US gas pipelines can meet demand from CO2 rule

OREANDA-NEWS. June 26, 2015. The Environmental Protection Agency's (EPA) proposal for cutting CO2 emissions from power plants will not require a significant build-out of pipelines even if there is large increase in the use of natural gas, a trade group said.

EPA's proposed Clean Power Plan will only drive incremental gas demand up by 7.3 Bcf/d (207mn m3/d) between 2016 and 2030 under a "stress test" scenario that includes persistently low prices, Advanced Energy Economy said in a study published today. The group represents energy efficiency, gas generation and renewable energy companies that could benefit from the rule.

Grid operators, reliability groups and utilities have raised concerns that early emission targets proposed by the EPA could cause reliability problems as the utilities will have to depend more on gas generators to cut CO2. It can take 3-5 years to plan, finance, permit and construct new pipelines.

Adding enough pipeline capacity to meet new gas demand under the stress test scenario would only cost about \\$3.2bn, or about 7pc more than the projected cost of building capacity under a reference case scenario, the study said. The stress test scenario is based on gas prices being 20pc lower than the projections from the US Energy Information Administration (EIA).

But if prices are inline with those projections, the emissions rule would require only half as much of incremental pipeline capacity, or about 3.4 Bcf/d, which will cost \\$1.4bn.

The southern US would have the most incremental demand for gas under the Clean Power Plan, with nearly 5 Bcf/d by 2020 under the stress test scenario.

Also high gas demand from the power sector could fade as the use of renewable energy increases to meet the stringent emission limits.

The power sector gas demand could end up being 0.7 Bcf/d less than a reference case scenario by the rule's final compliance year in 2030.