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Enhancing Sustainable Growth Through Efficient Natural Gas Solutions

This briefing discusses the effectiveness and benefits of utilizing natural gas for sustainable growth in energy markets. It highlights the direct use of natural gas in appliances, demonstrating its lower energy loss compared to electricity. The report details the potential of Combined Heat and Power (CHP) systems and examines market drivers including environmental regulations and federal incentives for fossil fuel reduction. It emphasizes the significant technical and economic potential of CHP, identifying opportunities to improve efficiency and reduce risks for users.

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Enhancing Sustainable Growth Through Efficient Natural Gas Solutions

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  1. April 2, 2013 Sustainable Growth Briefing Communications & Market Committee Meeting – April 2, 2013 Rick Murphy Managing Director, Sustainable Growth

  2. Advocacy InitiativesSupporting Efficient Natural Gas Solutions • DOE Furnace Standards • Federal Legislation on Fossil Fuel Reduction Mandates for Federal Buildings • National Dialogues on Energy Intensity/Productivity

  3. Direct Use of Natural GasIs the Clean, Efficient Choice When it comes to appliances, the direct use of natural gas is the smarter, cleaner and more efficient choice. • The direct use of natural gas traveling from wellhead to burner tip in America’s homes and businesses loses only about 8% of its usable energy. • Converting to natural gas or any other fossil fuel into electricity to power comparable electric end-use products and appliances in the home or business results in the loss of 68% of its usable energy. Source: Gas Technology Institute

  4. Combined Heat and Power TechnologiesAssessing the Market Source: AGA, ICF International

  5. Market Drivers for CHP • Growing recognition of CHP benefits by state and federal policymakers • Opportunities driven by environmental regulations • Changing natural gas outlook Annual Capacity Additions Over 4,500 MW announced/under construction

  6. Existing CHP • 82 GW of installed CHP at over 4,100 industrial and commercial facilities (2012) • Natural gas based CHP concentrated in Northeast, Gulf Coast, Midwest and California • Northwest and Southeast have high concentration of sites in forest products and paper industries 71% is natural gas based, consuming an estimated 4.2 Tcf annually

  7. Technical Potential for CHP

  8. CHP Technical Potential – Base Case

  9. Economic Potential – Base Case Moderate Potential Strong Potential

  10. Impact of Scenarios on Gas Consumption • Economic Potential includes moderate and strong potential. • Incremental gas use equals CHP consumption minus avoided boiler fuel.

  11. Summary • Total Technical Potential 123 GW • Base Case Economic potential of 41.6 GW (<10 year payback): • 35.2 GW Moderate Potential (5 to 10 years) • 6.4 GW Strong Potential (<5 years) • Incentives for CHP will improve overall economics and increase the economic potential – 25 % reduction in capital cost increases economic potential to 54.4 GW: • 37.9 GW Moderate Potential (5 to 10 years) • 16.5 GW Strong Potential (<5 years) • Spark spread is a critical factor in economic competitiveness for CHP and could be positively affected by increased electricity prices – 15% increase in electric prices increases economic potential to 62.7 GW • 45.3 GW Moderate Potential (5 to 10 years) • 17.4 GW Strong Potential (<5 years)

  12. Policy Issues • Incentives for CHP can improve overall economics and increase the economic potential and reduce perceived risks to users • Spark spread is a critical factor in economic competitiveness for CHP and could be positively affected by: • Reduction in standby charges • Payments for CHP grid support • Retirements of embedded coal capacity • Future increases in electric costs • Possible federal policies • Expansion of investment tax credit • Include CHP as a qualified resource in national clean energy standards • Federal procurement requirements • Encourage CHP participation in ancillary services markets • Possible state policies • Include CHP as a qualified resource in clean energy portfolio standards or electric utility energy efficiency resource standards • Standardized interconnection requirements • Specific incentives

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