Squeezing Every BTU Natural Gas Direct Use Opportunities and Challenges

1. January 17, 2012 Squeezing Every BTUNatural Gas Direct Use Opportunities and Challenges Richard Meyer rmeyer@aga.org

2. Delivering natural gas thatfuels America’s way of life • The American Gas Association (AGA), founded in 1918, represents local natural gas companies that cleanly fuel the way of life of 175 million Americans nationwide • 2.4 million miles of pipeline • 92% of the residential and commercial U.S. natural gas consumption

3. of Natural Gas The Direct Use

4. TheReport • Advantages and Benefits Consumer Costs Greater Resource Efficiency Greenhouse Gas / Pollutant Emissions Reductions Abundant, Domestic, Stable Supply First Cost Builder vs. Consumer Interests Perverse Incentives Inconsistent Policy Full Fuel Cycle Appliance Labeling Align Costs and Benefits Research and Development • Constraints • Policy Recommendations

5. Advantages and Potential Benefits Natural Gas Direct Use Advantages to Other Fuels Checkmark given for each advantage an energy source provides.

6. AND THEN There Was Abundance According to the Energy Information Administration andthe Potential Gas Committee, the U.S. has enough natural gas to meet America’s diverse energy needsfor more than 100 years

7. Annual Energy PricesTO RESIDENTIAL CONSUMERS Natural gas is the most cost-effective home heating fuel available. Fuel oil and propane are tethered to crude oil prices, which continue to rise. Expenditures for electricity for heating purposes are greater than natural gas on average.

8. CONSUMERS SAVEEstimated Annual Energy Bill for Typical New Household Customers will, on average, spend less for space heating, water heating, cooking, and clothes drying using natural gas than using any other energy source. 2010 Dollars

9. HOW ARE WE USING ENERGY? Residential Energy Consumption History and Projection Usable energy loss associated with electricity equals about half of the total energy consumed in the residential and commercial sectors U.S. Energy Information Administration

10. Data: Gas Technology Institute

11. USING LESS ENERGYAverage Energy Use and Losses for a New Home

12. Full-fuel-cycle Greenhouse Gas Emissions of a Typical Household Natural gas used in homes reduces greenhouse gas emissions

13. About half of all electric home use electric resistance furnaces for space heating. EIA Residential Energy Consumption Survey 2009

14. 40% of households with natural gas use electric heat! EIA Residential Energy Consumption Survey 2009

15. Sizable number of natural gas heated homes with electric water heating. EIA Residential Energy Consumption Survey 2009

16. Reduce Oil Consumption Enhance Energy Security

17. Constraints First cost purchase and installation of gas equipment and appliances. Misaligned incentivesof building contractors and end-use consumers. Economically perverse incentives from electric utilities to consumers and builders. Inconsistent policies in regulatory and programmatic approaches.

18. First Cost – Water Heaters U.S. DOE & EPA

19. Efficiencies and Installed Costs for Minimum Efficiency Central HVAC Systems

20. Builder Decision and Resistance to Gas Use • Higher first cost for gas appliances • Equipment requirements • Constraints from floor plans The builder decision to install a natural gas appliance, or suite of applications, is primarily driven by three principal factors: -Natural gas availability -Economic impact on the builder -Consumer preference

21. Incentives to go “all-electric”

22. Inconsistent Approach to Energy Codes and Standards • Programs with Site-Energy Approach • DOE Appliance Codes and Standards • EPA Energy Star, National Energy Rating Program for Homes • National Association of Home Builders, National Green Building Program • Residential Green Build,, Green Building Initiative • U.S. Green Building Council, LEED Rating System • Programs with Source / FFC Approach • DOE, Residential Retrofit Guidelines • DOE, Federal Petroleum-Equivalent Fuel Economy Calculator • EPA Energy Star, Commercial Buildings Program • Green Building Initiative,Assessment Protocol for Commercial Buildings • International Green Construction Code • U.S. Green Building Council, LEED for Existing Building O&M Rating System

23. Policy Recommendations

24. Direct and Distributed Use of Natural GasPolicy Recommendations #1 • Develop and incorporate full-fuel-cycle analysis into energy policy, regulations and energy efficiency metrics.

25. Direct and Distributed Use of Natural GasPolicy Recommendations #2 • Provide consumers with the best available information on comparable energy options through the use of enhanced appliance and equipment labeling, including carbon footprint information.

26. Direct and Distributed Use of Natural GasPolicy Recommendations #3 • Encourage government agencies, state public utility commissions, and utilities to jointly develop innovative policies and regulations that provide better alignment of costs and benefits over the life cycle of consumer equipment.

27. Direct and Distributed Use of Natural GasPolicy Recommendations #4 • Research and development programs and investment focus should include natural gas delivery and end-use technology to fully maximize the value of natural gas resources.

28. We Rely on Natural Gas Every Day Clothes Dryers Hot Water Fireplaces Cooking Furnaces

29. Communication • AGA Members Webinar TrueBlueNaturalGas.com Capitol View American Gas Magazine Executive Summary Distribution Hill Briefings NARUC Federal Agencies Media Construction Professionals Energy and Environmental Advocates • Legislators, regulators, agencies • Third party

30. Find Us Online www.aga.org www.truebluenaturalgas.org http://twitter.com/naturalgasflk www.facebook.com/naturalgas www.linkedin.com/company/50905?trk=tyah Richard Meyer rmeyer@aga.org 202-824-7134

31. www.aga.org The American Gas Association, founded in 1918, represents 201 local energy companies that deliver clean natural gas throughout the United States. There are more than 70 million residential, commercial and industrial natural gas customers in the United States, of which 91% — more than 64 million customers — receive their gas from AGA members. Today, natural gas meets almost one-fourth of the United States’ energy needs.

32. Defining Measures of Energy Consumption Site (point-of-use) measure of energy consumption reflects the use of electricity, natural gas, propane, and/or fuel oil by an appliance at the site where the appliance is operated, based on specified test procedures. Full-fuel-cycle measure of energy consumption includes, in addition to site energy use, the energy consumed in the extraction, processing, and transport of primary fuels such as coal, oil, and natural gas; energy losses in thermal combustion in power-generation plants; and energy losses in transmission and distribution to homes and commercial buildings. Source: National Academy of Science

33. Direct Use Available Here and Now 1/ - EIA Annual Energy Outlook 2011 Reference Case2/ EIA Analysis of American Power Act 2010.

34. Energy Value Chain Efficiencies Source: Gas Technology Institute

35. What is average household energy usage? Average Household Energy Usage per Year for a New Household (MMBtu) Losses include energy used or lost in extraction, processing, conversion, transportation, and distribution of energyFull-fuel-cycle is sum of site use and energy losses

36. Distributed Generation

37. Combined Heat and Power Technologies generate electricity and capture useful heat simultaneously to increase the overall efficiency of an energy system Natural gas is the primary fuel for CHP – Over 70 percent of CHP installations use natural gas

38. First Cost – Space Heating Systems AGA Financial and Operational Information Series

39. Opposing Trends  No New Gas Demand U.S. EIA & AGA calculations

40. Natural gas losing market share to electricity U.S. Census Bureau