Demand for natural gas will ramp up, in light of rising concerns about greenhouse gases
Los Angeles, CA (PRWEB) December 23, 2012
The Coal and Natural Gas Power industry has been steaming steadily along in the five years to 2012. Revenue is anticipated to increase at an average of 0.7% annually to $104.6 billion over this period. According to IBISWorld industry analyst Deonta Smith, “As the economy began to recover, the price of coal increased, leading to a boost in the price of electricity.” During the recession, low demand forced operators to keep rates low. However, many sectors, including electricity transmission firms, have started to demand more energy with improving business activity. Due to this renewed demand, electricity generators have been able to pass along higher prices to transmission companies and their customers. Thus, rate increases that have taken place during the past five years have been largely concentrated during the recovery. Rates are expected to continue expanding through 2012 as the economy rebounds. As a result, industry revenue is anticipated to grow 3.7% in 2012.
While coal-based generation is still dominant, firms have increasingly turned their focus to natural gas-based generation over the past five years. “Natural gas prices are traditionally low, and newfound reserves in the Appalachian Basin have helped keep them down, hastening the industry's shift toward this power source,” says Smith. Investment in natural-gas plants has grown as well. These plants require lower initial fixed costs than other plants and can be expanded in a more cost-efficient manner. Furthermore, expected regulations on carbon emissions have increased the impetus to switch to natural gas because it emits about half as much carbon dioxide as coal-based generation.
The Coal and Natural Gas Power industry has a low level of concentration. The four largest participants account for less than 20.0% of industry revenue. Concentration has increased during the past five years, however, due to increased acquisition activity and heightened investment in natural gas generation facilities. The planned merger between Duke Energy's subsidiary, Progress Energy, and Diamond Acquisition Corporation in 2011 is an example of this trend, since these companies are planning to dramatically increase generating capacity.
Over the next five years, stronger economic growth will stimulate greater demand for electricity. At the same time, higher fuel prices (coal and natural gas) will underpin electricity price increases as these extra costs are passed on to customers. Meanwhile, concerns about greenhouse gases will continue to cause industry firms to opt for natural gas over coal. While external competition from renewable energy-based generation is expected to increase, renewable energy will likely remain only a small portion of the energy consumed in the United States over the next five years. Additionally, investment in renewable energy largely depends on government funding and incentives; as such, looming federal deficits will limit the growth of this competitor. Because of these trends, revenue is anticipated to grow over the five years to 2017.
For more information, visit IBISWorld’s Coal & Natural Gas Power in the US industry report page.
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IBISWorld industry Report Key Topics
This industry operates fossil fuel-powered electricity generating plants. The steam generated by burning coal and gas is used to power turbines that generate electricity.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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