Thoughtful Pathways

Natural Gas:A Foundation Fuel

Chris McGillVP Energy Markets, Analysis and StandardsAugust 2018

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US experienced the single-largest gas consuming day in history January 1, 2018.

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105.9 107.0 104.6113.5 112.1 108.6

116.0

138.7132.0

122.2

134.9

147.1

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Peak Day Natural Gas Consumption (Bcf per day)

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January 2018What was the Test this Time?

New Single Day Natural Gas Consumption Record for the lower-48 states – 147.1 Bcf on January 1, 2018.

Domestic Consumption – 14 straight days of consumer demand (less exports) in excess of 100 Bcf.

Sustained pipeline and LNG exports at 5-7 Bcf per day.

Winter requires more energy than summer.

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1,739 TBtu

766 TBtu

WINTER (JANUARY 2014) SUMMER (JULY 2011)

US Residential Monthly Winter & Summer Energy Consumption, Top Months 2010-2016

Source: EIA Monthly Energy Review

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2

3

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5

6

7

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9

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Dollars per Million BTU

Natural Gas Prices Prompt-Month Futures at Henry Hub

Range

2009-2014

Natural gas prices have remained low compared to history.

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2018

2017

2016 2015

US Natural Gas Resource Estimates from the Potential Gas Committee

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Domestic natural gas production is increasing.

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S&P Global Forecast

65

70

75

80

85

90

Natural Gas Production, US Lower-48 (Bcfd)

Feb’1876.5 Bcfd

History S&P Global Forecast

Dec’1881.4 BcfdAug’18

80.0 Bcfd

Dec’1985.0 Bcfd

Domestic Shale Gas Production

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Safety is Our FoundationNatural gas utilities spend $24 billion annually to enhance the safety of natural gas distribution & transmission systems

AGA Engages in Many Topical Areas in Support of Members

• Guidelines document

• Pilot summary document

• Workshops• March 2016• April 2017• January 2018• 2019 Date and

location TBD

• Discussion Group sessions

A voluntary safety & operational practices program that allows utilities to be reviewed by peers, share leading practices & identify opportunities to better serve customers & communities.

Each review includes fellow gas utility professionals from North America who provide the company with feedback to help enhance its safety and efficiency.

Peer Review

By end of 2018, AGA members that serve 81% of U.S. natural gas customers will have participated in a peer review.

81%

AGA Operations Best Practices Program

• Identifies procedures of top-performing companies & innovative work practices that may be used to continuously evaluate & improve participants’ unique operating systems

• Three focus areas:• Benchmarking• Roundtables• Questionnaires

• 2017 Topics: Leak Survey/Leak Management, Vehicular Safety/Operating/Driving, Damage Prevention/Locating/ Cross Bores

• 2018 Topics: Transmission Integrity, ROW Management, Encroachment/Working with Munis/Permitting, Contractor Oversight & Quality Assurance

• Annually: System Reliability; Company Profile

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Natural gas utilities implement security programs and actively engage in voluntary actions to help enhance security.

AGA members are implementing the TSA Pipeline Security Guidelines and utilizing available security standards, models, guidelines and information sharing resources.

However, there are different visions for

domestic energy policy.

“It is very clear that we cannot afford to expand infrastructure and reliance on fossil fuels, including gas.”

“At the same time, we do need to ensure that coal energy is not backfilled with gas.”

SNL Interview, Daily Gas Report, Lena Moffitt, Beyond Dirty Fuels Campaign Director, Sierra Club, August 19, 2016.

Natural Gas in the Crosshairs

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Residential gas use is a small part of the US GHG Inventory

Power, 29%

Transportation

26%

Industrial

12%

Other

Residential

1%

Residential

Gas Use

4%

Other

Commercial

1%

Commercial

Gas

3%

Non-Energy

CO2

6%

Methane, 9%

Nitrous Oxide

5%Other Gases 3%

• Electricity

generation and

transportation are

the two largest

GHG sources.

• Residential gas

use is 4% of total

GHG emissions.

• Commercial gas

use is 3%.

As the grid decarbonizes, calls to “electrify everything” grow.

AGA Study• Will residential electrification actually reduce

emissions?

• How will residential electrification impact natural gas utility customers?

• What are the impacts on the Power Sector and Transmission infrastructure?

• What is the overall cost of residential electrification?

• https://www.aga.org/research/reports/implications-of-policy-driven-residential-electrification/

Main Questions the Study Addresses

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Electrification will require significant capacity additions.

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2023 2035

US Electricity Generation Capacity (GW)

Additional

capacity due

to residential

electrification

Electric power

requirements grow

in the Base Case

Initial Findings from Study

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Implications of Policy-Driven Electrification of Residential Gas Use, AGA, July 2018.

1. Natural gas is a critical residential energy source: Residential natural gas demand in January is more than twice electricity demand in July

2. Total GHG reduction potential from policy-driven residential electrification is

small: Ranging from 1.0 to 1.5 % of U.S. GHG emission in 2035.

3. Policy-Driven Electrification will be burdensome to customers: average residential household energy costs (utility bills and equipment/renovation costs) increase by 38 to 46 %.

Initial Findings from Study

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Implications of Policy-Driven Electrification of Residential Gas Use, AGA, July 2018.

4. A policy-driven residential space and water heating strategy is expensive to the economy - $590 Billion to $1.2 Trillion in total incremental energy costs.

5. Such a policy may require infrastructure investments of $150 to $425 Billion for generation capacity and transmission.

6. Policy-driven electrification of the residential sector is an expensive tool for greenhouse gas emissions reductions - $572 to $806 per ton CO2.

Progress in technology and market developments for all energy sources

need to be understood and acknowledged but what problem is policy-driven electrification of the natural gas residential space and

water heating sector trying to solve?

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Emissions Reductions Costs for Alternative Approaches to Reducing CO2 Emissions

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Source: Implications of Policy-Driven Electrification of Residential Gas Use, AGA, July 2018.

Costs to Consumers By Region

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Source: Implications of Policy-Driven Electrification of Residential Gas Use, AGA, July 2018.

-1000

0

1000

2000

3000

4000

5000

6000

7000

An

nu

al P

er-

Ho

use

ho

ld C

ost

s ($

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)

Average Annual Per-Household Cost from Power andTransmission CostsAnnual Households Direct-Consumer Costs per Household

Pre-Electrification: Average Household Annual HouseholdEnergy Costs

$3,930 $2,760 $1,960 $1,740 $1,240 $1,683 $520 $130 $400 $1,420

25-40%GHG reduction potential on a customer basis by integration of these technologies and other efficiency practices

Emerging gas technologies can make substantial and cost-effective contributions to GHG reduction goals

~100Innovative Gas Technologies for Residential / Small Commercial identified in our global search

60-80%GHG reduction –sufficient to meet COP 21 goals – with inclusion of future CHP technologies and Renewable Gas

• Policy goals for sustainable energy can be achieved at significantly lower consumer cost through integrating innovative gas solutions into long-term resource planning, while offering customers more choice and improved affordability, reliability and comfort.

• Gas technologies can enhance energy system reliability (system-wide and as a local backup) and efficiency, while reducing the need for new electric generation and T&D infrastructure and preserving the future value of gas infrastructure.

• Electric technologies will also improve, and are supported by incentives, but their GHG impacts depend on the generation fuel mix. In some regions electrification may increase GHG emissions through the 2030s.

Enovation Partners, May 2018.

• IoT thermostats (i.e. Nest, Honeywell)

• Building envelope (insulation, windows, building materials)

• Demand controls for HW systems • Thermostatically controlled low flow

shower head

Innovative technologies were assessed, prioritized and aligned with relevant end use pathways

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Note: All technologies were independently evaluated and scored by several SMEs; evaluation criteria primarily considered GHG impact and time to market; aggregated scores were consistent among experts and robust against multiple weightings; * designates technology with multiple end-uses, but listed only once

• Tankless water heater -Maintenance-free approaches for tankless water heaters

• Solar-assisted heating - PV assisted domestic hot water heater (potable)

• Unplugged power burners - Two-Phase Thermo-Syphoning (TPTS) technology

• Combined Space and Water Heating Systems*

• Fuel cell electric vehicles (hydrogen)• Commercial CNG vehicles

• Ozone and cold water washing

• High production fryers• Boilerless steamer - Multistacked

convention steamer for high volume cooking

• Combination steam and heat oven

• Low-cost residential gas absorption heat pump (GAHP) combination

• Condensing furnace• Transport Membrane Humidifier

(TMH)

• Solid oxide fuel cells*• Micro CHP – gas recip, sterling

engine*

High priority technologies by major end use, Enovation Partners, May 2018

Questions?Chris McGillVP Energy Markets, Analysis and StandardsAmerican Gas Associationcmcgill@aga.org

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