Redrawing the World’s Energy Map: The Gas Revolution and Energy Self- Reliance in North America...
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Redrawing the World’s Energy Map: The Gas Revolution and Energy Self- Reliance in North America The Natural Gas Industry Future Directions Kevin McCrackin
Redrawing the Worlds Energy Map: The Gas Revolution and Energy
Self- Reliance in North America The Natural Gas Industry Future
Directions Kevin McCrackin Vice President Utility Marketing
Slide 2
Corporate Overview Largest Natural Gas Utility Company 7 Local
Distribution Utilities in 7 states 4.5 million customers Tropical
Shipping
Slide 3
North American Gas Markets: Abundant Low Cost Resource of over
100 years per EIA and Potential Gas Committee Wood Mackenzie Shale
gas and tight oil plays Sources: Wood Mackenzie (North America Gas
Service, Unconventional Gas Service) $2 $3 $4 $5 $6 $7 $8
2000200520102015202020252030 Year production >250 mmcfde $/mmbtu
US shales Canadian shales Tight oil Liquid-rich shales 10 tcfe 100
tcfe 50 tcfe 201020112012 Marcellus becomes the leading US gas
play
Slide 4
Changing Economics: Natural Gas Prices Exceptionally Low
Source: U.S. Department of Energy, Energy Information
Administration Between June 2008 and December 2012, Henry Hub
natural gas prices have decreased 78% Hurricanes Katrina and Rita
2008 Oil Shock
Slide 5
Wood Mackenzie Price outlook Source: Wood Mackenzie (North
America Gas Service, Coal Market Service, Macro Oils Service) Where
are fuel prices headed in North America markets? Oil/gas ratio
Source: Wood Mackenzie (North America Gas Service)
Slide 6
Who Is Using Natural Gas in the United States? Residential
Commercial Industrial Power Generation Source: U.S. Department of
Energy, Energy Information Administration % of natural gas
throughput Natural gas use for power generation has increased 87%
in the past 25 years Industrial customer usage has decreased by 21%
in that same period
Slide 7
Wood Mackenzie But, an Industrial Renaissance is underway due
to abundant supplies and low natural gas prices Source: Wood
Mackenzie North America Gas Service Annual gas demand growth (US
& Canada) Demand growth (vs. 2010)
Slide 8
Looming Natural Gas Demand: Coal retirements will accelerate in
mid-decade with Mercury & Air Toxics Standards (MATS) Wood
Mackenzie Source: Wood Mackenzie North America Power Service US
coal retirements
Slide 9
New Markets for Natural Gas Power Generation Combined Heat
& Power Compressed Natural Gas Liquefied Natural Gas
Slide 10
Source: U.S. Department of Energy, Energy Information
Administration Power Generation Mix Million megawatts Coal Natural
Gas Other Nuclear Petroleum Products
Slide 11
Projected Natural Gas Consumption 11 Source: ICF International
The Largest Natural Gas Market Growth Opportunity is Power
Generation Are Central Bulk Power Plants the most efficient way to
grow?
Slide 12
Implications to the Florida Generation Market FP&L
Generation Plans: New combined cycle power plants planned or under
construction at Rivera Beach, Martin and Port of Everglades Old
peaking units requiring upgrades due to heat rates above 17,000
Btu/kWh Achieving the improved environmental standards could
require replacement of existing natural gas turbine peakers
Evaluation is looking at new natural gas combustion turbines Other
Possible Gas-Fired Plants: Closure of Crystal River Polk Power
Station Expansion FPL Analyst Presentation March 12, 2013
Slide 13
Slide 14
Between now and 2035, North America requires construction of
over 1,400 miles/year of natural gas pipelines, with 17% of the new
pipeline being constructed in the Southeast. $205 Billion invested
in North America through 2035 Southeast U.S. natural gas demand
doubles; 10 Bcf/d to 20 Bcf/d Southeast U.S. infrastructure
investment of over $35 Billion 568 pipeline laterals to attach new
gas-fired power generation. 33% of these laterals projected to be
constructed in the Southeast. Natural Gas Infrastructure
Requirements Source: ICF International study for INGAA Foundation,
North American Midstream Infrastructure through 2035 $Billions
Slide 15
FPL Analyst Presentation March 12, 2013
Slide 16
NATURAL GAS vs. ELECTRIC The Big Picture Direct Use is Most
Efficient .so, distributed generation at the home makes sense.
Slide 17
Combined Heat and Power (CHP) is more Efficient 17
http://www.aga.org/our-issues/playbook/Documents/AGA_Playbook2012_HI_RES.pdf
Slide 18
18 Executive Order August 30 Coordinate and strongly encourage
efforts to achieve a national goal of deploying 40 gigawatts of
new, cost effective industrial CHP in the United States by the end
of 2020. Convene stakeholders, through a series of public
workshops, to develop and encourage the use of best practice State
policies and investment models that address the multiple barriers
to investment in industrial energy efficiency and CHP. Utilize
their respective relevant authorities and resources to encourage
investment in industrial energy efficiency and CHP.
Slide 19
Federal Support for CHP 19 Incentives 10% Investment Tax Credit
(ITC) for CHP through December, 2016; 50 MW or less 10% ITC for
micro turbines capped at $200/kW of capacity; 2 MW or less 30% ITC
for fuel cells or $3,000/kW ($1,000/ kW residential), whichever is
smaller Modified Accelerated Cost-Recovery System for 2013 bonus
depreciation is 50% of the eligible basis Renewable Energy
Production Tax Credit (ARRA portion expires end of 2013) renewable
fuels only Support EPA recognizes CHP as an efficiency measure
under developing greenhouse gas emissions standards EPA includes
output-based options that recognize CHP benefits in ICI Boiler MACT
and Utility MACT (MATS) DOE increases technology deployment support
for CHP and announces goal of 40 GW of new CHP capacity by 2020
Clean Energy Standard Act of 2012 Includes nuclear, clean coal, and
natural gas Recognizes the additional energy efficiency and
greenhouse gas benefits of CHP Proposals to encourage rate-basing
of utility investments in behind the meter energy efficiency and
CHP Florida - Renewable energy tax credit of 1/kWh annually (CHP is
eligible), Solar and CHP sales tax exemption. Net metering excess
generation credited at the utility retail rate.
Slide 20
U.S. CHP Generation Capacity Vision 20 Source: Combined Heat
and Power: Effective Energy Solutions for a Sustainable Future
Sponsored by the U.S. Department of Energy
Slide 21
The U.S. is the worlds largest natural gas producer, but lags
behind other nations in natural gas transportation There are more
than 12.7 million natural gas vehicles on the road worldwide but
less than 125,000 are in the United States. Source: NGV Global
Slide 22
Fuel price is the driver, and it is expected to stay this
time.
Slide 23
PRICING CHARACTERISTICS 20% 13% 27% 40% Natural Gas
Distribution & Compression Marketing & Profit Taxes CNG
(July 2012) Retail Price: $1.85/gge The natural gas commodity cost
component is about one quarter the crude oil cost component in the
make-up of the overall price of the delivered fuel, giving CNG a
price dampener against price volatility.
Slide 24
PRICE STABILITY OF CNG Natural Gas at $2.88/Mcf Natural Gas
(divide by 7.2) $0.40 Transport Costs & Fees $0.20 Electricity
Costs per GGE $0.10 Maintenance per GGE $0.20 Federal and State
Taxes $0.25 Fuel Card Fees per GGE $0.05 Retailer Profit Margin
$0.70 CNG at the Pump $1.90 Natural Gas at $5.76/Mcf Natural Gas
(divide by 7.2) $0.80 Transport Costs & Fees $0.20 Electricity
Costs per GGE $0.10 Maintenance per GGE $0.20 Federal and State
Taxes $0.25 Fuel Card Fees per GGE $0.05 Retailer Profit Margin
$0.70 CNG at the Pump $2.30 The natural gas fuel commodity makes up
a smaller portion of the overall price of the delivered fuel when
compared to gasoline or diesel.
Slide 25
THE ECONOMICS OF VEHICLE CLASSES Type of Vehicle Incremental
Cost * Annual Use (Gals.) Annual Savings ** Simple Payback Honda
Civic (consumer)$7,500500$75010 yrs. Sedan (fleet
application)$10,0001,200$1,8006 yrs. Pickup Truck (fleet
app.)$11,0002,000$3,0004 yrs. Cargo Van$14,0002,500$3,7504 yrs.
Step Van/Box Truck$24,0004,000$6,0004 yrs. School
Bus$28,0002,600$3,7507 yrs. Garbage Truck$35,0008,000$12,0003 yrs.
Class 8 Truck$65,00015,000$22,5003 yrs. * Cost assumes no grant
money, rebates, tax credits, etc. available * * Savings calculated
based on savings of $1.50/GGE at retail CNG station
Slide 26
THE LIGHT DUTY MARKET CHALLENGE $500,000+ for Centralized
Fueling Stations 500 down, 160,000 to go - $50+ billion? in
investment to match gasoline stations The economics work for
fleets, so there will continue to be growth $100,000?+ to make a
private station public accessible $8,000+ Vehicle
Conversion/Replacement Premium Takes 7 years+ to recover the
premium Limited vehicle selection from OEMs, especially vehicles
desired by target customers Efforts around conversion, and
specifically tank technologies, is ongoing $5,000 Home Refueling
Appliance (HRA) product and Installation Cost An additional 4+
years to recover the HRA cost Limited fill capability, maintenance
unknown (historically not good) Result: $8,000 + $5,000 = $13,000
per vehicle premium, or 11+ years payback MUST REDUCE VEHICLE
CONVERSION COSTS & DEVELOP A LESS EXPENSIVE HRA
Slide 27
Expect 12% of New vehicle sales to be NGVs by 2020 NGV Engine
Costs are expected to be competitive by 2020
Slide 28
THE HOME REFUELING APPLIANCE (HRA) BRC Fuelmaker Phill is the
only commercially available HRA Expensive price with installation,
approximately $6,000 Limited fill capability, less than a half
gallon per hour Historically has had compressor performance and
maintenance issues AGL is a distributor, and installs and maintains
Phill units AGL Resources is actively engaged with a team of
industry leaders in the development of a less costly HRA U.S.
Department of Energy - Advanced Research Projects Agency-ENERGY
(ARPA-E) Methane Opportunities for Vehicular Energy (MOVE) 13
projects awarded with $30 million in funding including 4 HRA
designs Engineer Light-Weight Affordable Natural Gas Tanks Develop
Natural Gas Compressors that can efficiently fuel a NGV at home GTI
and GE have projects within this program, and AGL is actively
involved
Slide 29
Florida Legislation is headed in the right direction Repeals
the Decal program for Alternative Fuels effective January 1, 2014
Exempts natural gas fuel from taxes for 5 years Survey of Florida
residents shows 72% support for legislation encouraging NGV
adoption 96% of the residents think Energy Independence is
important Florida Natural Gas Vehicle Coalition In an August 2012
study, the transistioning of Florida Commercial Fleets to Natural
Gas results in following benefits over 20 years: 10,000 new jobs
$330 million in new wages $1 billion in economic output An update
based upon February 2013 SB560 and HB579 legislation improves these
results as follows over 5 years: 20,000 new jobs $715 million in
new wages $2.5 billion in economic output
Slide 30
LNG in HHP Applications Total High Horsepower 15.2 billion
gallons
Slide 31
Key Takeaways Natural gas is more relevant than ever to our
energy future. New market opportunities for natural gas will
potentially reshape entire industries. Floridas growth is aligned
with the growth in natural gas as a fuel and will make Florida a
significant market participant. AGL Resources is uniquely
positioned to deliver on the promise of natural gas.