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S&P Global Market Intelligence ($):

The significant downward trend in coal-fired generation seen across the U.S. since 2010 continues in S&P Global Market Intelligence’s fourth-quarter 2020 Power Forecast, fueled by declines in prices of natural gas and renewable generation. In 2020, 7,361 MW of coal was retired, making up 53.9% of the country’s retirements, while 29,210 MW, or 75.4% of new capacity, came online from renewables.

Natural gas generation’s market share growth will soon break with the historical trend, however, as it is forecast to peak in 2024 and then decrease as renewables replace coal and gas generation through the end of the decade. Renewable generation will surpass coal and nuclear by 2023 and 2024, respectively. With hydro, including pumped storage, to remain fairly constant at 6.5% of U.S. generation and nuclear to decrease slightly to 16.5% by 2030, the increase in renewable contributions will bring the total clean energy generation share up to 46%.

The shift from coal to renewables is most remarkable in the mountain states of Colorado, Wyoming, Utah and Nevada; coal currently makes up more than 50% of generation but will decrease to below 30% by 2030 while renewable generation increases by 10% to 20% during that period. Gas generation makes up the remaining generation lost by coal, with increases of 10% to 20% as well. The largest increases in renewable production will come out of the Northeast and California, where the most aggressive renewable portfolio standards are driving development. Since there is already very little coal generation in these regions, most of the renewable generation will replace existing gas-fired generation.

The U.S. Energy Information Administration published its 2021 Annual Energy Outlook, or AEO, in February, with a notable increase in coal-fired generation from 20.5% in 2020 to 24.9% and 25.7% in 2021 and 2022, respectively. The EIA’s independent forecast of natural gas prices, however, diverges from the OTC Global Holdings natural gas forward prices used by Market Intelligence Power Forecast. EIA forecasts a 40 cent/MMBtu increase in natural gas prices in 2021 from December 2020 prices, and their forecast remains 50 cents-$1.00/MMBtu higher than the OTC Global Holdings forwards through the end of the decade.

This price increase forecast in the annual energy outlook, or AEO, provides enough downward pressure on natural gas generation to benefit other resources. On average, Market Intelligence forecasts 6% more natural gas generation nationwide through 2030 than the AEO. The lower natural gas forwards used by Market Intelligence result in less coal in the near term and, ultimately, less renewable generation through the end of the decade. In 2022, the 7% difference in natural gas generation over the AEO comes from predominantly coal, while by 2025, the 6% offset is balanced by almost all renewables.

With the inauguration of President Joe Biden and a Democratic majority in both the Senate and House of Representatives, future policies may shift the generation mix in the Market Intelligence Power Forecast more quickly away from coal and natural gas than the fourth-quarter 2020 release estimated.

[Katherine McCaffrey]

More ($): Q4’20 forecast continues trends in coal, renewables for 46% clean energy by 2030

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