
future. ICF is fluent in the language of change, whether driven by markets,
technology, or policy. Since 1969, we have combined a passion for our work
with deep industry expertise to tackle our clients' most important challenges.
We partner with clients around the globe—advising, executing, innovating—to
help them define and achieve success. Our more than 4,500 employees serve
government and commercial clients from more than 60 offices worldwide. ICF's
website is http://www.icfi.com.
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Erica Eriksdotter, +1 703-934-3668
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