NATIONAL OVERVIEW 2014 ENERGY MARKET PERSPECTIVE Neil CopelandManagement Consulting Division.

NATIONAL OVERVIEW 2014ENERGY MARKET PERSPECTIVE

Neil Copeland Management Consulting Division

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About the Black & Veatch Energy Market Perspective

.

The EMP is available as a National Service or as one or more regional services: Western, Texas (ERCOT), Northeast, Midwest and Southeast.

EMP North American Market Coverage

Black & Veatch EMP: 2014 Outlook

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Top 7 Electric Industry Issues

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3Reliability, environmental regulation, and economic regulation are the top issues industry-wide

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Black & Veatch Outlook on U.S. Power Demand

• Growth of 1.6% annually from 2014-2016, before reverting to a long-term growth trend of about 1.0% per year

Source: EIA, Black & Veatch Energy Market Perspective Analysis

20082009

20102011

20122013

20142015

20162017

20182019

20202021

20222023

20242025

-

100

200

300

400

500

600

700

800

900

1,000

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Peak Demand - United StatesCoincident Peak Demand (GW) Annual Growth Rate (%)

Coin

ciden

t Pea

k De

man

d (G

W)

Annu

al G

row

th ra

te (%

)

Black & Veatch EMP: 2014 Outlook

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Black & Veatch EMP: 2014 Outlook

Natural Gas; 352,226

Nuclear; 97,393 Coal; 293,597

Hydro & Other Re-

newables; 112,175

Wind; 67,681 Solar; 12,815

Coal (IGCC); 1,709

Other Steam Turbine; 86,246

34%

10%29%

11%

7%1%0%

8%

Natural Gas; 717,028

Nuclear; 61,137

Coal; 162,885

Hydro & Other Re-

newables; 113,324

Wind; 133,321

Solar; 39,227

Coal (IGCC); 5,166 Other Steam Turbine; 50,126

56%

5%

13%

9%

10%

3%0%4%

CAPACITY MIX (MW) IN 2014 CAPACITY MIX (MW) IN 2038

Capacity represents the total amount of electricity that can be produced.

The Changing Capacity Mix: Where U.S. energy will come from

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Black & Veatch EMP: 2014 Outlook

ENERGY MIX (GWh) IN 2014 ENERGY MIX (GWh) IN 2038

Energy mix refers to total electricity consumed and where that electricity came from.

Natural Gas;

1,048,284

Nuclear; 773,764

Coal; 1,596,070

Other Steam

Turbine; 63,899

Wind; 185,157

Solar; 23,982

Hydro & Other Re-newables; 356,139 Coal (IGCC); 10,519

26%

19%39%

2%5%

1%9% 0%

Natural Gas; 2,705,297

Nuclear; 486,210

Coal; 1,079,001

Other Steam

Turbine; 39,076

Wind; 416,767

Solar; 123,609

Hydro & Other Re-newables; 371,286 Coal (IGCC); 40,879

51%

9%

21%

1%

8%

2%7%1%

The Changing U.S. Energy Mix

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Black & Veatch forecasts additional 86.2 GW of coal-fueled generator retirements by 2038

• Continuing trend in retirement of smaller, older coal-fired assets through 2020

• Forecasted retirements driven primarily by low-cost natural gas prices and EPA hazardous air pollutant requirements

• Future Green House Gas emission regulations could materially alter projections

Coal Unit Retirements Forecasted at 60.1 GW by 2020

Source: Black & Veatch

Black & Veatch EMP: 2014 Outlook

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West County Energy Center, Fla.

Coal retirements and decline in regional reserve margins will drive continued capacity growth

• Power sector demand for gas expected to grow 3.1% annually

• More than 364,000 MW of new gas capacity is expected before 2038

• Technology advances, clean air initiatives drive growth

Natural Gas-Fueled Generation Will Continue to Grow

Source: Black & Veatch

Black & Veatch EMP: 2014 Outlook

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 $-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

Henry Hub Natural Gas Spot PriceHistorical (Nominal) B&V Projection (Mid-Year 2013) B&V Projection (Year End 2013) EIA AEO 2013

2013

$/M

MBt

uNatural Gas Price Forecast

2013-2017Growth in low-cost supplies

dampens price growth

2017-2022Price growth is driven by LNG exports, coal capacity retirements, and GHG legislation

Black & Veatch EMP: 2014 Outlook

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New England price spikes in winter signal infrastructure constraints

Black & Veatch EMP: 2014 Outlook

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Major Pipeline Constraint Points During Peak Winter in New England

Iroquois Gas TransmissionMaritimes & Northeast

Portland Natural GasTennessee Gas Pipeline

Algonquin Gas Transmission

Tennessee 300 Line

Algonquin G System/J Loop

Tennessee 200 Line

M&NE and TGP Dracut

Pipeline Constraint Points

• Winter pipeline constraints exist due to a lack of market area storage and growing peak residential, commercial, and power generation demand

• During last week’s winter storm, regional natural gas prices reached above $40.00/MMBtu while Gulf Coast prices remained at $4.00/MMBtu

Black & Veatch EMP: 2014 Outlook

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Planned U.S. Pipeline Projects Highlight Constraints on the System

Source: EIA, March, 2013

Over 50% of 2012 projects are in theNortheast U.S.

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Lopburi 55 MW Solar Farm - Thailand

Renewable capacity additions are driven by state Renewable Portfolio Standards requirements

• In the short term, the status of tax incentives for wind looms in the political arena

• ~93,200 MW of new capacity additions anticipated by 2038

• Wind will make up majority of new capacity additions

• Solar capacity expected to grow as a result of technology advances

Renewable Energy Growth Will Continue

Source: Black & Veatch

Black & Veatch EMP: 2014 Outlook

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Trajectory of Renewables Growth

Source: Black & Veatch Energy Market Perspective Analysis

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• Overall electric generation capacity will increase by 30%•Natural gas generation ↑ 100+%•Renewable generation ↑ 150%•Nuclear capacity ↓ 35%•Conventional coal ↓ 40%

• Overall market share will also shift•Natural gas = more than half of all electricity consumed•Coal’s market share ↓ 20%•Nuclear’s market share ↓ 10%

Nuclear and coal retirements will vary by region.

NATIONAL PROJECTIONS: WHAT DOES IT ALL MEAN?

DURING THE NEXT 25 YEARS:

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