The Impact of Energy-Efficiency and Renewable Energy on Natural Gas Markets

Transcription

1 The Impact of Energy-Efficiency and Renewable Energy on Natural Gas Markets 24 th Annual North American Conference of the USAEE/IAEE Anna Monis Shipley ACEEE Washington, D.C. July 9, 2004

2 The American Council for an Energy Efficient Economy (ACEEE) Non-profit (501c (3)) dedicated to advancing energy efficiency through research and dissemination. 20 staffers in DC, Delaware, Michigan and Wisconsin Industry, Buildings, Utilities, Transportation, and National Policy Funding: Foundation and Federal grants (50%) Specific Contract work (20%) Conferences (25%)

3 Energy Price Outlook Natural Gas are high likely remain high World Oil prices high likely remain high Coal facing new emissions restrictions and demand pressure likely increase Electricity face upward price pressures fuel prices and demand driving price Energy has become an increasingly important business decision

4 Why is this happening & where will this lead us? Demand has out-stripped ability of suppliers Electricity demand puts pressure on other fuel markets (220GW new capacity) Demand likely to remain high domestically and globally (e.g., China) Energy markets moving from regional to global (e.g., Oil and LNG)

5 1/1/04 7/1/ Industrial Fuel Prices Natural Gas #2 Oil NatGas Wellhead 1/1/96 7/1/96 1/1/97 7/1/97 1/1/98 7/1/98 1/1/99 7/1/99 1/1/00 7/1/00 1/1/01 7/1/01 1/1/02 7/1/02 1/1/03 7/1/03 7/1/95 1/1/95 7/1/94 1/1/94 Price ($/MBtu)

6 ACEEE Research Approach Sector estimates by State of the near-term (1 year) and mid-term (5 year) implementable potential for energy efficiency and conservation programs for: 1. Natural Gas 2. Electricity 3. Renewable Resources Calculated reasonably achievable savings based on sector end-uses (i.e. space heating, motors, lighting...)

7 Policy Scenarios Analyzed Region National (lower 48) Pacific West* Northeast/PJM** New York Electric Efficiency X X X Scenario Analyzed NG Efficiency X X X Renewable Resources X X X X *California, Oregon and Washington ** ME, MA, VE, NH, CT, RI, NY, NJ, PA, DE, and MD

8 Using EEA Natural Gas Model EEA respected, independent natural gas analysts used for current and past NPC NatGas studies Fully integrated natural gas market model incorporating supply, transmission, storage and consumption at 106 nodes Using July 2003 projection as base case ACEEE modified consumption only model handles other issues (e.g., fuel switching, demand destruction)

9 Changes in National Natural Gas Consumption from EE & RE 2004 National Policy Case 2008 National Policy Case Change in Consumption (Bcf) Residential Commercial Industrial Power Generation -1,000 Change in Consumption (Bcf) Residential Commercial Industrial Power Generation -1,200

10 Impacts of EE & RE on Annual Retail Natural Gas Prices 10 9 Average Annual Retail Gas Price ($/MMcf) Residential Base Case Commercial Base Case Industrial Base Case Residential Policy Case Commercial Policy Case Industrial Policy Case

11 Changes in Industrial Gas Consumption 9,000 Natural Gas Consumption (Bcf) 8,800 8,600 8,400 8,200 8,000 7,800 7,600 Avoided Demand Destruction National Efficiency and Renewable Case EEA Base Case 7,400 7,200 7,

12 Benefits and Costs from Reductions in Energy Expenditures Total Benefits = $103,937 Million Total Investment and Program Costs = $30,243 million Power Gen. Gas 23.4% Residential Gas 27.9% Electric - Industrial 11.2% Renewables 25.8% Natural Gas - Residential 7.1% Natural Gas - Commercial 1.3% Industrial Elec. 0.8% Natural Gas - Industrial 2.4% Industrial Gas 29.0% Commercial Elec. 1.6% Residential Elec. 1.7% Commercial Gas 15.6% Electric - Commercial 19.6% Electric - Residential 32.6% Benefits Costs

13 Benefits/Costs Analysis Benefit/Cost ratio of approximately 3.4 Investment dominated by electric efficiency and renewables measures Benefits predominately result from gas expenditure reductions Benefits result from combination of price reductions and consumption reductions

14 Wholesale Price Impacts Change from EEA Base Change from EEA Base Gas Prices Case in 2004 Case in 2008 (in 2002$/MMBtu) Dollars Percent Dollars Percent Henry Hub EEA July 2003 Base Case ACEEE: National % % ACEEE: Pacific West % % ACEEE: Northeast/PJM % % ACEEE: NY Renewables % % New England EEA July 2003 Base Case ACEEE: National % % ACEEE: Pacific West % % ACEEE: Northeast/PJM % % ACEEE: NY Renewables % % Southern California EEA July 2003 Base Case ACEEE: National % % ACEEE: Pacific West % % ACEEE: Northeast/PJM % % ACEEE: NY Renewables % %

15 Changes in NE Hub Wholesale Prices Under Different Scenarios EEA July 2003 ACEEE: National ACEEE: Northeast/PJM Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 New England Hub Price ($/MMBtu)

16 NatGas Consumption Reductions In Midwest ,000 60,000 Change in Natural Gas Consumption (MMcf) 45,000 30,000 15, ,000-30,000-45,000-60,000-75,000 IL IN IA MI MN MO ND OH SD WI Residential Commercial -90, , ,000 Industrial Power

17 NatGas Expenditure Reductions In Midwest ,000 Cumulative Change in Natural Gas Expenditures (Million $) 0-1,000-2,000-3,000-4,000 IL IN IA MI MN MO ND OH SD WI Residential Commercial Industrial Power -5,000

18 Impact of Expanded Renewables in New York State Change in Natural Gas Expenditures (Million 2003$) Industrial Commercial Residential Power

19 Policy Solutions Energy efficiency performance targets Expanded federal funding for EERE implementation programs at DOE and EPA Appliance efficiency standards More efficient buildings through codes Support of clean and efficient distributed generation Renewable portfolio standards Public awareness campaign by state and national leaders

20 Conclusions We can do something about high natural gas prices encourage energy efficiency and renewable energy Only viable near-term options supply options will take 2-7 years Electric efficiency critical because of expanded natural gas generation National decision makers need to lead NOW consumers are motivated but need direction Sooner we start the sooner states will see benefits

21 Future Natural Gas Analysis ACEEE is preparing follow-on research: Update baseline and national impacts Extend analysis period to 2020 Assess Midwest impacts Assess Pacific-West impacts

22 For Further Information Contact: Anna Shipley or Neal Elliott or