The economic difficulties that have afflicted much of the world since 2008 will result in electric power demand growth slowing by approximately half of its normal growth rate in the next 20 years, according to a recent Wood Mackenzie study.

The report, A Lost Decade of Demand Growth, stated demand levels for energy sources that were previously forecasted to be reached in 2019, would not occur until 2030 due to a combination of the poor economy as well as initiatives aimed at improving energy efficiency.

Prajit Ghosh, senior analyst for North American power research at Wood Mackenzie and the report's author, said that natural gas will be the energy source hit the least in this forecast, as it is plentiful and produces less greenhouse gas emissions than most other fuel sources.

He told Midstream Monitor that natural gas is the fuel of the future, but the slower growth in power demand will also decrease the previously forecasted growth for natural gas. While the power generation pie is smaller than expected, natural gas has been increasing its share of the pie and will continue to do so because of lower prices, increased supply and more stringent environmental policies.

According to the report, only 20 states and provinces in North America have reached their pre-recession levels of energy demand at this time. The U.S. is not expected to return to these levels until late 2013.

"The lost decade of demand growth effectively reduces the size of the future power generation pie. If one were to isolate the impacts of reduced load growth, other things being equal, natural gas burn would have been lower than previous forecasts by about 5 billion cubic feet (Bcf) per day in 2013 and 15 Bcf per day by 2030. This would translate to almost a quarter of reduction in expected natural gas demand from the power sector going forward," he said in the report.

While overall power demand is slowing, natural gas continues to make large gains as more coal-fired power generation is retired in order to meet new carbon emission targets. In addition, more plants are switching from coal to gas due to gas being cheaper. Coal will remain an important energy source, because its demand will continue to retreat as gas and renewables make gains in the coming decade.

"Most of the upside for gas, in terms of market share, comes in taking market share from coal. Coal is approximately 37%-38% of total power generation at this point. By the end of the study period we expect the percentage of coal-fired power generation will fall to almost 25% of total power generation," he told Midstream Monitor. "Much of coal's market share will be taken by natural gas, particularly in the Southeast.

"The Southeast region is one of the fastest-growing regions in the country in terms of population growth, which implies an increase in power demand as well. In addition, a large portion of the coal-fired power generation that we're forecasting is in the Southeast and Midwest.

The Southeast has been the biggest driver of coal-to-gas switching because the coal plants there utilized more expensive coal from the Central Appalachian region that were unable to compete with lower gas prices. Ghosh said that gas prices would have to rise above $4.00 per million Btu in order for this switching phenomenon to end.

He added that there are efforts in the region to switch from Central Appalachian coal to Illinois basin coal, which is cheaper, but also dirtier. "Because a lot of these power plants are being retrofitted with clean-up equipment some of these facilities can switch coal sources. Should these facilities be successful in these efforts, it would limit the amount of coal-gas switching," he said.

The report factored in approximately 6-7 Bcf per day of liquefied natural gas (LNG) exports by 2020. Gas prices are expected to flatten out by 2015 with slight increases due to coal-gas switching, industrial demand and LNG exports.

"What the recession has done is cause a behavioral impact in some consumers as they try to consume less electricity to save money. Whether this behavior continues is anyone's guess. You can argue both ways: That when the recession ends you will have pent up demand that will cause energy demand to soar; or this behavior can continue and change how we consume energy.

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