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April 2, 2013

April 2, 2013. Sustainable Growth Briefing. Communications & Market Committee Meeting – April 2, 2013. Rick Murphy Managing Director, Sustainable Growth. Advocacy Initiatives Supporting Efficient Natural Gas Solutions. DOE Furnace Standards

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April 2, 2013

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  1. April 2, 2013 Sustainable Growth Briefing Communications & Market Committee Meeting – April 2, 2013 Rick Murphy Managing Director, Sustainable Growth

  2. Advocacy InitiativesSupporting Efficient Natural Gas Solutions • DOE Furnace Standards • Federal Legislation on Fossil Fuel Reduction Mandates for Federal Buildings • National Dialogues on Energy Intensity/Productivity

  3. Direct Use of Natural GasIs the Clean, Efficient Choice When it comes to appliances, the direct use of natural gas is the smarter, cleaner and more efficient choice. • The direct use of natural gas traveling from wellhead to burner tip in America’s homes and businesses loses only about 8% of its usable energy. • Converting to natural gas or any other fossil fuel into electricity to power comparable electric end-use products and appliances in the home or business results in the loss of 68% of its usable energy. Source: Gas Technology Institute

  4. Combined Heat and Power TechnologiesAssessing the Market Source: AGA, ICF International

  5. Market Drivers for CHP • Growing recognition of CHP benefits by state and federal policymakers • Opportunities driven by environmental regulations • Changing natural gas outlook Annual Capacity Additions Over 4,500 MW announced/under construction

  6. Existing CHP • 82 GW of installed CHP at over 4,100 industrial and commercial facilities (2012) • Natural gas based CHP concentrated in Northeast, Gulf Coast, Midwest and California • Northwest and Southeast have high concentration of sites in forest products and paper industries 71% is natural gas based, consuming an estimated 4.2 Tcf annually

  7. Technical Potential for CHP

  8. CHP Technical Potential – Base Case

  9. Economic Potential – Base Case Moderate Potential Strong Potential

  10. Impact of Scenarios on Gas Consumption • Economic Potential includes moderate and strong potential. • Incremental gas use equals CHP consumption minus avoided boiler fuel.

  11. Summary • Total Technical Potential 123 GW • Base Case Economic potential of 41.6 GW (<10 year payback): • 35.2 GW Moderate Potential (5 to 10 years) • 6.4 GW Strong Potential (<5 years) • Incentives for CHP will improve overall economics and increase the economic potential – 25 % reduction in capital cost increases economic potential to 54.4 GW: • 37.9 GW Moderate Potential (5 to 10 years) • 16.5 GW Strong Potential (<5 years) • Spark spread is a critical factor in economic competitiveness for CHP and could be positively affected by increased electricity prices – 15% increase in electric prices increases economic potential to 62.7 GW • 45.3 GW Moderate Potential (5 to 10 years) • 17.4 GW Strong Potential (<5 years)

  12. Policy Issues • Incentives for CHP can improve overall economics and increase the economic potential and reduce perceived risks to users • Spark spread is a critical factor in economic competitiveness for CHP and could be positively affected by: • Reduction in standby charges • Payments for CHP grid support • Retirements of embedded coal capacity • Future increases in electric costs • Possible federal policies • Expansion of investment tax credit • Include CHP as a qualified resource in national clean energy standards • Federal procurement requirements • Encourage CHP participation in ancillary services markets • Possible state policies • Include CHP as a qualified resource in clean energy portfolio standards or electric utility energy efficiency resource standards • Standardized interconnection requirements • Specific incentives

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