With an incoming Republican-controlled House of Representatives, the United States should expect to see a "significant" change in the approach to domestic energy policy for at least the next two years, and attention is likely to focus on expanding the use of natural gas, according to a report by Deutsche Bank Climate Change Advisors (DBCCA).

The new Congress may be more resistant to renewable energy incentives in a constrained budget environment. However, expanding the use of gas over coal is an area that "President Obama has identified as an area of bipartisan agreement," the DBCCA noted.

The report, "Natural Gas and Renewables: A Secure Low Carbon Future Energy Plan for the United States," outlines an evolution of the U.S. electricity system through 2030. Lead author Nils Mellquist and his team concluded that by using a "mix" of natural gas, renewables and nuclear energy to replace old and inefficient coal plants, the United States in the short term -- defined as the next 20 years -- could almost halve its carbon dioxide emissions.

The "key finding is that a significant switch by the U.S. electricity sector from coal to natural gas would be the most secure, least-cost approach to lower emissions," the authors said. Using more gas and less coal "would make the Obama administration's targets of a 17% overall economywide reduction in greenhouse gas emissions by 2020 and an 83% reduction by 2050 realistically achievable."

Abundant supplies of unconventional shale gas would make the large-scale switch possible.

"Increasing supply is causing a long-term fall in the price of natural gas, making it a far more economic fuel than in the past. We believe shale gas is environmentally sustainable with best practices. And because it is domestically abundant it also provides a high level of energy security," according to the report.

For the coal-to-gas switch, "a key driver is a $4-6/MMBtu natural gas price due to the major increase in supply coming from unconventional shale gas," said the authors. "A further addition to this strategic energy transition would be a return to natural gas producers agreeing to sell forward production under long-term contracts to electricity producers in order to mitigate price volatility."

The switch would yield a low-cost alternative to coal. "Through the middle of 2010, the economics of gas have already caused about a 3% increase in natural gas-fired generation fuel mix in the past two years ended 2Q2010...In our view, a coal-to-gas switch that is suitably based on raising utilization rates of existing plants in the face of massive new unconventional shale supply will certainly keep this a least-cost pathway."

According to DBCCA's analysis, the "most important" factor policy-wise is the pending regulation being phased in through 2014 by the Environmental Protection Agency, which would render old (more than 45 years) and inefficient coal plants uneconomic compared with dispatching existing or building new gas plants.

The DBCCA report concluded that using more gas, wind and solar over the next 20 years would allow the power system to remain "reliable and flexible" and would keep options open beyond 2030, after which technology advances could become the new "game changers." Using the researchers' assumptions, they concluded that:

Beyond 2030 would require more "decarbonization" efforts to reduce emissions by 80% through 2050, the DBCCA found. Those efforts "likely" would include "a massive increase in renewable energy paired with natural gas carbon capture and storage, or a substantial build-up in nuclear energy, or even possibly a geo-engineering or technology breakthrough."

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