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Gas to win from Obama's latest coal war front

GAS is to gain a greater generation share under US President Barack Obama's controversial Clean P...

Anthony Barich
Gas to win from Obama's latest coal war front

Under the base policy case in the US Energy Information Administration’s recently released analysis of the Environmental Protection Agency's proposed Clean Power Plan rule, the main compliance plan to lower emissions rates as the proposed rule comes into effect is to increase natural gas-fired generation to displace and ultimately surpass coal-fired generation.

Later, as more wind and solar capacity are added, renewable generation also surpasses coal-fired generation.

The EIA’s analysis, which uses its own Annual Energy Outlook 2015 reference case as its baseline, shows renewables and energy efficiency programs benefitting from a compliance formula that counts renewable generation or, in the case of efficiency, avoided generation in the denominator of the compliance formula for existing fossil generation, That formula calculates emissions per unit of generation.

However, it is not just Obama’s proposed Clean Power Plan that can significantly affect the electricity generation mix and other key energy market outcomes.

For this reason, EIA's analysis also modelled the proposed rule using the High Oil and Gas Resource and High Economic Growth cases from AEO2015 as alternative baselines.

The HOGR case reflects a scenario in which more abundant domestic natural gas resources and better technology enhance natural gas supplies, keeping projected annual average spot natural gas prices below $4.50 per million British thermal units through 2040.

“Even before the proposed rule is considered, natural gas plays a much larger role in the generation mix, largely at coal's expense, in the HOGR case than in the reference case,” the EIA said.

“In the reference case, coal generation at existing coal plants is supported by a steady rise in natural gas prices beyond 2020, with annual average spot prices exceeding $7.50/MMBtu by 2040.

“When the proposed rule is modelled using the HOGR case as the baseline, natural gas plays a larger role in compliance, with the natural gas-fired share of total generation rising to 37% in 2020 and 44% in 2030. Renewables grow at a slightly lower rate, while the share of coal-fired generation declines to 28% in 2020 and 19% in 2030.”

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