According to the ICF Kaiser Consulting Group's
1999 Bulk Power Outlook
FAIRFAX, VA, June 1, 1999 - Power markets in the Western
System Coordinating Council are "poised on the precipice"
of capacity shortfalls and extreme price volatility this summer
and next, according to a new study of the regional market
by the Energy Practice of the ICF Kaiser Consulting Group.
"The West stands at least a one in three chance of experiencing
price spikes similar to those seen in the Midwest market during
the summer of 1998," said Judah Rose, a Senior Vice President
with the Group and the director of the ICF study.
ICF's analysis of the West points to a number of key near-term
implications:
- Regional Capacity Deficits. The region is in a
delicate supply/demand balance, with most subregions of
the West relying on a capacity surplus in the Pacific Northwest
to meet near-term peak capacity requirements. Because demand
growth is outpacing new supply additions, those deficits
will only become more extreme over the next two years.
- Volatility Exacerbated by Hydroelectric Dependence.
A fifth consecutive year of above-average hydroelectric
generation—the principle cause of the Pacific Northwest
surplus—will again mask the West's precarious supply/demand
balance in 1999. However, if the drought conditions of the
early 1990s resurface, the West will find itself at an even
greater risk of price spikes.
- Upward Pressure on Prices. Prices are on an upward
trend for 1999 and 2000, the result of both higher regional
spot natural gas prices and the increasing value of "pure
capacity" –the value of ensuring reliability
for consumers.
The study also evaluates the long-term future of the Western
market and highlights the following key results:
- Capacity Requirements Growing Steadily. The region's
underlying demand growth is strong, creating a long-term
regional capacity need totaling more than 18,000 MW by 2005,
unless there is a serious economic downturn in the region.
- Energy Prices Trending Downward. The trend for
long-term energy prices is for negative real growth through
2010, but the region will remain susceptible to near-term
volatility while market institutions continue to evolve
and new supply is slowly added over the next few years.
- Capacity Prices Rising Slowly. Current low capacity
values will continue to rise (but still remain below many
other regions) as new, more efficient generation is added.
- Strong Gas Demand Growth at Stable Prices. Gas
demand for power generation is poised to more than double
by 2010, with the most explosive growth in the Rocky Mountain
and Southwest subregions. Even so, the West region's vast
gas supply potential appears capable of meeting this growth
with little, if any, real price appreciation through 2010.
"The Western U.S. Region volume of our Bulk Power
Outlook, along with the other five regional volumes, offers
comprehensive insights into the rapidly changing North American
power markets," said Sudhakar Kesavan, President of the
ICF Kaiser Consulting Group. "No other firm can match
our analytic capabilities—which are based on an understanding
of the fundamentals driving electric power markets—and
the knowledge gained from working one-on-one with the market's
key players."
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ICF International (Nasdaq: ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, environment, transportation, social programs, defense, and homeland security markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 1,800 employees serve these clients worldwide. ICF’s Web site is http://www.icfi.com.
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For Immediate Release
Contact: Douglas Beck
1.703.934.3820
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