Discussion on the Threat of Electrification to Residential Natural Gas Demand

Transcription

1 Discussion on the Threat of Electrification to Residential Natural Gas Demand Prepared for the American Gas Association State Affairs Committee Tuesday, October 10 h, 2017 Mike Sloan Managing Director (o) (m)

2 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

3 What are we Talking About? Proposals for mandatory, widespread/total electrification of residential home heating and water heating. 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

4 Where is This Happening? Ontario Vancouver, BC Denver California, Pacific Northwest, Massachusetts, Alberta, Others 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. 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 Some policies that effectively exclude gas have been initiated but may be delayed due to pushback from industry. 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. Active discussion and analysis of electrification. Massachusetts Senate Bill

5 Who is Pushing the Electrification Agenda? Environmental Groups Other NGOs State and Provincial Regulators Electrification Electric Utilities Electric Generators (Renewable) ICF proprietary and confidential. Do not copy, distribute, or disclose. 5

6 Local Clean Energy Commitments Mayors Conference in June: 250 mayors unanimously backed a commitment for US cities to run entirely on renewables by Mayors Signing Sierra Club Pledge 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 Source: Sierra Club ICF proprietary and confidential. Do not copy, distribute, or disclose. 6

7 WHAT IS DRIVING THIS? 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. Million tco2 Comparison of Policy and 2ºC Scenarios for the United States (Energy CO 2 only) 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 Year 7

8 WHAT IS DRIVING THIS? Low-GHG Electricity Seems Like an Attractive Alternative Renewable Portfolio Standards ME: 40% by 2017 WA: 15% by 2020 OR: 50% by 2040 CA: 50% by 2030 NV: 25% by 2025 ID UT: 20% by 2025 MT: 15% by 2015 WY CO: 30% by 2020 AZ: 15% by 2025 NM: 20% by 2020 ND: 10% by 2015 SD: 10% by 2015 NE KS: 20% by 2020 OK: 15% by 2015 MN: 26.5% by 2025, 31.5% by 2020 (Xcel only) IA: 105 MW MO: 15% by 2021 AR WI: 10 % by 2015 IL: 25% by 2026 MI: 15% by 2021 IN: 10% by 2025 TN OH: 12.5% by 2026 KY WV VT: 75% by 2032 PA: 18% by 2021 NH: 24.8% by 2025 VA: 15 % by 2025 NC: 12.5% by 2021 SC: 2% by 2021 NY CES: 50% By 2030 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 2027 MD: 25% by 2020 DC: 50% by 2032 DE: 25% by 2026 TX: 5,880 MW by 2015, Voluntary target: 10,000 MW by 2025 LA MS AL GA FL No RPS Mandatory Voluntary ICF proprietary and confidential. Do not copy, distribute, or disclose.

9 Annual Generation (billion kwh) WHAT IS DRIVING THIS? But We are Not on the Path to a Fully Renewable Grid (at least any time soon) EIA Forecast of Electric Generation (billion kwh) 5,000 4,500 4,000 3,500 Coal Natural Gas Nuclear Oil/Other Hydro Wind Solar Other Renewables Renewables to account for 34% of generation by ,000 2,500 2,000 1,500 1, U.S. EIA Annual Energy Outlook 2017 Base Case with CPP ICF proprietary and confidential. Do not copy, distribute, or disclose. 9

10 WHAT IS DRIVING THIS? 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 Projected U.S. Delivered Energy Mix 2035 (Quads) Total = 74 Q 10

11 WHAT IS DRIVING THIS? 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

12 WHY GAS? 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%. Non-Energy CO2, 403 Commercial Gas, 175 Commercial, 71 Residential Gas Use, 253 Other Residential, U.S. GHG Emissions (MMT) Nitrous Oxide, 335 Methane, 656 Industrial, 806 High GWP Gases, 185 Power, 1,901 Transportation, 1,736 U.S. EPA Inventory of U.S. GHG Emissions 12

13 WHY GAS? 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 531 Peak Month Energy Consumption ( ) 1,070 U.S. Peak Month TBtu RESIDENTIAL COMMERCIAL INDUSTRIAL Electricity Natural Gas Electricity is Summer Peaking, Natural Gas is Winter Peaking 13

14 WHY 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

15 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

16 WHAT IS DRIVING THIS? Will Electrification Reduce Emissions? Projected Grid Benefit 2035 But is it Cost Effective? Source: EIA data and ICF analysis *State results are based on preliminary analysis ICF proprietary and confidential. Do not copy, distribute, or disclose. 16

17 But is it Cost Effective? Cost of CO 2 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 CO 2 reduced. With new infrastructure: $300 to $400/ton CO 2 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

18 CASE STUDY Gas Peak Demand Can be Much Higher than Electric Ontario Gas and Electric Demand ICF proprietary and confidential. Do not copy, distribute, or disclose. 18

19 CASE STUDY Ontario Electrification Costs 19

20 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

21 Michael Sloan (O) (M)