Direct Use of Natural Gas Direct Use of Natural Gas

Tampa ElectricPeoples Gas

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TECO Energy

Tampa Electric•660,000 customers•Over 4,400 megawatts of generating capacity Peoples Gas•330,000 customers•Over 10,000 miles of distribution mainand 113 miles of transmission main

      

Direct Use of Natural Gas Implications for Power Generation, Energy Efficiency, and Carbon Emissions

Study Conducted by Black & Veatch Corporation

February 2008

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Observations for Natural Gas

•Tight supply market •Demand remains strong

•Use for power generation expected toincrease significantly

•GHG emissions regulations likely to put further strain on the market

•Drivers of Natural Gas Demand Remain Strong

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Observations for Natural Gas•Drivers of Natural Gas Demand Remain Strong

• Direct use of natural gas delivers 90% energy efficiency to end users – as compared to 27% end use efficiency when natural gas is used to generate electricity

• Direct use of natural gas in home heating and water heating results in 40% less CO2 emissions than electricity

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Study Objectives

• Analyze increased use of natural gas for power generation and impact on the natural gas market

• Assess impact of increasing direct use of natural gas for residential & commercial (R&C) end uses

Space Heating Water Heating Cooking Clothes Drying

• Quantify impact of increased direct use of natural gas on

Energy Consumption Total Energy Costs CO2 Emissions

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Analysis Approach

Assumptions

Analysis to be performed in scenario

based conditions

Assumptions on the extent of shift in R&C

demand

Use of AGA & AGF studies, EIA’sAEO 2007 and other public sources

to support analysis

Analysis

Define Scenarios

Assess shift in R&C demand from electricity to direct use of gas

Impact of Increase in gas demand

Impact of decrease in electricity demand

Net impact on the US market as captured by defined metrics

Metrics

Energy Consumption

Energy Cost

CO2 Emissions

Assumptions

Analysis to be performed in scenario

based conditions

Assumptions on the extent of shift in R&C

demand

Use of AGA & AGF studies, EIA’sAEO 2007 and other public sources

to support analysis

Analysis

Define Scenarios

Assess shift in R&C demand from electricity to direct use of gas

Impact of Increase in gas demand

Impact of decrease in electricity demand

Net impact on the US market as captured by defined metrics

Metrics

Energy Consumption

Energy Cost

CO2 Emissions

Study Conducted by Black & Veatch

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Scenarios Assessed

Reference Base Case1. Current Supply/2006 R&C Technology/No CO2 Restrictions

Natural Gas Constrained World / High CO2 Restrictions with:2. 2006 R&C Technology

or3. High Technology (based on future efficiency targets)

Natural Gas Surplus World / Low CO2 Restrictions with:4. 2006 R&C Technology

or5. High Technology (based on future efficiency targets)

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Study Findings

Increased use of natural gas in R&C applications can

Decrease energy consumption

Decrease power generation needs

Reduce overall energy cost

Reduce CO2 emissions

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Impact on Energy Consumption in 2030

-2.50

-2.00

-1.50

-1.00

-0.50

0.00

Reference Case High CO2-High Tech High CO2-2006 Tech Low CO2-High Tech Low CO2-2006 Tech

Qu

ad

rilli

on

Btu

Source: Energy Information Administration (“EIA”), B&V Analysis

Increased Direct Use Of Natural GasIncreased Direct Use Of Natural GasReduces Total Energy ConsumedReduces Total Energy Consumed

A 50% shift of the switchable electric load to natural gas end use can produce:

• Energy Savings = 1.25 to 2.00 quadrillion Btu

• Avoided Generation capacity = 63 to 80 GW

• Avoided Investment costs = $49B to $122B

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Impact on Energy Costs in 2030

Increased Direct Use Of Natural Gas Increased Direct Use Of Natural Gas Reduces Total Energy CostsReduces Total Energy Costs

In supply-constrained/Lieberman-Warner CO2 restrictions scenario, Energy Savings = $18B to $29B by 2030

Source: Energy Information Administration (“EIA”), B&V Analysis

-30.00

-25.00

-20.00

-15.00

-10.00

-5.00

0.00

Reference Case High CO2-High Tech High CO2-2006 Tech Low CO2-High Tech Low CO2-2006 Tech

20

05

$ B

illio

n

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Impact on CO2 Emissions in 2030

Source: Energy Information Administration (“EIA”), B&V Analysis

-250.00

-200.00

-150.00

-100.00

-50.00

0.00

Reference Case High CO2-High Tech High CO2-2006 Tech Low CO2-High Tech Low CO2-2006 Tech

Mill

ion

CO

2 T

on

s

Increased Direct Use Of Natural Gas Increased Direct Use Of Natural Gas

Reduces Reduces COCO2 2 EmissionsEmissions

In all scenarios, projected decrease in CO2 emissions

From 60 million to 200 million tons

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Looking Forward

• Natural gas is the “bridge to the future”

• Demand is growing in all segments

• Supply access and infrastructure remain critical issues that must be addressed

• High and volatile prices are detrimental to consumers and the economy

Increased direct use of natural gas

can make a significant positive impact on

energy consumption, energy costs, and the

environment