President Obama’s announcement Tuesday of a sweeping climate change initiative, which some are calling a “war on coal,” will add to the list of departing coal-fired power plants and could result in demand for an incremental 4-8 Bcf/d of natural gas by 2020, one analyst estimated (see Daily GPI, June 26).

The imposition of a carbon emission limit on power plants would lead to an estimated incremental retirement of about 70 GW of coal-fired capacity by 2020 over and above the approximately 40 GW of expected retirements engendered by the U.S. Environmental Protection Agency’s (EPA) Mercury and Air Toxics Standards rules, according to Christi Tezak, with ClearView Energy Partners LLC.

“In the aggregate, this adds up to a shutdown of roughly one-third of U.S. coal-fired generation capacity within the space of a decade,” Tezak said in a “climate and emissions” note that was issued after the president unveiled his climate action plan targeting the nation’s largest source of polluting emissions.

ClearView used recent figures compiled by the Natural Resources Defense Council (NRDC) to calculate how retiring coal plants would impact carbon dioxide equivalent (CO2) emissions. Using NRDC’s notional 1,500 pounds of CO2e/MWh as a starting point, that “implies an incremental retirement of about 70 GW of coal-fired capacity by 2020,” Tezak said. She calculated the replacement of the total 110 coal-fired GW would mean an added 4-8 Bcf/d in natural gas-fired power.

Pennsylvania Gov. Tom Corbett called Obama’s climate change proposal initiative a “war on coal” and on jobs. “Here in Pennsylvania, nearly 63,000 men and women, including 8,100 miners, work in jobs supported by the coal industry,” Corbett said. Pennsylvania is the fourth-largest coal producing state in the nation.

Analysts with Tudor, Pickering, Holt & Co. (TPH) said fossil fuels fared better than was expected in the president’s climate action plan.

“At the margin, [it was] positive for fossil fuels (really!). Coal [is] not going to be outlawed tomorrow, [Obama is] warming up to natural gas, and renewables promoted but largely rhetorical. …Nat gas cited as ‘critical bridge fuel,’ promotion of coal-to-gas fuel-switching, development of a global market for gas, and adoption of heavy-duty natural gas vehicles encouraged.”

The TPH analysts also spotlighted a recent unheralded move by the administration to change its estimate of the social or emissions-generating cost of carbon from $24 to $38/ton. “$38/ton is a big number…on a coal versus gas generation basis, estimate increases breakeven price for natgas a dramatic $2.50/MMBtu-plus.” The change was baked into a notice about emissions from microwave ovens.

TPH is estimating that given the increase in total cost of coal, the price of natural gas could rise by as much as $2.50/MMbtu before it would be costlier to generate electricity with natural gas than with coal, everything else being equal.

It was pointed out that it will take time for new rules to be written and implemented, a process that in the past has dragged on for years, interrupted by administration changes and court lawsuits. Existing plants likely would be given time to make changes. However, anyone planning on building a power plant that could last 50 years is bound to be influenced by prospective carbon limits.

And as for whether his administration will approve the controversial Keystone XL pipeline to carry tar sands oil from Canada to Gulf Coast markets anytime soon, read what you will into Obama’s statement. He said the State Department would approve the pipeline if it does not “significantly increase” greenhouse gas emissions. Define “significantly,” and then watch which way the wind is blowing.

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