Gas use by US utilities seen rising on air quality standards: analysts

Washington (Platts)--9Aug2013/416 pm EDT/2016 GMT

A "materially larger increase" in natural gas use by US utilities could occur between 2015 and 2020 if the US Environmental Protection Agency adopts tougher new air quality standards governing CO2 emissions for fossil fuel plants, Bernstein Research said in a report Friday.

"In a scenario where the EPA sets a CO2 reduction target of 5% from 2012 levels by 2020 through a cap and trade scheme, we would expect gas consumption to increase by 4 Bcf/d," the analysts said. "A CO2 reduction target of 10% by 2020 could double this figure, causing utility gas burn to increase by 8.1 Bcf/d."

The analysts said they expect state-mandated increases in the use of renewable generation to continue through 2020, suppressing utility demand for coal and gas.

"The state renewable portfolio standards that are currently in effect require that US renewable generation expand by about 70 million MWh through 2015 and about 200 million MWh through 2020," the analysts said.

"We expect renewable generation to increase by about 90 million MWh from 2011 through 2015 and by about 225 million MWh through 2020," they added. "We calculate that this growth in renewable energy will reduce utilities' use of gas in power generation by about 1.2 Bcf/d through 2015, and by a further 1.9 Bcf/d between 2015 and 2020."

But the analysts said they expect retirements of coal fired power plants "to surge" through 2015, when the EPA's Mercury and Air Toxics Standards come into effect.

"This loss of coal fired generation will require a significant increase in the output of the nation's gas fired generating fleet, and a commensurate rise in utility gas burn," the analysts said.

"Through 2015, we see coal plant retirements driving an increase in utility gas burn of 3.1 Bcf/day, followed by a further increase of 1.7 Bcf/d from 2015 through 2020," they added.

--Rodney White, rodney_white@platts.com
--Edited by Kevin Saville, kevin.saville@platts.com

 

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