november 1, 2011

Northwest Power and ConservationCouncil

Slide 1

Direct Use of Natural GasEconomic Fuel Choices from the Regional

Power System and Consumer’s Perspective

November 1, 2011


Slide 2

Study Objectives Determine which residential space and water heating systems

are least-cost (TRC) and least-risk for the region’s power system given;– The diversity of space conditioning and water heating

systems and existing housing characteristics– A large number of combinations of space conditioning and

water heating systems to select from– That carbon emissions as well as their economic risk are a

consideration Determine whether the retail market will lead consumers to

chose the space conditioning and water heating systems that are also least cost and least risk for the region’s power system


Slide 3

Significance Council’s existing policy on fuel choice/fuel switching has not

be thoroughly reviewed since 1996 Council’s analysis and policy recommendations are of intense

interest to the natural gas industry, as well as electric utilities in the region

Of the 3.6 million existing PNW households– 2.6 million will replace their space conditioning and water

heating system over the next 20 years– 130,000 annual “fuel choice” decisions

Potential for conversion of existing appliances:– Electricity to gas: Reduce load by 1,500 MWa– Gas to electricity: Increase load by 2,500 – 5,000 MWa


Slide 4

Two Perspectives Regional Power System

– Space conditioning and water heating system selection based on wholesale electricity and gas prices

– Considers total system “cost” and “risk” (i.e., consideration of individual space and water heating conversion costs and performance alone does not account for the cumulative effects of these systems on the need for new resources)

Consumer Perspective– Space conditioning and water heating system selection

based on retail electricity and gas prices– Does not consider for “system” level impacts

slide 4


Slide 5

Observations From Regional Power System Perspective

In the Council’s Resource Portfolio model’s “least cost/least risk” plan new gas-fired turbines are deployed to serve load growth beyond that met with conservation and renewable resources– Consideration of these costs make some conversions to natural gas

economically preferable However, most homes (~75%) should stay with their current

space heating and water heating systems– Improvements in the efficiency of electric space heating and water

heating systems is a lower cost (TRC) option than converting most homes without existing gas access to gas space and/or water heating

– Extending gas service is an economic hurdle to converting all-electric households to gas space and/or water heating


Slide 6

Summary-TRC PerspectiveEnergy Impacts

Over 20 years– 560 MWa decline in regional electricity use

» 225 MWa from improvements in electric efficiency» 335 MWa from conversion to gas space and/or water

heating– 7 x 1012 BTUs per year decrease in regional

natural gas use» 13.1 x 1012 BTUs per year increase in direct gas use» 20.1 x 1012 BTUs per year decrease in gas used for

power generation


Slide 7

Summary-TRC PerspectiveHouseholds

Over 20 years– 2,593,839 Existing households with electric or gas

space or water heating (excludes 20% of without “gas access” via main or line extension)

– 1,896,000 Retain existing electric space and/or water heating systems, but upgrade efficiency

– 698,000 convert from electric space and/or water heating to natural gas (424,000 water heating, 115,000 space and water heating)

– 125,000 convert from gas to electric water heating (HPWH)


Slide 8slide 8

No. Segments

No. Housholds/yr 20-year Total

Share of Total

Change in Use (MWa-20th yr)

Change in Use (Trillion BTU-20th yr)

Replace w/Same Fuel & Same Equipment 20 48,412 968,235 37.3% - - w/Higher Efficiency Space Heating Equipment Only 14 1,807 36,145 1.4% (10) - w/Higher Efficiency Water Heating Equipment Only 10 33,439 668,785 25.8% (118) - w/Higher Efficiency Space & Water Heating Equipment 14 11,142 222,835 8.6% (95) - Sub-Total 58 94,800 1,895,999 73.1% (223) - Conversions from Electricity to Gas - Space Heating only 11 1,520 30,400 1.2% (31) 1.14 Water Heating only 6 21,197 423,940 16.3% (161) 7.29 Space & Water Heating 6 5,745 114,900 4.4% (166) 6.62 Sub-Total 23 28,462 569,240 21.9% (358) 15.05 Conversions from Gas to Electricity - Space Heating only 0 - - 0.0% - - Water Heating only 6 6,262 125,240 4.8% 24 (1.97)Space & Water Heating 0 - - 0.0% - - Sub-Total 6 6,262 125,240 4.8% 24 (1.97)

Conversions to Gas Space Heating and Electric Water Heating (from Electric Space Heating and Gas Water Heating) 8 168 3,360 0.1% (3) 0.07 Totals 95 129,692 2,593,839 100% (559) 13.15 Changes Net of Efficiency Improvements 37 34,892 697,840 27% (336) 13.15


Slide 9

Summary – TRC PerspectiveEmissions

Regional emissions of CO2 are about the same under a scenario that maintains gas space and water heating market shares or a scenario that results in conversion to electric space and water heating systems– While existing electric appliances produce more CO2

than gas appliances due to the inefficiency of the overall power system, conversion to heat pumps for space and water heating produce roughly equivalent emissions

– Moreover, the limited potential for economic conversions to natural gas make the impact negligible


Slide 10

Consumer Perspective Given current retail electricity and natural gas

prices and forecast future retail prices, would consumers likely select the space and water heating systems found to be economically preferable from a regional (TRC) perspective

Is there evidence that consumers are selecting the space and water heating systems that are economical preferable from a TRC perspective?

slide 10


Analytical Approach Compare the “first cost” and “life cycle

cost” of alternative space conditioning and water heating systems using:– Utility specific retail electricity and natural gas prices– 6th Plan forecast of future retail price escalation rates– “Average” system installation and operation and

maintenance cost– Representative range of housing sizes and climates

» 1500 – 2250 sq.ft.» Portland, Seattle, Boise, Spokane, Kalispel

slide 11


Slide 12

Analytical Approach The “best” space conditioning and water heating

system options for consumers is dependent upon the difference between their retail prices for electricity and natural gas

In order to represent this diversity the life cycle cost model was run using the retail rates for all gas and electric utilities in the region that serve the same general geographic area– “service territory” matching was not done

slide 12


Slide 13

Consumer Life Cycle Cost Model Designed to compare:

– First cost (Installed cost of system excludes gas line extension cost)

– First year space conditioning and water heating cost– Life cycle space conditioning and water heating cost– “Annual Levelized cost” of space conditioning and

water heating User can model specific utilities and climates Users with “Crystal Ball” can model distributions

of climate zones and utility rates

slide 13


Slide 14slide 14


Slide 15slide 15


Slide 16slide 16


Slide 17slide 17


Slide 18slide 18


Slide 19slide 19


Slide 20

First Cost of Space Conditioning Systems

slide 20

Ductless

HP

Electric

FAF w/C

AC

Electric

FAF

Zonal E

lectri

c w/C

AC

Zonal

Electric

Heat Pu

mp

Gas FA

F w/CAC

Gas FAF

Hybrid H

P $0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

10501450150019001900 w/Bsmnt2250 w/Bsmnt


Slide 21

First Cost of Water Heating Systems

slide 21

SF - Electric Resistance - X<=55

SF - HPWH - X<=55

SF - Gas Tank - X<=55

SF - Condensing Gas - X<=55

SF - Instant Gas - X<=55

SF - HPWH - X>55

SF - Condensing Gas - X>55

SF - Instant Gas - X>55

MF - Electric Resistance - X<=55

MF - Gas Tank - X<=55

MF - Instant Gas - X<=55

MF - Condensing Gas - X<=55

MF - HPWH - X<=55

$0 $500 $1,000 $1,500 $2,000 $2,500


Slide 22

Cumulative Distribution of LCC for Gas Furnace w/Condensing Gas DHW

slide 22


Slide 23

Cumulative Distribution of LCC for Gas Furnace w/HPWH DHW

slide 23


Slide 24

Cumulative Distribution of LCC for Gas Furnace w/AC w/Condensing Gas DHW

slide 24


Slide 25

Cumulative LCC for Heat Pump w/ HPWH DHW

slide 25


Slide 26slide 26

$1,000 $2,000 $3,000 $4,000 $5,000 $6,000$6,000

$6,500

$7,000

$7,500

$8,000

$8,500

$9,000

$9,500LCC vs First Cost 1050 sq.ft. MF - Zonal Base

Electric Zonal with HPWH - X<=55

Electric Zonal with Gas Storage Tank - X<=55

Electric Zonal with Electric Resistance - X<=55

Electric Zonal with Condensing Gas - X<=55

Electric Zonal with Tankless Gas - X<=55

Electric Zonal w/CAC with HPWH - X<=55

Ductless HP with HPWH - X<=55

First Cost (2009$)

Life

Cyc

le C

ost (

2009

$)


Slide 27slide 27

$1,000 $2,000 $3,000 $4,000 $5,000$6,500

$6,700

$6,900

$7,100

$7,300

$7,500

$7,700

$7,900LCC vs First Cost 1050 sq.ft. MF - FAF Base


Electric FAF with HPWH - X<=55

Electric Zonal with Gas Storage Tank - X<=55

Electric FAF with Gas Storage Tank - X<=55

Electric Zonal with Electric Resistance - X<=55


Gas FAF with HPWH - X<=55

First Cost (2009$)

Life

Cyc

le C

ost (

2009

$)


Slide 28slide 28

$2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000$15,000

$15,200

$15,400

$15,600

$15,800

$16,000

$16,200

$16,400

$16,600LCC vs First Cost 1900 sq.ft. SF - Zonal Base

Ductless HP with HPWH - X<=55

Ductless HP with Condensing Gas - X<=55

Ductless HP with Gas Storage Tank - X<=55



Ductless HP with Tankless Gas - X<=55

First Cost (2009$)

Life

Cyc

le C

ost (

2009

$)


Slide 29slide 29

$4,000 $5,000 $6,000 $7,000 $8,000$14,800

$15,000

$15,200

$15,400

$15,600

$15,800

$16,000

$16,200

$16,400

LCC vs. First Cost for SF 1900 sq.ft. w/ FAF w/AC Base

Gas FAF w/CAC with HPWH - X<=55

Gas FAF w/CAC with Condensing Gas - X<=55

Gas FAF w/CAC with Gas Storage Tank - X<=55

Heat Pump with HPWH - X<=55

Heat Pump with Condensing Gas - X<=55

Hybrid Heat Pump with HPWH - X<=55

First Cost (2009$)

Life

Cyc

le C

ost (

2009

$)


Slide 30slide 30

Existing RPM Scenario A - LCC Scenario B - LCC0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Space Conditioning System ChoicesTRC vs LCC Results for All Households

HP& Ductless HPElectric FAFElectric zonalGas FAF

Mar

ket S

hare

by

2030

LCC Scenario A assumes gas access (line or line and main extension) cost are paid directly by consumer. LCC Scenario B assumes gas access cost are recovered in all residential retail rates.


Slide 31

Existing RPM Scenario A - LCC

Scenario B - LCC

Scenario B1 - LCC

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Water Heating System ChoicesTRC vs LCC Results for All Households

HPWHCondensing GasGas TankElectric Resistance

Mar

ket S

hare

by

2030

LCC Scenario A assumes gas access (line or line and main extension) cost are paid directly by consumer. LCC Scenario B assumes gas access cost are recovered in all residential retail rates.LCC Scenario B1 is identical to Scenario B, except that water heating systems within 1% of the lowest LCC systemare considered “equivalent.”


Slide 32slide 32

Existing RPM Scenario B - LCC0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Space Conditioning System Selection RPM vs. LCC Results for Households with Existing Gas

Service

HP& Ductless HPElectric FAFElectric zonalGas FAF

Mar

ket S

hare

by

2030


Slide 33slide 33

Existing RPM Scenario B - LCC Scenario B1 - LCC0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Water Heating System Selection RPM vs. LCC Results for Homes with Existing Gas Service

HPWHCondensing GasGas TankElectric Resistance

Mar

ket S

hare

by

2030

LCC Scenario B assumes gas access cost are recovered in all residential retail rates.LCC Scenario B1 is identical to Scenario B, except that water heating systems within 1% of the lowest LCC systemare considered “equivalent.”


Slide 34

Summary of FindingsAlignment Between Regional (TRC) and

Consumer (LCC) Results The space heating systems found to be

economically preferable from a regional (TRC) perspective are generally also be the lowest life cycle (LCC) systems

The high efficiency gas and electric water heating systems found to be economically preferable from consumer (LCC) perspective were also found to be economically competitive from a regional (TRC) perspective

slide 34


Slide 35

Summary of FindingsAlignment Between Regional (TRC)

and Consumer (LCC) Results The regional (TRC) analysis includes the full cost of gas

service access (i.e., line or main and line extensions) in each space and/or water heating equipment selection

The consumer (LCC) analysis considered two scenarios for recovering the cost of gas service.– Scenario A – Assumed gas access cost are recovered

directly from the household converting– Scenario B – Assumed gas access cost are recovered

entirely through residential rates The “fuel choice” results from Scenario A & B generally

“bracket” those observed from the TRC analysis

slide 35


Slide 36

Summary of FindingsConsumer Perspective

Market Evidence NEEA surveys indicate that consumers selected

the space and water heating systems that are economical preferable from a TRC perspective

Continued decline in electric space and water heating market share indicate that where gas is available consumers are converting to gas space and/or water heating systems– Limited recent surveys of conversions

slide 36


Slide 37

Backup Slides

slide 37


Slide 38

Similarity of Appliance PerformanceExample for Gas Tank (2) in Water Heating Choices Slide


Slide 39

Water Heating Choices129,693 households per year

31,202 households/yr


15,010 households/yr6,430 change to electricity

-101.4 BTUs 10^9/yr

64,356 households/yr21,197 change to gas364.5 BTUs 10^9/yr

5,745 households/yr5,745 change to gas99.7 BTUs 10^9/yr

T

T

T

T


Slide 40

Similarity of Appliance PerformanceExample for HPWH (1) in Water Heating Choices Slide


Slide 41

Space Heating Choices129,693 households per year


4,111 households/yr


72,919 households/yr799 change to gas 31.6 BTUs 10^9/yr

4,793 households/yr

67 households/yr

6,019 households/yr

491 households/yr

6,177 households/yr6,136 change to gas 247.2 BTUs 10^9/yr

499 households/yr499 change to gas15.7 BTUs 10^9/yr

T

T

T

T

T

T

T

T

T


Slide 42

Summary of TRC Results Gas and electric appliances for space and water heating have become competitive both in terms of

efficiency and cost– Where the model selects a particular appliance, there are typically appliances using the alternative fuel with

similar performance– Given the precision of our calculations, there is no clear winner

The total number of space heating conversions is small (7,434 annually or less than 6 percent of households) and are to gas from electricity. These households either– Use or will use gas for water heating anyway, or– Do not value the air conditioning that heat pumps can provide and require only a service extension for natural

gas (not a main extension) The total number of water heating conversions to gas from electricity is significant (26,942 annually

or about 21 percent)– These households either already have natural gas for space heating or will add it to convert their space heating

The total number of water heating conversions to electricity from gas is small (6,430 annually or less than 6 percent)– These households have water heaters of greater than 55 gallon capacity and therefore must add a more efficient

appliance. They select heat pump water heaters over gas water heat technology. – Again, the competition between gas and electric appliances is close. If condensing gas were chosen in lieu of

a heat pump water heater, the effect over 20 years would be to lower the electric savings to 240 MWa from 340 MWa. From a regional planning perspective, this is small.

november 1, 2011

Documents

water heating system

current space heating

water heating conversion

gas pricesdoes

existing gas access

mwanorthwest power

natural gas industry

residential space