Natural Gas in the German Residential & Commercial Market

1. Natural Gas in the GermanResidential & Commercial Market Gas Industry mCHP WorkshopParis, 29 – 30 May 2008 Stephan Ramesohl (Dr.-Ing.)E.ON Ruhrgas AG

2. Key Questions • What is the current situation? • How does the framework change? • Which are the consequences from using natural gas inthe residential & commercial market? • Which are the strategic answers of the gas industry? • Which opportunities does mCHP offer?

3. 2030 New Buildings – Overall Downward Trend With Declining Market Share • apartments 2006: 140,000 homes w/natural gas Forecast for 2030: -50%; of which 50% w/natural gas Source: state officies of statistics inclusing federal states from 1991

4. 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1/05 2/05 3/05 4/05 1/06 2/06 3/06 4/06 1/07 2/07 3/07 Nat gas Electric heat pumps Wood pellet boilers Fuel oil Others Loss in Market Shares as a Result of Upcoming Competition Market shares space heating/hot water absolute Source: E.ON Ruhrgas

5. But: Existing Homes Remaining Core Market with High Energy Requirements Heat demand High energy requirements of existing homes in the long term Share of homes [%]

6. Existing Residential Buildings in Germany • Total residential buildings: 17.7 million • Total apartments: 39.0 million • 31 Dec 2006, Federal Office of Statistics • Large potential for technologies involving renewable energies

7. The Gas Customer‘s Voice: Rising Demand for Renewable Energies in Existing Homes 20% Natural gas users increasinglyshifting their focus torenewable energies Risk of losingapprox. 5.7 bn m³/a 15% 10% 5% 58 % 60 % 59 % 64 % 61 % 60 % 58 % 78 % 87 % 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: E.ON Ruhrgas

8. Key Questions • What is the current situation? • How does the framework change? • Which are the consequences from using natural gas inthe residential & commercial market? • Which are the strategic answers of the gas industry? • Which opportunities does mCHP offer?

9. Driver 1: Uncertain Trend in Energy Prices ? Extra-light fuel oil Natural gas Dynamic developmentin particular for gas/oil ? Electricity Source: Federal Ministry of Economics

10. Driver 2: Energy and Climate Policy (Meseberg Package): 14 out of 29 measures relevant to natural gas, residential and commercial (R & C) premium markets strongly affected (10) EnEV  (11) Betriebskosten Mietwohnungen (12) CO2-Gebäude- Sanierungsprg.  (13) Energetische Modernisierung v. soz. Infrastruktur (14) EEWärmeG  (15) Energetische Sanierung v. Bundesgebäuden (6) Einführung moderner Energie- management- systeme (14) EEWärmeG  Sector-specific (18) Umstellung Kfz-St. auf CO2-Basis (1) KWK  (2) Ausbau EE-Strom (3) CO2-arme KW-Technologien others: 15% R & C: 46% Industry: 25% power: 14% Share 2006 [%] • (7) Förderprogramme für Klimaschutz und Energieeffizienz … • (9) Einspeiseregelung für Biogas in Erdgasnetze  • (25) Energieforschung und Innovation Affecting allsectors

11. Most Important Consequences of Meseberg Package in Residential & Commercial Market (Date: Jan 2008) Amended EnEV* (new buildings) 2009 (and possibly 2012) More stringent limit values for primaryenergy requirements -30% each 2009: knock-out criterion for gas condensing boiler 2012: knock-out criterion for gas condensing boiler + solar • Renewable Energies Heat Act (currently only new buildings) • Compliance options • Solar (4% collector area/m2 useful area)  Gas condensing boiler + solar • Electric heat pump (>50%, min 3.3/4.0) Problematic for some EHPs. • Gas heat pump (>50%, COPmin 1.2)  OK, achievable with gas heat pump • Bio oil (>50%, in condensing appliance) . • Biomethane (>50%, only CHP)  Discrimination against biomethane • µCHP  Possibly incentive for µCHP . • (Mandatory) connection to group/district heat  Discrimination against gas (w/renewable energies/CHP). • Additional efficiency (-15% vs. EnEV*) .

12. Key Questions • What is the current situation? • How does the framework change? • Which are the consequences from using natural gas inthe residential & commercial market? • Which are the strategic answers of the gas industry? • Which opportunities does mCHP offer?

13. Consequences • Gas condensing technology alone no option in future for new buildings • Take proactive steps to secure position of natural gas in new buildings as a trend market • Goal: Defend nationwide gas supplies – object to extreme political stance (no natural gas in new buildings from 2020) • Establish new technology options • Existing buildings continue to be mass market with (so far) relatively free choice of technology • Condensing boilers to be developed further as the basic technology with a focus on existing homes(costs , condensing boiler/solar, biomethane) • Sales lost as a result of improved efficiencies/renewable energies to be compensated for by substitution of fuel oilFocus: customers with service connection as target group

14. Key Questions • What is the current situation? • How does the framework change? • Which are the consequences from using natural gas inthe residential & commercial market? • Which are the strategic answers of the gas industry? • Which opportunities does mCHP offer?

15. Strategic Answer, Part 1:Expand Technology Portfolio - Combine Natural Gas and Renewable Energies Highly efficientcondensing heatingsystems (existing) Solar & gascondensing boiler Naturalgas Bio-methane Gas heat pump to use ambient heat

16. hocheffizienteBrennwertheizungen(Bestand) Solarthermie &Gas-Brennwertkessel Umweltwärme durchGaswärmepumpe Strategic Answer, Part 2:Expand Technology Portfolio - Combine Heat and Power Highly efficientcondensing heatingsystems (existing) Solar & gascondensing boiler Naturalgas Bio-methane Gas heat pumpto use ambient heat (Micro) CHP

17. Key Questions • What is the current situation? • How does the framework change? • Which are the consequences from using natural gas inthe residential & commercial market? • Which are the strategic answers of the gas industry? • Which opportunities does mCHP offer?

18. Natural Gas-Based CHP to Curb CO2 EmissionsExisting single-family home as an example (annual heat + power balance) 14.00 12.00 10.00 CO2 emissions in t/a 8.00 6.00 4.00 2.00 e = 40% e = 32% e = 38% 0.00 district heat gas condensing gas condensing packaged CHP micro CHP micro CHP boiler boiler (group heat) (optimised) coal power with combined-cycle power mix D

19. Supplies MFH MFH Supplies Gas: 97,000 kWh Gas: 69,000 kWh Electricity: 20,000 kWh Electricity: 42,000 kWh BW µKWK Gas + 28,000 kWh + 40% - 22,000 kWh Grid electricity Opportunity: mCHP to Increase Gas Sales EFH Supplies EFH Supplies Gas: 26,000 kWh Gas: 21,000 kWh BW Electricity: 1.500 kWh µKWK Gas + 5,000 kWh + 25% Electricity: 4,400 kWh Grid electricity - 2,900 kWh

20. Requirements for mCHP under Renewable Energies Heat Act Stirling concepts on the edge? EWärmeG(BaWü) electr. power ratio [-] EEWärmeG(Bund) Threshold value: 15% primary energy savingscompared to grid electricity and condensing boiler total efficiency [%]

21. There is a future for natural gas in the domestic sector –but not this one … No solar panel, no wall insulation –let‘s go …. ! DIE ZEIT, 11 Oct 2007