Taking a Global Look at New Power Generation

As U.S. power producers consider how to meet future demand, they must increasingly be aware of global developments in new generation with the potential to affect domestic fuel supplies, costs, and regulatory policies.

A recent EPRI report analyzed the factors underlying global decisions for new generation. The report entitled Drivers of New Generation: A Global Review (1014920), examined those factors in Western Europe, China, India, and the United States (which together make up two-thirds to three-fourths of total energy consumption) as well as Japan, South Korea, Taiwan, and Brazil.

Qualified funders may view or download a copy of the report by clicking on the link below.

How to Apply the Results

This report will support fuel and technology forecasting and assist individuals and organizations involved in modeling responses to climate change.

Highlights of Results

Some highlights of the report’s findings are as follows:

  • New Capacity. More than 1,300 GW of new generation capacity are expected to be installed worldwide during 2004–2020. This represents more than the current installed generation capacity in U.S., roughly 1,000 GW. About 35% of this total net generation capacity addition is projected to be in two countries, China and India, which will rely mostly on coal-fired generation for their new capacity needs.Overall, coal and gas in roughlyequal parts will likely be the main fuel sources for global generation development through 2020.
  • Coal. Only two of the “Big 4” coal-producing countries (U.S., Russia, China,and India) are expected to rely mainly on coal for their new generation development. Thegrowing environmental backlash and potential for carbon regulations in U.S., and the vastgeographical dispersion between major coal reserves and population centers as well as high cost of extracting coal in Russiamay limit the use of coal. However, the expected heavy reliance on coal by China and India will have the dominant impact on world coal use.
  • Nuclear. Nuclear power is expected to regain a share of generation expansion after a 20-year period of slow activity. Significant growth is expected in China, India, and South Korea.
  • Natural Gas. World gas supply is in a state of transition, from a number of relatively isolated domestic gas markets to an evolving international market with some price connectivity, but not convergence. Natural gas is a swing factor for new generation choice if coal and nuclear are found to be less desirable or expensive in the countries where coal and/or nuclear dominate the current projections. However, it is not clear to what extent natural gas supply and infrastructure to transport gas (through pipelines and liquefied natural gas [LNG]) can support a significant switch away from coal and nuclear.
  • Renewables. Renewables are on the rise in the developed countries, largely due to subsidies andobligatory portfolio composition standards. Europe, in particular, is expanding, particularly wind, which is very heavily subsidized in manycountries (over $100/MWh). In the U.S., many states have renewable portfolio standards requirements that seek10-20% renewables over the coming decade.
  • Europe.Europe is dealing with several strong, somewhat conflicting influences in its choice of new generation. For example, coal prices in Europe are roughly two times U.S. levels, while gas prices are about the same.The CO2 cap-and-trade system in Europe raises the cost of operating coal plants, and tends to favor renewables, gas, and nuclear. However, uncertainty in future CO2 prices and shifting allocation rules are likely to deter investment in capital-intensive alternative generation capacity and coal CCS (carbon capture and storage). Europe’s reliance on imported gas (primarily from Russia) is likely to become even more significant if gas combined cycles provide a major portion of new generation capacity. Strong growth in capacity from renewable generation is expectedacross Europe, in accordance with the EU Directive on Renewables that targets 21%renewable share in total generation by 2010.
  • China.China is rapidly expanding its generation capacity. In 2005, new generatingcapacity increased about 70 GW (size of U.K. generation) with another 102 MW added in 2006(twice the size of California generation), and 75 GW estimated to be added in 2007.
  • India. More than 60% of India’s 1.1 billion people are agrarian, and 40% of the households may have no electricity whatsoever. Electric consumption per capita in 2004 was extremelylow in India, at slightly more than one-quarter of China’s level. Energy efficiency in India is also among the lowest in the world. Electricity shortages are prevalent and severe in India, with an underserved residential and industrial base. India’s electric power industry is Byzantine with deep layers of bureaucracy, monopoly, and subsidies. Today India is on the eve of implementing a new round of energy policy reform under theframework laid out by the Energy Policy Act of 2003.
  • Wealthier Asian Nations (Japan, South Korea, Taiwan). The strategies for increasing power plant capacity among the wealthier Asian nations are similar to those for Western Europe in that thereis a clear focus on adding new gas-fired power plants. The major difference is that these Asian nations, for the most part, also endorse increasing their nuclearcapacity.
  • New Technologies. New technologies are not taking root in a substantial way. Most of the expansion beingpursued involves refinements and standardization to existing, widely used technology. Inparticular, there is only slight movement towards advanced nuclear technology, or integrated gasification combined cyclewith CCS. Partly this is due to expense and the lack of CO2 pricing, but it probably also reflects technological and economic risk-aversion plus political constraints.
  • Expansion Uncertainty. Overall expansion uncertainty is quite large. The bulk of announced expansion comes from China and India, whoseelectric needs are inextricably tied to their economic growth, and vice versa. If it is notfeasible for them to electrify as rapidly as they have aspired, their macroeconomic growthmay be correspondingly lower. Another significant source of uncertainty is CO2 regulatory policy, itself tied up in the question of what the U.S. will do in anticipation of what China and India will or will not do. Third is the question of how extensively and expensively will LNG be available, and how will it link world oil and gas markets. Finally, there is worldwide competition for infrastructure equipment anddevelopment commodities, such as steel and generation turbines. The electricity sectoris competing against urban development, other industrial expansion, and the like for a shareof resources whose cost and timely availability is becoming more worrisome.

Related Reports

The present study on global generation development is one of a suite of three international energy studies conducted during 2007 through early 2008. The others are comprehensive analyses of global natural gas/liquefied natural gas (LNG) and coal markets (EPRI Reports 1014921 and 1014922). Taken together, they portray the richness

and the surprises occurring in the international sphere, and also underscore the magnitude of effort required to effectively assess global phenomena.

For more information contact Jeremy Platt, 650-855-2628, .

View or download Drivers of New Generation: A Global Review (1014920).

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