Gas Utilisation Technology and Markets in the UK 2020 and Beyond. Adrian Richardson Sao Paulo 29th October 2012

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1 Gas Utilisation Technology and Markets in the UK 2020 and Beyond Adrian Richardson Sao Paulo 29th October 2012 British Gas Trading Limited 2011

2 Contents Natural gas in the UK Gas utilisation challenges and opportunities Technology & Innovation in British Gas

3 Contents Natural gas in the UK Gas utilisation challenges and opportunities Technology & Innovation in British Gas

4 TWh Natural gas in the UK energy mix Current use widespread across all sectors UK Consumption of Natural Gas Electricity generators Energy industries Services Domestic Industrial

5 TWh (000 s) Natural gas in the UK energy mix Imports rising rapidly 500 Net Gas Imports

6 Natural gas in the UK energy mix Fossil fuels still dominate in power generation Wind 4% Hydro and Other fuels 5% Nuclear 17% UK Power Generation Mix 2011 Imports 1% Other Fuels 4% Hydro 1% Coal 28% Oil 1% Gas 39%

7 UK energy policy challenges The energy tri-lemma Carbon emissions Security of supply Rising Energy Costs

8 Security of supply Renewables intermittency Total generation, all windfarms in Ireland,

9 Trends in UK Energy Mix Mature market undergoing dramatic change Electrification of heat and transport Changing power generation fleet retirement of coal and nuclear fleet rapid growth in wind new nuclear Critical role for natural gas supporting transition to carbon-free power and heat balancing intermittent renewables Gen. capacity retired & replaced 25% BY 2016 low cost and short lead time capacity additions

10 Contents Natural gas in the UK Gas utilisation challenges and opportunities Technology & Innovation in British Gas

11 Gas utilisation technology Key challenges and opportunities More efficient use of resources Integration of gas with renewables Smart networks and smart homes Decarbonisation of gas

12 More efficient use of gas Distributed generation heat fuel power Majority of microchp sales to date in Japan UK market emerging Source: Delta Energy & Environment, June 2012

13 Integration with renewables Gas and hybrid heat pumps

14 Smart grid Key role for natural gas Predictable and dispatch-able distributed generation Central generation

15 Smarter connected homes Smart meters, appliances and HEMS

16 Decarbonisation of gas Biogas, CCS, plasma and H 2 injection Carbon removal pre or post conversion Methane to hydrogen for stationary and/or mobility Hydrogen as a storage media for surplus renawable power (to grid or to pipeline network)

17 Contents Natural gas in the UK Gas utilisation challenges and opportunities Technology & Innovation in British Gas

18 UK energy industry is based on a competitive and disaggregated model FTSE top 30 Integrated FTSE top 30 company A growing energy business in the UK and North America Group revenue of 22 billion 12 million homes #1 UK electricity and gas supplier Biggest home services company in UK Britain s leading supplier of energy to businesses

19 British Gas The largest energy provider in UK 27,000 employees (11,000 engineers) Central heating installations Home services and repair Microgen & energy efficiency

20 Technology & Innovation supports BG s vision Lead a smarter energy future Knowledge Build & Transfer Products & Solutions Shape New Markets and Build BG Presence We focus on five key areas Smart Grid Connected appliances Microgen and heating solutions Energy efficiency Adjacent Markets

21 Collaborative Projects EU co-funded project > 50MM budget 27 partners, including 9 fuel cell suppliers 1000 fuel cells across 12 countries Objective to build real world experience in installation, support, customers and assess barriers to uptake

22 Collaborative Projects EU co-funded project 10MM budget 15 partners manufacturers, utilities, R&D, academic Objective to develop and demonstrate gas absorption heat pumps for individual homes, delivering 40% primary energy saving

23 Collaborative Projects Ofgem funded 54MM budget 4 lead partners utilities, R&D, academic Trialling technology solutions in 14,000 UK homes Objectives to understand trends in customer demand, flexibility in that demand, flexibility in the supply network, solutions to alleviate network constraints

24 Collaborative development Role of British Gas Not an R&D house, not a manufacturer Market and customer insight to guide NPD Regulation and technical standards Operational insight for new products and services Trial and commercial pilot capability Access to large mature markets

25 Technology and Innovation Models for developing new products & services Supplier Acquisition Collaborative Development Investment Externally funded consortia

26 Future of Energy

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28 Gas utilisation technologies summary Collaboration key to unlock the potential Gas utilisation technologies have a central role to play in meeting energy policy goals International cooperation brings widest capability set and speed to scale in markets