Presentation Transcript

1. Redrawing the World’s Energy Map: The Gas Revolution and Energy Self-Reliance in North AmericaThe Natural Gas Industry Future Directions Kevin McCrackin Vice President Utility Marketing
2. Corporate Overview Largest Natural Gas Utility Company 7 Local Distribution Utilities in 7 states 4.5 million customers Tropical Shipping
3. North American Gas Markets: Abundant Low Cost Resourceof over 100 years per EIA and Potential Gas Committee Shale gas and tight oil plays 2010 2011 2012 Marcellus becomes the leading US gas play $8 $7 $6 10 tcfe $5 $/mmbtu 50 tcfe $4 100 tcfe US shales $3 Canadian shales Tight oil Liquid-rich shales $2 2000 2005 2010 2015 2020 2025 2030 Year production >250 mmcfde Sources: Wood Mackenzie (North America Gas Service, Unconventional Gas Service)
4. Changing Economics: Natural Gas Prices Exceptionally Low Hurricanes Katrina and Rita 2008 Oil Shock Between June 2008 and December 2012, Henry Hub natural gas prices have decreased 78% Source: U.S. Department of Energy, Energy Information Administration
5. Where are fuel prices headed in North America markets? Price outlook Oil/gas ratio Source: Wood Mackenzie (North America Gas Service, Coal Market Service, Macro Oils Service) Source: Wood Mackenzie (North America Gas Service)
6. Who Is Using Natural Gas in the United States? Natural gas use for power generation has increased 87% in the past 25 years Industrial customer usage has decreased by 21% in that same period % of natural gas throughput Commercial Power Generation Residential Industrial Source: U.S. Department of Energy, Energy Information Administration
7. …But, an Industrial Renaissance is underway due to abundant supplies and low natural gas prices Annual gas demand growth (US & Canada) Demand growth (vs. 2010) Source: Wood Mackenzie North America Gas Service Source: Wood Mackenzie North America Gas Service
8. Looming Natural Gas Demand: Coal retirements will accelerate in mid-decade with Mercury & Air Toxics Standards (MATS) US coal retirements Source: Wood Mackenzie North America Power Service
9. New Markets for Natural Gas Power Generation Combined Heat & Power Compressed Natural Gas Liquefied Natural Gas
10. Power Generation Mix Million megawatts Nuclear Other Coal Petroleum Products Natural Gas Source: U.S. Department of Energy, Energy Information Administration
11. Projected Natural Gas Consumption The Largest Natural Gas Market Growth Opportunity is Power Generation – Are Central Bulk Power Plants the most efficient way to grow? Source: ICF International
12. Implications to the Florida Generation Market FP&L Generation Plans: New combined cycle power plants planned or under construction at Rivera Beach, Martin and Port of Everglades Old peaking units requiring upgrades due to heat rates above 17,000 Btu/kWh Achieving the improved environmental standards could require replacement of existing natural gas turbine peakers Evaluation is looking at new natural gas combustion turbines Other Possible Gas-Fired Plants: Closure of Crystal River Polk Power Station Expansion FPL Analyst Presentation – March 12, 2013
13. FPL Analyst Presentation – March 12, 2013
14. Natural Gas Infrastructure Requirements $Billions Between now and 2035, North America requires construction of over 1,400 miles/year of natural gas pipelines, with 17% of the new pipeline being constructed in the Southeast. $205 Billion invested in North America through 2035 Southeast U.S. natural gas demand doubles; 10 Bcf/d to 20 Bcf/d Southeast U.S. infrastructure investment of over $35 Billion 568 pipeline laterals to attach new gas-fired power generation. 33% of these laterals projected to be constructed in the Southeast. Source: ICF International study for INGAA Foundation, “ North American Midstream Infrastructure through 2035”
15. FPL Analyst Presentation – March 12, 2013
16. NATURAL GAS vs. ELECTRICThe Big Picture – Direct Use is Most Efficient…….so, distributed generation at the home makes sense.
17. Combined Heat and Power (CHP) is more Efficient http://www.aga.org/our-issues/playbook/Documents/AGA_Playbook2012_HI_RES.pdf
18. Executive Order – August 30 “Coordinate and strongly encourage efforts to achieve a national goal of deploying 40 gigawatts of new, cost effective industrial CHP in the United States by the end of 2020.” ”Convene stakeholders, through a series of public workshops, to develop and encourage the use of best practice State policies and investment models that address the multiple barriers to investment in industrial energy efficiency and CHP.” ”Utilize their respective relevant authorities and resources to encourage investment in industrial energy efficiency and CHP.”
19. Florida - Renewable energy tax credit of 1¢/kWh annually (CHP is eligible), Solar and CHP sales tax exemption. Net metering excess generation credited at the utility retail rate. Federal Support for CHP Incentives 10% Investment Tax Credit (ITC) for CHP through December, 2016; 50 MW or less 10% ITC for micro turbines capped at $200/kW of capacity; 2 MW or less 30% ITC for fuel cells or $3,000/kW ($1,000/ kW residential), whichever is smaller Modified Accelerated Cost-Recovery System – for 2013 bonus depreciation is 50% of the eligible basis Renewable Energy Production Tax Credit (ARRA portion expires end of 2013) – renewable fuels only Support EPA recognizes CHP as an efficiency measure under developing greenhouse gas emissions standards EPA includes output-based options that recognize CHP benefits in ICI Boiler MACT and Utility MACT (MATS) DOE increases technology deployment support for CHP and announces goal of 40 GW of new CHP capacity by 2020 Clean Energy Standard Act of 2012 – Includes nuclear, clean coal, and natural gas – Recognizes the additional energy efficiency and greenhouse gas benefits of CHP Proposals to encourage rate-basing of utility investments in behind the meter energy efficiency and CHP
20. U.S. CHP Generation Capacity Vision Source: Combined Heat and Power: Effective Energy Solutions for a Sustainable Future Sponsored by the U.S. Department of Energy
21. The U.S. is the world’s largest natural gas producer, but lags behind other nations in natural gas transportation There are more than 12.7 million natural gas vehicles on the road worldwide – but less than 125,000 are in the United States. Source: NGV Global
22. Fuel price is the driver, and it is expected to stay this time….
23. The natural gas commodity cost component is about one quarter the crude oil cost component in the make-up of the overall price of the delivered fuel, giving CNG a price dampener against price volatility. CNG (July 2012) Retail Price: $1.85/gge 13% Taxes Marketing & Profit 40% 27% Distribution & Compression Pricing Characteristics 20% Natural Gas
24. Natural Gas at $5.76/Mcf Natural Gas (divide by 7.2) $0.80 Transport Costs & Fees $0.20 Electricity Costs per GGE $0.10 Maintenance per GGE $0.20 Federal and State Taxes $0.25 Fuel Card Fees per GGE $0.05 Retailer Profit Margin $0.70 CNG at the Pump $2.30 Natural Gas at $2.88/Mcf Natural Gas (divide by 7.2) $0.40 Transport Costs & Fees $0.20 Electricity Costs per GGE $0.10 Maintenance per GGE $0.20 Federal and State Taxes $0.25 Fuel Card Fees per GGE $0.05 Retailer Profit Margin $0.70 CNG at the Pump $1.90 Price Stability of CNG The natural gas fuel commodity makes up a smaller portion of the overall price of the delivered fuel when compared to gasoline or diesel.
25. The Economics of Vehicle Classes * Cost assumes no grant money, rebates, tax credits, etc. available * * Savings calculated based on savings of $1.50/GGE at retail CNG station
26. $500,000+ for Centralized Fueling Stations 500 down, 160,000 to go - $50+ billion? in investment to match gasoline stations The economics work for fleets, so there will continue to be growth $100,000?+ to make a private station public accessible $8,000+ Vehicle Conversion/Replacement Premium Takes 7 years+ to recover the premium Limited vehicle selection from OEM’s, especially vehicles desired by target customers Efforts around conversion, and specifically tank technologies, is ongoing $5,000 Home Refueling Appliance (HRA) product and Installation Cost An additional 4+ years to recover the HRA cost Limited fill capability, maintenance unknown (historically not good) Result: $8,000 + $5,000 = $13,000 per vehicle premium, or 11+ years payback MUST REDUCE VEHICLE CONVERSION COSTS & DEVELOP A LESS EXPENSIVE HRA The Light Duty Market Challenge
27. NGV Engine Costs are expected to be competitive by 2020 Expect 12% of New vehicle sales to be NGV’s by 2020
28. BRC Fuelmaker Phill is the only commercially available HRA Expensive price with installation, approximately $6,000 Limited fill capability, less than a half gallon per hour Historically has had compressor performance and maintenance issues AGL is a distributor, and installs and maintains Phill units AGL Resources is actively engaged with a team of industry leaders in the development of a less costly HRA U.S. Department of Energy - Advanced Research Projects Agency-ENERGY (ARPA-E) – Methane Opportunities for Vehicular Energy (MOVE) 13 projects awarded with $30 million in funding – including 4 HRA designs Engineer Light-Weight Affordable Natural Gas Tanks Develop Natural Gas Compressors that can efficiently fuel a NGV at home GTI and GE have projects within this program, and AGL is actively involved The Home Refueling Appliance (HRA)
29. Florida Legislation is headed in the right direction Repeals the “Decal” program for Alternative Fuels effective January 1, 2014 Exempts natural gas fuel from taxes for 5 years Survey of Florida residents shows 72% support for legislation encouraging NGV adoption 96% of the residents think Energy Independence is important Florida Natural Gas Vehicle Coalition In an August 2012 study, the transistioning of Florida Commercial Fleets to Natural Gas results in following benefits over 20 years: 10,000 new jobs $330 million in new wages $1 billion in economic output An update based upon February 2013 SB560 and HB579 legislation improves these results as follows over 5 years: 20,000 new jobs $715 million in new wages $2.5 billion in economic output
30. LNG in HHP Applications Total High Horsepower 15.2 billion gallons
31. Key Takeaways Natural gas is more relevant than ever to our energy future. New market opportunities for natural gas will potentially reshape entire industries. Florida’s growth is aligned with the growth in natural gas as a fuel and will make Florida a significant market participant. AGL Resources is uniquely positioned to deliver on the promise of natural gas.