Squeezing every BTU

1. Squeezing Every BTU
Natural Gas Direct Use Opportunities and Challenges
Richard Meyer
rmeyer@aga.org
January 17, 2012

2. Delivering natural gas that
fuels America’s way of life
• The American Gas Association (AGA), founded in
1918, represents local natural gas companies that
cleanly fuel the way of life of 175 million Americans
nationwide
• 2.4 million miles of pipeline
• 92% of the residential and commercial U.S. natural
gas consumption
2

3. The Direct Use
3
of Natural Gas

4. Policy Recommendations
The Report Consumer Costs
Greater Resource Efficiency
Greenhouse Gas / Pollutant Emissions Reductions
Abundant, Domestic, Stable Supply
First Cost
Builder vs. Consumer Interests
Perverse Incentives
Inconsistent Policy
Full Fuel Cycle
Appliance Labeling
Align Costs and Benefits
Research and Development
Constraints
Advantages and Benefits
4

5. Advantages and Potential
Benefits
Natural Gas Direct Use Advantages to Other Fuels
Checkmark given for each advantage an energy source provides.

6. According to the
Energy Information
Administration and
the Potential Gas
Committee, the U.S.
has enough natural
gas to meet America’s
diverse energy needs
for more than 100
years
AND THEN There Was Abundance
6

7. Annual Energy Prices
TO RESIDENTIAL CONSUMERS
7
Natural gas is the
most cost-
effective home
heating fuel
available.
Fuel oil and
propane are
tethered to crude
oil prices, which
continue to rise.
Expenditures for
electricity for
heating purposes
are greater than
natural gas on
average.

8. Natural Gas Electricity Oil Propane
Space Heating $887 $1,062 $1,542 $1,806
Other $388 $731 $710 $790
Total $1,275 $1,793 $2,252 $2,596
Customers will, on
average, spend less
for space heating,
water heating,
cooking, and
clothes drying using
natural gas than
using any other
energy source.
C O N S U M E RS S AV E
Estimated Annual Energy Bill for
Typical New Household
8
2010 Dollars

9. 9
Usable energy loss associated with electricity equals about half of the total
energy consumed in the residential and commercial sectors
Residential Energy Consumption History and Projection
HOW ARE WE USING ENERGY?
U.S. Energy Information Administration

10. 10
Data: Gas Technology Institute

11. USING LESS ENERGY
Average Energy Use and
Losses for a New Home
11
106.9
53.2
108.5 106.9
14.1 113.5
27.8 17.6
Natural Gas Electricity Oil Propane
MMBtu per Year
Energy Losses (Source-to-Site)
End-Use Consumption

12. Full-fuel-cycle
Greenhouse Gas
Emissions of a
Typical Household
Natural gas used in homes
reduces greenhouse gas
emissions
12

13. About half of all electric home use
electric resistance furnaces for space
heating.
13
3.6
5.7
9.8
19.1
Million Households
Electric Main Heating Equipment by
Number of Households (2009)
Central Warm-Air Furnace
Heat Pump
Built-In Electric Units
Portable Heaters / Other
EIA Residential Energy Consumption Survey 2009

14. 40% of households with natural gas use
electric heat!
14
5.0 Million
18.8 Million
4.6 Million
41.0 Million
Householdswith Natural Gas Service
with Electric Water
Heat
with Electric Space
Heat
with Electric Space
& Water Heat
Other (Gas Space &
Water Heat)
With
Electric
Heating
EIA Residential Energy Consumption Survey 2009

15. Sizable number of natural gas heated
homes with electric water heating.
15
EIA Residential Energy Consumption Survey 2009

16. Reduce Oil Consumption
Enhance Energy Security
16

17. Constraints
First cost purchase and installation of gas equipment and
appliances.
Misaligned incentives of building contractors and end-use
consumers.
Economically perverse incentivesfrom electric utilities to
consumers and builders.
Inconsistent policies in regulatory and programmatic
approaches.

18. First Cost – Water Heaters
Storage Water Heater Type
Site
Efficiency
(EF)
Installed
Cost
Yearly
Energy
Cost
Life
(Years)
Total
Cost
Gas
Minimum efficiency
0.59 $1,079 $284 12 $4,487
High-efficiency
0.65
$1,591
$251 12
$4,603
Electric
Minimum efficiency
0.90 $569 $563 14 $8,451
High-efficiency
0.95
$711
$533 14
$8,173
18
U.S. DOE & EPA

19. Efficiencies and Installed Costs for
Minimum Efficiency Central HVAC Systems
19
$3,682
$4,691
$5,384
$3,213
$2,000
$3,000
$4,000
$5,000
$6,000
20%
30%
40%
50%
60%
70%
80%
90%
100%
Minimum Efficiency
Air-Source Heat Pump
Minimum Efficiency
Gas Central Furnace
w/A-C
Proposed 90%
Effciency Gas Furnace
w/A-C
98% AFUE Electric
Central Furnace w/A-C
Installation
Cost
AFUE-Equivalent
Efficiency
(Source)
System
Source Efficiency - Heating
Installed System Cost

20. • Higher first cost for gas appliances
• Equipment requirements
• Constraints from floor plans
The builder decision to
install a natural gas
appliance, or suite of
applications, is
primarily driven by
three principal factors:
-Natural gas
availability
-Economic impact on
the builder
-Consumer preference
Builder Decision and
Resistance to Gas Use
20

21. Incentives to go “all-electric”
21

22. Inconsistent Approach to Energy Codes and
Standards
• Programs with Site-Energy Approach
• DOE Appliance Codes and Standards
• EPA Energy Star, National Energy Rating Program for Homes
• National Association of Home Builders, National Green Building Program
• Residential Green Build,, Green Building Initiative
• U.S. Green Building Council, LEED Rating System
• Programs with Source / FFC Approach
• DOE, Residential Retrofit Guidelines
• DOE, Federal Petroleum-Equivalent Fuel Economy Calculator
• EPA Energy Star, Commercial Buildings Program
• Green Building Initiative, Assessment Protocol for Commercial Buildings
• International Green Construction Code
• U.S. Green Building Council, LEED for Existing Building O&M Rating System
22

23. Policy
Recommendations

24. Direct and Distributed Use of Natural Gas
Policy Recommendations #1
• Develop and incorporate full-fuel-cycle analysis into energy
policy, regulations and energy efficiency metrics.
24

25. Direct and Distributed Use of Natural Gas
Policy Recommendations #2
• Provide consumers with the best available information on
comparable energy options through the use of enhanced
appliance and equipment labeling, including carbon footprint
information.
25

26. Direct and Distributed Use of Natural Gas
Policy Recommendations #3
• Encourage government agencies, state public utility
commissions, and utilities to jointly develop innovative policies
and regulations that provide better alignment of costs and
benefits over the life cycle of consumer equipment.
26

27. Direct and Distributed Use of Natural Gas
Policy Recommendations #4
• Research and development programs and investment focus
should include natural gas delivery and end-use technology to
fully maximize the value of natural gas resources.
27

28. We Rely on Natural Gas Every Day
28
Hot Water
Fireplaces
Furnaces
Clothes Dryers
Cooking

29. Third party
Communication Webinar
TrueBlueNaturalGas.com
Capitol View
American Gas Magazine
Executive Summary Distribution
Hill Briefings
NARUC
Federal Agencies
Media
Construction Professionals
Energy and Environmental Advocates
Legislators, regulators, agencies
AGA Members
29

30. 30
Richard Meyer
rmeyer@aga.org
202-824-7134
Find Us Online
www.aga.org
www.truebluenaturalgas.org
http://twitter.com/naturalgasflk
www.facebook.com/naturalgas
www.linkedin.com/company/5090
5?trk=tyah

31. The American Gas Association, founded in 1918, represents 201 local energy companies
that deliver clean natural gas throughout the United States. There are more than 70 million
residential, commercial and industrial natural gas customers in the United States, of which
91% — more than 64 million customers — receive their gas from AGA members. Today,
natural gas meets almost one-fourth of the United States’ energy needs.
31
www.aga.org

32. Defining Measures of Energy Consumption
Site (point-of-use) measure of energy consumption reflects the use of electricity,
natural gas, propane, and/or fuel oil by an appliance at the site where the appliance
is operated, based on specified test procedures.
Full-fuel-cycle measure of energy consumption includes, in addition to site energy
use, the energy consumed in the extraction, processing, and transport of primary
fuels such as coal, oil, and natural gas; energy losses in thermal combustion in
power-generation plants; and energy losses in transmission and distribution to
homes and commercial buildings.
Source: National Academy of Science
32

33. Cumulative Unplanned Electric Generation Capacity Additions and Costs (by 2035)
(Gigawatts installed)
Current
Policies /1
Carbon
Constrained
Policies /2
Total Overnight Cost in 2009
(2008 $/kWh)
Nuclear 6.3 62.0 $3,820
Gas Combined Cycle 60.9 54.7 $648
Direct Use Available Here and Now
33
1/ - EIA Annual Energy Outlook 2011 Reference Case
2/ EIA Analysis of American Power Act 2010.

34. Energy Value Chain Efficiencies
Value Chain: Extraction Processing Transportation2 Conversion Distribution
Cumulative
Efficiency
Natural Gas 97.0% 96.9% 99.0% -- 98.8% 91.9%
Oil 96.3% 93.8% 98.8% -- 99.3% 88.6%
Propane 95.9% 95.3% 98.6% -- 99.2% 89.3%
Electricity:
Coal-Based 98.0% 98.6% 99.0% 32.7% 93.8% 29.3%
Oil-Based 96.3% 93.8% 98.8% 31.7% 93.8% 26.5%
Natural Gas-Based 97.0% 96.9% 99.0% 42.1% 93.8% 36.7%
Nuclear-Based 99.0% 96.2% 99.9% 32.7% 93.8% 29.2%
Other3-Based -- -- -- 56.0% 93.8% 49.7%
Electricity Weighted
Average4
-- -- -- 35.8% -- 31.9%
34
Source: Gas Technology Institute

35. What is average household energy usage?
Natural Gas Electricity Oil Propane
Space Heating 74.3 31.5 74.3 74.3
Water Heating 25.4 16.6 29.1 25.4
Cooking 3.3 1.8 1.8 3.3
Clothes Drying 3.8 3.3 3.3 3.8
Total Site Use 106.9 53.2 108.5 106.9
energy Losses 2 14.1 113.5 27.8 17.6
Full-Fuel-Cycle Use 3 121.0 166.7 136.3 124.5
35
Average Household Energy Usage per Year for a New Household (MMBtu)
Losses include energy used or lost in extraction, processing, conversion, transportation, and distribution of energy
Full-fuel-cycle is sum of site use and energy losses

36. Distributed Generation
36

37. 37
Natural gas is the primary fuel for CHP – Over 70 percent of CHP installations use natural gas
Combined Heat and Power Technologies
generate electricity and capture useful heat simultaneously to increase the
overall efficiency of an energy system

38. First Cost – Space Heating Systems
Scenario 1:
Natural Gas Heat, Electric Cooling
Scenario 2:
Electric Heat & Cooling
Natural
Gas
Furnace
Electric
Central Air
Conditioning
Total for
Both
Systems
Electric Heat Pump
Appliance Cost $809 $1,761 $2,570 $2,483
Installation Cost $782 $489 $1,271 $455
Average Annual Fuel Cost $797 $252 $1,049 $1,262
Annual Maintenance &
Repair $42 $131 $173 $122
Life Cycle Cost - NPV $19,053 $19,467
38
AGA Financial and Operational Information Series

39. Opposing Trends  No New Gas Demand
39
U.S. EIA & AGA calculations

40. Natural gas losing market share to electricity
40
0
10
20
30
40
50
60
70
80
1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
%
Heating Fuel Market Share
All New One-Family Houses Completed
Gas Electricity
U.S. Census Bureau