Demand for natural gas will ramp up, in light of rising concerns about greenhouse gases
Los Angeles, CA (PRWEB) July 15, 2012
The Coal and Natural Gas Power industry has been steaming along during the five years to 2012. Revenue is anticipated to increase at an average of 0.7% annually to $104.6 billion over the five years to 2012. After the economic recovery, the price of coal increased, which then led the price of electricity to increase. “As the economy turned around in 2010, many sectors, including electricity transmission firms, demanded more energy,” says IBISWorld industry analyst Deonta Smith. “Electricity generators then passed along higher prices to transmission companies and their customers.” Rate increases that took place during the past five years have been concentrated during the recovery, as demand declines during the recession led to lower rates for electricity across the board. Rate growth has continued to occur in 2012 as the economy expands. Industry revenue is anticipated to grow 3.7% from 2011 to 2012.
While coal-based generation is still dominant, natural gas-based generation has gained ground. Historically, low natural gas prices have hastened this trend and newfound reserves in the Appalachian Basin are keeping the price of natural gas low. Also, investment in natural-gas plants grew during the recession because facilities used to create electricity from natural gas can begin small, requiring lower initial fixed costs, and be expanded cost efficiently over time. “Expected regulations on carbon emissions have increased the impetus to switch to natural gas because it emits about half the carbon dioxide that coal-based generation does,” adds Smith. The Coal and Natural Gas Power industry has a low level of concentration. Concentration has increased during the past five years, reflecting the acquisitions of generating facilities by some firms, including major players The Southern Company and American Electric Power Company, and the heightened investment in natural gas generation facilities.
Stronger economic growth is expected over the next five years, lifting demand for electricity and the amount of power generated by the industry. 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. Concerns about greenhouse gases will continue to cause industry firms to opt for natural gas over coal. Despite the expected immediate increase of renewable energy-based generation (external competition to the industry), renewable energy will still comprise a very small portion of the energy that the United States consumes in 2017. Additionally, investment in these types of generation depends on government funding and incentives; as such, looming federal deficits will limit the growth of renewable energy. Because of these trends, revenue is anticipated to grow over the five years to 2017. For more information, visit IBISWorld’s Coal and 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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