discussion on the threat of electrification to residential ... · vancouver, bc plan to position...

Tuesday,

October 10h,

2017

Mike Sloan

Managing Director

703-218-2758 (o)

703-403-7569 (m)

[email protected]

Discussion on the Threat of Electrification to Residential Natural Gas Demand

Prepared for the American Gas Association

State Affairs Committee

Agenda

Why is there a push toward electrification to address

climate change?

Where is this most overt?

Who is pushing this policy approach and in what

ways?

How is it being manifested in different regions?

How are other utilities responding – any successes?

ICF analysis of impacts for AGA

2

What are we Talking About?

Primarily justified as a GHG reduction measure based on

expectation of increasingly clean, renewable power grid.

Sometimes also positioned as a way to manage renewable

generation profiles (the “duck curve”).

Sometimes tied to replacement of less efficient electric

technologies.

Not the historical gas/electric market competition.

3

Proposals for mandatory, widespread/total electrification of residential

home heating and water heating.

Where is This Happening?Ontario Residential electrification was promoted by NGOs and

then aggressively pursued by environmental agency.

Concerns from generators and ISO and strong

analytical pushback from gas industry have

significantly stalled the activity.

Vancouver, BC Plan to position Vancouver as the greenest city in the world.

100% renewable energy goal before 2050 establishes a

phased approached to achieve zero emissions in all new

buildings by 2030.

Some policies that effectively exclude gas have been

initiated but may be delayed due to pushback from industry.

Denver City task force recently recommended “Shift commercial

buildings and 200,000 households off natural gas to heat

sources that do not lead to carbon pollution.”

California, Pacific

Northwest,

Massachusetts,

Alberta, Others

Active discussion and analysis of electrification.

Massachusetts Senate Bill 1849.

4

Who is Pushing the Electrification Agenda?

Environmental Groups

State and Provincial Regulators

Electric Generators

(Renewable)

Electric Utilities

Other NGOs

5ICF proprietary and confidential. Do not copy, distribute, or disclose.

Electrification

ICF proprietary and confidential. Do not copy, distribute, or disclose.ICF proprietary and confidential. Do not copy, distribute, or disclose.ICF proprietary and confidential. Do not copy, distribute, or disclose.

Local Clean Energy Commitments

6

Source: Sierra Club

Mayors Signing Sierra Club Pledge

Mayors Conference in

June: 250 mayors

unanimously backed a

commitment for US cities

to “run entirely on

renewables by 2035”.

140 Mayors of both

parties have signed

Sierra Club “100 %

Clean Energy” pledge (represented in orange dots on

map).

Map of Cities that Signed the Commitment

An underlying truth…

Long-term climate goals

require deep

decarbonization.

This does not necessarily

mean elimination of

gaseous/liquid fuels.

The timing is key – 2050

and beyond targets are

uncertain but we need

reliable energy supply

until then.

We have to analyze the

options.

7

WHAT IS DRIVING THIS?

Mil

lio

n t

CO

2

7,000

6,000

5,000

4,000

3,000

2,000

1,000

DDPP Main Case

IEA 450 Scenario

IEA Current Policies Scenario

IEA New Policies Scenario

LIMITS-450 Median

WRI Base Case

WRI Go-Getter

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Year

Comparison of Policy and 2ºC Scenarios

for the United States (Energy CO2 only)


Low-GHG Electricity Seems Like an Attractive Alternative…


No RPS

Mandatory

Voluntary

OR: 50% by2040

WA: 15% by2020

CA: 50%by

2030

NV: 25%by

2025

MT: 15% by2015

CO: 30% by2020

AZ: 15% by2025 NM: 20% by

2020

TX: 5,880 MW by 2015,Voluntary

target: 10,000 MW by 2025

KS: 20% by2020

MO: 15%by 2021

IA: 105 MW

MN: 26.5%

by 2025, 31.5% by

2020 (Xcel only)

ND: 10% by 2015

SD: 10% by 2015

WI: 10 % by 2015

IL: 25% by 2026

MI: 15% by 2021

OH: 12.5%

by 2026

VA: 15 % by 2025

PA: 18% by 2021

NY CES: 50%

By 2030

ME: 40% by 2017

VT: 75% by 2032

NH: 24.8% by 2025

MA CES: 16%

by 2018, +2% each year after

RI: 38.5% by 2035

CT: 27% by 2020

NJ: 20.38% by 2020,

4.1% solar by

2027MD: 25% by 2020

DE: 25% by 2026

UT: 20%by

2025

NC: 12.5% by 2021OK: 15%

by2015

IN: 10% by 2025

DC: 50% by 2032SC: 2%

by 2021

ID

WY

NE

AR

LA

ALMS

GA

FL

TN

KY

WV

Renewable Portfolio Standards


But We are Not on the Path to a Fully Renewable Grid (at least any time soon)

9


U.S. EIA Annual Energy Outlook 2017 Base Case with CPP

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2017 2035 2050

Ann

ua

l G

en

era

tion

(bill

ion

kW

h)

EIA Forecast of Electric Generation (billion kWh)

Coal Natural Gas Nuclear

Oil/Other Hydro Wind

Solar Other Renewables Renewables to

account for 34%

of generation by

2050

Misrepresented/Misunderstood Renewable Performance

Confusion between

“electricity” and

“energy”

“Germany nearly

reached 100 percent

renewable power on

Sunday”

“0.6% of U.S. land area

could provide 100% of

U.S. energy

requirements”

10


Total = 74 Q

Projected U.S. Delivered Energy Mix – 2035

(Quads)

General Opposition to Natural Gas

Themes woven into general opposition to new

gas production and infrastructure in many

states and other venues.

Rapid phase-out of fossil fuel production and

infrastructure

Increased renewable electricity generation

Electrification of existing gas applications

Seen in Virginia, New York, New England, and anywhere

that gas infrastructure is being discussed.

11


Res/Comm Gas Use is a Small Part of the U.S. GHG Inventory

Electricity

generation is still

the largest GHG

source.

Transportation is

a close second.

Residential gas

use is 4% of total

GHG emissions.

Commercial gas

use is 3%.

12

WHY GAS?

U.S. EPA Inventory of U.S. GHG Emissions

2015 U.S. GHG Emissions (MMT)

Power, 1,901

Transportation, 1,736

Industrial, 806

Other Residential, 67

Residential Gas Use,

253

Commercial, 71

Commercial Gas, 175

Non-Energy CO2, 403

Methane, 656

Nitrous Oxide, 335

High GWP Gases, 185

But a Very Large Part of the Peak Period Energy Portfolio

In the residential

sector, natural gas

provides twice as

much peak month

energy as

electricity.

And 35% more

energy in the

commercial sector

13

WHY GAS?

Electricity is Summer Peaking, Natural Gas is Winter Peaking

Peak Month Energy Consumption (2013-2017)

531

441

272

1,070

590

893

RESIDENTIAL COMMERCIAL INDUSTRIAL

U.S. Peak Month TBtu

Electricity Natural Gas

Why the Focus on Res/Com Natural Gas?

Transportation is by far the largest source of CO2

emissions after electricity generation

EV technology is still under development and short on consumer

acceptance

infrastructure challenges are large.

Industrial sector is very heterogeneous

Technologies are lacking for many applications.

Residential/commercial technologies (heat pumps) are

a mature technology and the sector has nearly 100%

electricity access.

So .. If electricity is “clean”, gas space and water heat

seems like the easy and obvious target.

14

WHY GAS?

ICF is working with AGA to assess the impact of and costs of shifting direct-use natural gas to electric appliances in the residential sector

The Key Questions:

Will residential electrification actually reduce

emissions?

Is residential electrification cost-effective

compared to other alternatives?

What is the impact on electricity infrastructure?

How do we tell the story?

15


Will Electrification Reduce Emissions?

16


Source: EIA data and ICF analysis

Projected Grid Benefit 2035

But is it Cost Effective?

*State results are based on preliminary analysis

But is it Cost Effective?

Cost of CO2 Reduction from Electrification (Preliminary)

Analysis performed for new gas vs electric heating and hot water

systems:

Emissions based on RPS.

Energy costs based on projected gas and electric rates including compliance with RPS.

Resulting costs:

Without new infrastructure: $175 to $225/ton CO2 reduced.

With new infrastructure: $300 to $400/ton CO2 reduced.

$14,000 - $20,000 per household converted.

Much higher than alternative options:

Current allowance market prices: $10 to $15 per ton.

Residential sector renewable natural gas: $50 to $80 per ton.

Transportation sector renewable natural gas: -$50 to $60 per ton.

17


Gas Peak Demand Can be Much Higher than Electric

18

CASE STUDY

Ontario Gas and Electric Demand

Ontario Electrification Costs

19

CASE STUDY

Conclusions

There are a variety of factors that are supporting the focus on

residential electrification.

Analysis generally does not support residential electrification as an

attractive GHG reduction pathway in the near to medium-term.

Electrification measures aimed at natural gas will be challenged by cost effectiveness

and the capacity constraints of the existing electrical system.

Significant investment in electricity generation, transmission, and distribution required to

meet any new winter peak capacity requirement

Gas industry analysis and engagement have been successful in

pushing back on some initiatives, but the trend is expanding.

More analysis and engagement is required.

20

Michael [email protected] (O)703.403.7569 (M)

mailto:[email protected]

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