GAS DEMAND TO CLIMB,PRICE TO REMAIN STABLE
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U.S. demand for natural gas as a electric power generation
fuel is expected to double by the year 2015, an industry analyst
said March 14, but gas prices will not rise as a result.
Paul Holtberg, group manager of the baseline/gas resource
center at the Gas Research Institute (GRI), told attendees at a
natural gas conference in Calgary, Alberta, that gas prices might
increase slightly through the year 2000 as various regulatory
issues are dealt with, but should be "relatively flat" through
2015.
This seemingly remarkable forecast tracks reasonably well
with the U.S. Department of Energy's (DOE) ANNUAL ENERGY OUTLOOK
1996 (see WIND ENERGY WEEKLY #681, January 22, 1996), which sees
an even sharper increase in natural gas's share of electric
generation, from 14% today to 27% by 2015. The DOE projection,
however, is evidently disconnected from Administration climate
change programs--it predicts a substantial increase in U.S.
emissions of carbon dioxide (CO2), the leading greenhouse gas.
According to the OUTLOOK, "Between 1994 and 2015, [37,000
MW] of nuclear capacity are expected to be retired, resulting in
a decline of 207 billion kWh per year, or 32%, from current
nuclear generation. To compensate for the loss of baseload
capacity and to meet rising demand, [230,000 MW] of new fossil-
fueled capacity will be needed. The resulting increase in
generation from fossil fuels will increase carbon emissions by
160 million tons, or 32%, over current levels." Carbon dioxide
emissions from natural gas are seen as approximately doubling (in
line with its share of generation) over the period, even as coal-
fired generation and CO2 emissions also rise.
It will be interesting to see how this is ultimately
reconciled with Administration pledges to reduce CO2 emissions to
1990 levels by the year 2000. The OUTLOOK's forecast, which is
basically by definition a "business-as-usual" projection, notes
that "Although renewable capacity increases from [94,000 MW] in
1994 to [115,000 MW] in 2015--reducing the impact of nuclear
retirements on total carbon emissions--the intermittent nature of
renewable technologies prevents them from compensating completely
for the losses in nuclear capacity."
The Administration is currently working on an update of its
Climate Change Action Plan (CCAP), which is aimed at carrying out
the pledge to stabilize greenhouse emissions. A DOE spokesman
said March 27 in an interview that the OUTLOOK numbers, with some
minor modifications from other forecasts, are used as a starting
point for CCAP. He also said that the CCAP update will, for the
first time, project emissions effects out to the year 2010, which
should shed some light on the Administration's view of the longer
term. The update is likely to be released sometime in April,
sources said.
Since gas is also viewed as the fuel of choice in much of
the developing world, there is also some question as to whether
rosy forecasts about low future prices will hold up. DOE's
INTERNATIONAL ENERGY OUTLOOK 1995 sees global energy demand
increasing by 36% between 1990 and 2010, but natural gas
consumption jumping by 47% over the same period, and by 140% in
the rapidly growing economies of southeast Asia. If global oil
production peaks around 2000 or shortly thereafter, as a number
of observers now predict, rising energy prices may make a hash of
today's optimism.
Peter Fusaro of Global Change Associates, another speaker at
the Alberta conference, agreed that gas-fired capacity should
dominate the market for new power in the U.S. following utility
deregulation, which is expected to put a heavy premium on low
prices. However, Fusaro noted, that will require the development
of long-term supply contracts that will reduce the financing risk
of new plants and pipelines.
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