January 17, 2012

Squeezing Every BTU

Natural Gas Direct Use Opportunities and Challenges

Richard Meyer
rmeyer@aga.org
Delivering natural gas that
fuels 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

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 The Direct Use
of Natural Gas

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 Advantages and Benefits
The Report Consumer Costs
Greater Resource Efficiency
Greenhouse Gas / Pollutant Emissions Reductions
Abundant, Domestic, Stable Supply

Constraints
First Cost
Builder vs. Consumer Interests
Perverse Incentives
Inconsistent Policy

Policy Recommendations
Full Fuel Cycle
Appliance Labeling
Align Costs and Benefits
Research and Development

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Advantages and Potential
Benefits
Natural Gas Direct Use Advantages to Other Fuels
Checkmark given for each advantage an energy source provides.
AND THEN There Was Abundance
According to the
Energy Information
Administration and
the Potential Gas
Committee, the U.S.
has enough natural
gas to meet America’s
diverse energy needs
for more than 100
years

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Annual Energy Prices Natural gas is the
most cost-effective
TO RESIDENTIAL CONSUMERS 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.

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C O N S U M E R S S AV E
Estimated Annual Energy Bill for
Typical New Household
Customers will, on
  Natural Gas Electricity Oil Propane average, spend less
for space heating,
Space Heating $887 $1,062 $1,542 $1,806 water heating,
Other $388 $731 $710 $790
cooking, and
clothes drying using
Total $1,275 $1,793 $2,252 $2,596 natural gas than
2010 Dollars
using any other
energy source.

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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

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Data: Gas Technology Institute

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USING LESS ENERGY
Average Energy Use and
Losses for a New Home
End-Use Consumption
Energy Losses (Source-to-Site)

27.8 17.6
14.1 113.5

106.9 108.5 106.9

53.2

Natural Gas Electricity Oil Propane

MMBtu per Year

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

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About half of all electric home use
electric resistance furnaces for space
heating.
Electric Main Heating Equipment by
Number of Households (2009)

Central Warm-Air Furnace

19.1
Heat Pump
9.8
Built-In Electric Units
5.7
3.6
Portable Heaters / Other

Million Households
EIA Residential Energy Consumption Survey 2009
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40% of households with natural gas use
electric heat!
Households with Natural Gas Service
4.6 Million

with Electric Water

With Heat
Electric
Heating 18.8 Million
with Electric Space
Heat
41.0 Million
with Electric Space
& Water Heat

Other (Gas Space &

5.0 Million Water Heat)

EIA Residential Energy Consumption Survey 2009

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Sizable number of natural gas heated
homes with electric water heating.

EIA Residential Energy Consumption Survey 2009

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Reduce Oil Consumption
Enhance Energy Security

6.6 million fuel oil 631 Bcf or 4

households 708 gallons of fuel per da
To Natural Gas
oil used (winter)
(Northeast) (winter

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

Site Yearly
Installed Life Total
Storage Water Heater Type Efficiency Energy
Cost (Years) Cost
(EF) Cost

Minimum efficiency
0.59 $1,079 $284 12 $4,487
Gas
High-efficiency $1,591 $4,603
0.65 $251 12
Minimum efficiency
0.90 $569 $563 14 $8,451
Electric
High-efficiency $711 $8,173
0.95 $533 14
U.S. DOE & EPA

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 Efficiencies and Installed Costs for
Minimum Efficiency Central HVAC Systems
Source Efficiency - Heating
100% Installed System Cost $6,000

90%
$5,384

80% $5,000
$4,691
70%
AFUE-Equivalent Installation
Efficiency Cost
(Source) 60% $4,000
$3,682
50%
$3,213
40% $3,000

30%

20% $2,000

System

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

-Economic impact on
the builder

-Consumer preference

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Incentives to go “all-electric”

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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

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Policy
Recommendations
Direct and Distributed Use of Natural Gas
Policy Recommendations #1

• Develop and incorporate full-fuel-cycle analysis into energy

policy, regulations and energy efficiency metrics.

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Direct and Distributed Use of Natural Gas
Policy 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.

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Direct and Distributed Use of Natural Gas
Policy 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.

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Direct and Distributed Use of Natural Gas
Policy 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.

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We Rely on Natural Gas Every Day Clothes Dryers

Hot Water

Fireplaces
Cooking

Furnaces

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 AGA Members

Communication Webinar
TrueBlueNaturalGas.com
Capitol View
American Gas Magazine

Legislators, regulators, agencies

Executive Summary Distribution

Hill Briefings
NARUC
Federal Agencies

Third party
Media
Construction Professionals
Energy and Environmental Advocates

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 Find Us Online

www.aga.org

www.truebluenaturalgas.org

http://twitter.com/naturalgasflk
Richard Meyer
www.facebook.com/naturalgas
rmeyer@aga.org
202-824-7134 www.linkedin.com/company/5090
5?trk=tyah

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 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.

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 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

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 Direct Use Available Here and Now

Cumulative Unplanned Electric Generation Capacity Additions and Costs (by 2035)
(Gigawatts installed)

Carbon
Current Total Overnight Cost in 2009
Constrained
Policies /1 (2008 $/kWh)
Policies /2
 

Nuclear 6.3 62.0 $3,820

Gas Combined Cycle 60.9 54.7 $648

1/ - EIA Annual Energy Outlook 2011 Reference Case

2/ EIA Analysis of American Power Act 2010.

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 Energy Value Chain Efficiencies
Cumulative
Value Chain: Extraction Processing Transportation2 Conversion Distribution
Efficiency

Natural Gas 97.0% 96.9% 99.0% -- 98.8% 91.9%

Oil 96.3% 93.8% 98.8% -- 99.3% 88.6%

Propane 95.9% 95.3% 98.6% -- 99.2% 89.3%

Electricity:            

Coal-Based 98.0% 98.6% 99.0% 32.7% 93.8% 29.3%

Oil-Based 96.3% 93.8% 98.8% 31.7% 93.8% 26.5%

Natural Gas-Based 97.0% 96.9% 99.0% 42.1% 93.8% 36.7%

Nuclear-Based 99.0% 96.2% 99.9% 32.7% 93.8% 29.2%

Other3-Based -- -- -- 56.0% 93.8% 49.7%

Electricity Weighted
-- -- -- 35.8% -- 31.9%
Average4

Source: Gas Technology Institute

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What is average household energy usage?
Average Household Energy Usage per Year for a New Household (MMBtu)

  Natural Gas Electricity Oil Propane

Space Heating 74.3 31.5 74.3 74.3

Water Heating 25.4 16.6 29.1 25.4

Cooking 3.3 1.8 1.8 3.3

Clothes Drying 3.8 3.3 3.3 3.8

Total Site Use 106.9 53.2 108.5 106.9

energy Losses 2 14.1 113.5 27.8 17.6

Full-Fuel-Cycle Use 3 121.0 166.7 136.3 124.5

Losses include energy used or lost in extraction, processing, conversion, transportation, and distribution of energy
Full-fuel-cycle is sum of site use and energy losses

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Distributed Generation

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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

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First Cost – Space Heating Systems
Scenario 1: Scenario 2:
Natural Gas Heat, Electric Cooling Electric Heat & Cooling
 

Natural Electric Total for

Gas Central Air Both Electric Heat Pump
Furnace Conditioning Systems
 
Appliance Cost $809 $1,761 $2,570 $2,483
Installation Cost $782 $489 $1,271 $455
Average Annual Fuel Cost $797 $252 $1,049 $1,262
Annual Maintenance &
Repair $42 $131 $173 $122
Life Cycle Cost - NPV     $19,053 $19,467

AGA Financial and Operational Information Series

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Opposing Trends  No New Gas Demand

U.S. EIA & AGA calculations

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Natural gas losing market share to electricity

Heating Fuel Market Share

% All New One-Family Houses Completed
80 Gas Electricity
70
60
50
40
30
20
10
0
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 22222
9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 00000
7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 00001
1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6U.S.
7 8Census
9 0 Bureau
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