Happy summer from the North America team at IEEFA. If you're new to the newsletter, thanks for signing up. If you were here for our first edition, thanks for sticking with us. We have a lot more to catch you up on.
The beginning of the second quarter started with an attempt to extend the life of coal plants in the U.S. We quickly showed why that made no economic sense and further showed that coal plant closures are likely to continue this year.
The North America team continued our outreach efforts by holding two webinars in the past quarter. We were thrilled to partner with Conexiones Climaticas on a webinar in early May about LNG in Mexico; you can watch the video here. We also presented our findings on the current state of the coal industry in May, and that webinar is available here. Our team also recorded a video presenting the findings of our Blue Hydrogen report - watch one of the authors, Anika Juhn, present her findings.
The team in North America has risen to the challenge of keeping up with a rapidly changing energy landscape while still providing insightful analysis. We hope you enjoy catching up on everything we've been up to, and we'll see you again in the fall.
This report found that the Mexican LNG industry in particular faces the potential for disruption by forces outside of the country’s control, including extreme weather as well as trade, regulatory, and legal decisions in the United States. Additionally, the meteoric rise in LNG exports has exposed North America to the increased volatility and higher prices of global gas markets, raising serious concerns for the proposed buildout of Mexican LNG export terminals. Spanish version available here.
The Financial Oversight and Management Board (FOMB) recognized earlier this year what IEEFA has long been stating: There is no room to raise rates in Puerto Rico to pay off the electrical system’s legacy debt, and priority must be given to restoring the island’s grid to a functional level of service. In its 2025 Fiscal Plan for the Puerto Rico Electric Power Authority (PREPA), the FOMB concluded in February that “PREPA has no projected excess cash flow after addressing the system needs and … no ability to raise rates further to sustain any debt.” Even so, the FOMB proposed a plan in March to restructure PREPA’s legacy debts. Spanish version available here.
This briefing note focused on Venture Global's failure to accurately predict terminal fees suggests that significant caution is needed regarding the timing and scale of new LNG export projects to avoid capital misallocation on ventures that may underperform. Ultimately, this analysis underscores that the LNG market’s future—both in terms of LNG demand and LNG pricing—remains highly uncertain, with feedstock price volatility as the only consistent expectation.
As utilities face forecasts of rapid electricity demand growth from data centers, utilities and regulators are scrambling to address the demand, potentially creating new costs for other ratepayers in the process. The Mid-Atlantic Reliability Link and Valley Link transmission lines, both of which would cut through parts of West Virginia, were proposed in response to forecasts of rapidly growing electricity demand in northern Virginia, largely driven by data centers. IEEFA believes grid operator PJM’s Regional Transmission Expansion Plan (RTEP) process should be reformed so that ratepayers across the PJM footprint are not bearing costs associated with transmission infrastructure that is driven by data centers and by state policy decisions to attract more data centers.
The Ksi Lisims liquefied natural gas (LNG) project in Western Canada faces significant infrastructure, regulatory, and financial risks on the local level. Compounding these risks is an impending global LNG supply glut, weak demand growth, and inflationary trade actions. The combination of key infrastructure challenges, inflation and the potential for delays and cost overruns make it highly unlikely that the project can be delivered within the budget initially put forward by advocates.
Chart of the Quarter
As coal plant closures continue, electricity generation in the U.S. rose to its highest level ever in 2024, driven by a sweeping transition to wind, solar, and gas, and more recently, battery storage. At the same time, coal-fired generation fell to its lowest level in decades, producing just 15.6% of the country’s power, less than utility-scale solar and wind, which produced 16.2%. In fact, in a clear sign that the remaining coal plants have been unable to produce competitively priced electricity most of the time, coal generation has been falling at an even faster pace than coal capacity has been retired.
Quotable
“We expect Australia’s contracted LNG volumes to fall considerably over the next 10 years. Without new LNG contracts, Australian LNG exporters will either be exposed to volatile LNG spot prices or reduced utilisation of their export facilities, which could potentially undermine LNG project financial returns,”
“Multiple approaches are needed to accelerate power system decarbonization in many Asian countries and to reduce future emissions from younger coal plants. Despite the challenges, transition credits can open new avenues to finance the decarbonization of power plants,”
On Tuesday, July 8 at 12:00 PM ET, IEEFA will join the Toronto Climate Observatory research institute, York University’s Centre of Excellence in Responsible Business (COERB) and the Trottier Family Foundation, for a webinar focused on analyses of the state of liquefied natural gas (LNG) markets and implications for Canadian, US and international investors and financiers.
This webinar will present market research and insights from the Institute for Energy Economics and Financial Analysis (IEEFA)'s Clark Williams-Derry, and host a panel discussion among financial experts.
With several LNG projects in British Columbia and the United States actively seeking funding from major Canadian, US and international banks, asset managers, insurers, and pension funds, this conversation is critical to managing long-term risk and making informed investment decisions.
