New Regulations Spark US$3.1 Billion Investment in U.S. Power Sector

30 Nov 2015  |  Press Release

BOSTON, U.S. – Mounting environmental regulations and fundamental shifts in the U.S. thermal power landscape is driving new investments in water and wastewater treatment. On the heels of the U.S. Environmental Protection Agency’s (USEPA) newly released effluent guidelines, Bluefield Research has boosted its forecasts to US$3.1 billion for the power sector’s water-related capital expenditures from 2015 to 2025.

A new report from Bluefield research analyzes key power sector trends, including discharge regulations, fuel-switching, and water supply risks, that are impacting investments in water and wastewater treatment solutions.

As the largest user of water and contributor to surface water pollution, the U.S. thermal power plants, coal-fired facilities in particular, are facing significant regulatory scrutiny. Bluefield identified 206 facilities in coal-rich, Mid-Atlantic and Midwestern states that are a central focus for EPA policymakers.

The USEPA’s 30 September 2015 Steam Electric Power Generating Effluent Guidelines, a policy to rein in key pollutants from power systems, lays the groundwork for water system upgrades to coal-fired electric power plants with capacities over 50 megawatts. The lion’s share of this spend, reaching US$2.4 million through 2025, will occur between 2019 and 2023 during National Pollutant Discharge Elimination System (NPDES) permit renewals. CAPEX for these retrofits could scale to US$7.5 billion by 2042.

Today, 45% of U.S. electric generation is fueled by coal, but significant declines in natural gas prices, accelerated by hydraulic fracturing, has begun to also influence asset strategies of power plant owners. Aging facilities and tightening air and water quality regulatory controls underlie 19 gigawatts of planned coal plant retirements. The upside for water players is that there will be a steady increase in greenfield natural gas plant additions– coal plant replacements and new generation to meet demand growth. This will drive US$540 million of water-related CAPEX over the next decade.

According to Erin Bonney Casey, an analyst for Bluefield Research, “79% declines in natural gas prices since 2008 and increased adoption of cost competitive renewables make the shift to new plants that much easier, paving the way form new water systems. But let’s be realistic, the U.S. power sector is incredibly mature. Any changes to water-related CAPEX will be incremental.”

According to Bluefield Research, the top three states for new thermal capacity additions are Virginia, Texas and California. “As these new plants are developed, the role of dry cooling, municipal wastewater reuse, and zero liquid discharge solutions will increase as well,” added Ms. Bonney Casey. “The risk to utilities and independent power producers is not just environmental but also operational. The adoption of new water solutions will be more far-reaching than just drought-stricken California; we have seen activity in Florida, Maryland, and Pennsylvania.”

These and other findings can be found in the Bluefield Research report, Water for Power: Market Trends & Opportunities in a Transitioning U.S. Landscape, 2015-2025.