In an April 28 white paper on expected near-term cost increases in natural gas and electricity, the U.S. Department of Energy's National Energy Technology Laboratory said opposition to new coal-fired power plants is threatening a generation capacity shortage in many areas of the country and is endangering U.S. energy security in the near term.

The opposition is also leading to a "dash to gas" and quickly causing a rise in natural gas prices at a time when federal climate change legislation could immediately lead to a doubling of natural gas consumption for power generation. A doubling of natural gas use due to the impact of emissions legislation would increase dependence on foreign energy sources and send "natural gas and power prices skyward," NETL said.

While the cost of CO2 offsets in a carbon cap-and-trade system would naturally increase the price of power in coal-heavy power markets, the report said natural gas-heavy markets would suffer a 31% larger jump in power prices because increased demand would raise the price of natural gas so much if new nuclear capacity or plentiful natural gas is not available.

NETL said the marginal price of U.S. electricity would be set "at the whims of foreign oil/LNG suppliers" if the country is forced to rely on natural gas imports while the nation's coal supply could help forestall such a situation.

The report said long-term projections for U.S. natural gas supply have consistently trended downward since 2001 due to high natural gas prices, cheaper available substitutes, disappointing U.S. production and declining Canadian imports. Due to the decreased domestic supply forecasts, NETL said the United States would have to import more LNG to meet theoretical demand in a carbon-constrained future.

"This implies that significant energy security issues will arise for the supply of natural gas, in addition to long-standing issues for secure petroleum supply," NETL said.

Aside from security issues, the report also said natural gas prices have previously been held down due to competition from coal and a run of warm winters, but opposition to coal would allow natural gas prices to match the percentage increase in the price of oil.

As the two commodities have traditionally been priced at an 8-to-1 ratio, the report said the mid-April price of oil at $115 per barrel would yield a natural gas price of $14 per MMBtu. With the competition from coal, gas prices were only $10.30 per MMBtu in mid-April, but the historic ratio of natural gas could return with pressure on the use of coal, the report said.

Such increases in the price of natural gas could cause trade-exposed sectors of U.S. industry to shut in production, especially against coal-powered competitors like China or regions like the Middle East with cheap natural gas reserves to supply power needs.

The loss of planned new coal plants will also reduce 2016 reserve capacity margin projections that are already forecast to be dangerously narrow, the report said.

NETL said no new coal plants combined with new nuclear capacity not being ready by 2016 will result in the entire continental United States, except for the Electric Reliability Council of Texas Inc. market, being "at high risk of power shortages, a present-day South African-like, electricity supply situation."

With natural gas demand forecast at 5.77 Tcf in the United States in 2009, NETL envisioned a 2016 with natural gas demand increased by climate change legislation, no new coal generation, power demand slightly higher than currently predicted and displacement of current coal-fired generation with available additional combined-cycle gas-fired capacity. Such a future yielded demand of 14.35 Tcf of natural gas in 2016, NETL said.

"Since the approximate 9 Tcf increase in natural gas consumption would be occurring at high prices, the impact on the economy would be severe," NETL said. "Since both power and heating prices would escalate, no sector would be exempt, but energy-intensive industry and residential sectors would certainly bear the heaviest burden."