US natural gas demand to increase 3.29 Bcf/d under EPA plan: EPA
Washington (Platts)--2Jun2014/509 pm EDT/2109 GMT
US natural gas demand would increase 3.29 Bcf/d by 2020 as a result
of the US Environmental Protection Agency's newly released plan to cut
carbon dioxide emissions from power plants 30% from 2005 levels by 2030.
After 2020, gas demand would fall as energy efficiency measures reduced
power demand, the EPA said. US gas demand averaged just under 71 Bcf/d
in 2013, according to the Energy Information Administration.
The EPA Monday also predicted gas prices would increase between 9% and
12% by 2020. Based on Friday's closing price for the calendar year-2020
NYMEX futures contract, the EPA's estimate would price gas at
$5.36/MMBtu-$5.50/MMBtu in 2020 if the plan becomes a rule.
Retired coal-burning power plants will be replaced, at first by gas
plants, then renewables, under the EPA's model, which foresees an
eventual 11% decrease in power demand due to demand reduction
technologies.
The plan most severely affects emissions from the roughly 600
coal-burning power plants in the US while benchmarking progress against
the year 2005. Coal consumption will decline 25% by 2020, EPA estimated,
then further decline another 30% by 2030.
Environmental groups, as expected, praised the effort, while coal and
oil trade groups howled that EPA's proposal would increase energy costs,
reduce the reliability of the electric grid and kill job growth.
Gas trade groups, meanwhile, opted for quiet notes of cooperation
without seeming triumphant that the EPA leaned their way.
"As we consider EPA's proposal with our members and with our power
generation customers, we agree the rules should be flexible and fair,"
Marty Durbin, CEO of America's Natural Gas Alliance, a trade group of
shale gas producers, said in a statement. "We believe they should
recognize the ability of natural gas to play an increasing role in the
delivery of reliable, safe and clean power."
By choosing 2005 as the year against which emission are reduced, the US
is nearly halfway to the 2030 goal. Carbon dioxide emissions peaked in
2007 and have been shrinking slowly as the result of both the great
recession and by cheap shale gas replacing coal in baseload power
plants.
The announcement resolves for stakeholders one of the most important
aspects of the highly anticipated plan by leaving the base year as 2005.
As anticipated, the plan gives states flexibility in meeting the
emissions standards either by mandating pollution control equipment or
by implementing a plant that takes a portfolio approach in reducing
aggregate statewide emissions. The plan will also allow states to work
together in meeting those goals.
An example of a multi-state effort would be the Regional Greenhouse Gas
Initiative, a cap-and-trade scheme formed to limit greenhouse gas
emissions in nine participant states.
EPA has set a June 2016 deadline for states to submit compliance plans,
but is using a "two-step" process that would give states more time if
needed.
--Bill Holland,
bill.holland@platts.com
--Peter Maloney,
peter.maloney@platts.com
--Edited by Richard Rubin,
richard.rubin@platts.com
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