POWER January 2013 - 6

SPEAKING OF POWER
My Top 10 Predictions
for 2013
A
year ago in this column, I predicted
that 2012 would be pivotal
for the power generation
industry, and it was. Coal-fired generation
dropped precipitously and
gas-fired generation accelerated much
faster than industry predictions. Early
in 2012 the unthinkable occurred:
coal- and gas-fired generation crossed
paths at about 32% for a short period
of time, although coal subsequently began
a slow recovery for the remainder
of the year. Our 2013 Industry Forecast
(p. 30) discusses the likely price and
usage trends to expect this year, which
are reflected in many of my 2013 predictions.
Looking
back over the past year's predictions,
I graded myself a " strong B, "
slightly down from the past two years (a
detailed discussion of my individual scores
is available as an online supplement to
this issue). Like coal, I'm expecting a
comeback in 2013.
10. Kyoto 2 is DOA. The Kyoto Protocol expired
on Dec. 31, 2012, and an extension
(Kyoto 2) was formulated in late
2011 as an interim measure until a new
treaty was negotiated, slated for 2015.
COP18, which ended on Dec. 7, made
no tangible progress. Few nations have
backed Kyoto 2, and Russia, Japan, and
Canada have rejected the measure unless
China and India also accept binding
targets. In 2013, China and India
won't engage, and the European Union
(EU) will stay at arms length until there
is agreement for carryover of unused
emissions allowances, which the many
small member countries disagree with.
9. Coal Combustion Residuals, and
Cooling Water Intake Structures Rules
Go Live. Why would the administration
go into low gear with these two regulations
in 2012 and delay post-election
into 2013 unless the rules were onerous?
Expect coal ash to be reclassified
as a special waste and new plants (plus
some existing ones) to be forced to begin
the move from once-through cooling
to cooling towers.
8. Natural Gas Prices Rise. Expect the
6
average price of natural gas used for
power generation to rise 20% and the
amount of electricity produced by natural
gas to drop by at least 10% in 2013,
below 2012 levels.
7. Coal Use Rises, But No New Plants Are
Built. As gas prices rise, the use of coal
for power generation will follow suit,
but at a lower rate. Expect coal-fired
generation to rise 7% to 8% in 2013,
over 2012 levels. Unfortunately, no new
coal plants will begin construction in
the U.S. in 2013.
6. The EU Embraces Coal. EU member
countries will begin construction of several
new supercritical coal-fired plants
in 2013 in preference to gas-fired combined
cycle plants. The price of natural
gas imported from Russia into the EU
is pegged to the price of oil, making
indigenous coal a very attractive fuel,
particularly when carbon allowance are
at historic lows, and the EU has already
reached its 2020 carbon dioxide reduction
goals.
5. The EPA Fracks Gas. On the same day
the Environmental Protection Agency
(EPA) released New Source Performance
Standards (NSPS) for the oil and natural
gas industry (Aug. 16, 2012), a group
of associations petitioned the EPA administrator
for reconsideration of certain
provisions (now pending). Also,
the petitions of eight industry groups
challenging the NSPS were combined
and filed with the D.C. Circuit Court
of Appeals on Oct. 15, 2012. The first
hearing is set for Dec. 21, 2012. I predict
that the EPA will make small adjustments
in the rule to correct the
most egregious errors, but the Court
of Appeals will strike down the rule for
many of the same reasons it did the
Cross-State Air Pollution Rule.
4. Demand Stays Flat. The Energy Information
Administration's (EIA's) Annual
Energy Outlook 2013 Early Release
Overview (AEO2013 Overview) predicts
that demand for electricity will rise at
a rate of 0.9% for 2013. In my opinion,
the prospects for an economic stall
in early 2013 are very high, thereby
quenching the hope of an increase in
www.powermag.com
the GDP growth rate. Electricity demand
will grow at the more pedestrian
rate of 0.7%.
3. Electricity Costs Rise. The average
domestic cost of electricity will reach
a new milestone of 12 cents/kWh in
2013, an increase of about 2%, according
to the EIA.
2. LNG Stays Home. The EIA's December
2012 release of its AEO2013 Overview
predicts that a surplus of natural gas
will be available for liquefied natural
gas (LNG) export by 2016, and the
volumes are double those predicted
in last year's report. With legislators
calling on President Obama to declare
a moratorium on gas exports and only
a single new export terminal approved
(Cheniere Energy's facility in Sabine
Pass, La.) to date, the infrastructure is
unlikely to be in place by 2016 to export
any significant additional quantities.
Other than Cheniere Energy, don't
expect approvals for additional export
terminals in 2013, which will make the
EIA predictions moot.
1. The Carbon Tax Dies. Perhaps the
most disturbing concept under discussion
by our congressional representatives
on both sides of the aisle
is the political viability of a carbon
tax. Spurring on that discussion was
the September 2012 study by the Congressional
Research Service that suggested
the U.S. budget deficit could
be reduced 50% in 10 years if a $20
per metric ton carbon tax were enacted.
The tax is represented by some
as a way to fight climate change, although
many legislators are more interested
in the tax as a new revenue
source, and others wish to use the
revenues to stem the flow of federal
budget red ink. Expect plenty of talk
but little action, because a tax by any
other name is still a tax.
I don't expect everyone to agree with
each of my predictions. If you have strong
feelings, aye or nay, let me know at editor@
powermag.com. ■
-Dr. Robert Peltier, PE is POWER's
editor-in-chief.
POWER | January 2013
http://www.powermag.com
POWER January 2013

Table of Contents for the Digital Edition of POWER January 2013
