Market November 2016 Prepared for the Propane Education and - PowerPoint PPT Presentation

Arkansas Propane Market November 2016 Prepared for the Propane Education and Research Council Presented by: Michael Sloan ICF International 9300 Lee Hwy Fairfax, VA 22031

Overview of Arkansas Propane Markets 1

Economic Value of Propane in Arkansas Source: ICF Impact of the U.S. Consumer Propane Industry on U.S. and State Economies in 2012 2

Arkansas Population and Income Metrics Median Household Income by Census Track (2015) Arkansas Households by Heating Fuel Solar energy Other fuel No fuel Coal or coke Households Households Households Households 0% 0% 0% Wood 0% Households 4% Fuel Oil Households 0% Natural Gas Households 39% Electricity Number of Households by Census Track (2015) Households 50% Propane Households 7% Arkansas Demographic Information Median Population Population Median HH Income Change (%) Households 2016 Income ($) Change (%) 2017 - 2022 2017 - 2022 2,994,495 2.08 1,178,438 44,271 6.23 Sources: ICF, SNL, US Census 3

West South Central Region New Home Construction Trends West South Central; Share of Fuel Sources West South Central Region Housing Starts for All New Housing Starts Propane Heated Propane Heated 70% Total Housing Total Housing Housing Starts Housing Starts Starts (2014) Starts (2015) (2014) (2015) 119,876 1,528 123,642 1,796 60% West South Central Region Housing Starts by State 50% Market Share 2015 2015 2015 New Residential State Propane 40% Households Construction Permits Households Arkansas 1,144,663 76,481 8,500 30% Louisiana 1,737,908 37,623 13,830 Oklahoma 1,465,951 95,737 11,545 20% Texas 9,421,412 293,458 175,443 10% 0% Electricity Natural Gas Propane Heating Oil Other / No Heat *Natural Gas & Propane data for 2008 & 2009 Sources: ICF, Survey of Construction Data, American Community Survey has been estimated 4

Arkansas Odorized Propane Demand Forecast  Total propane demand in Arkansas Propane Demand by Sector 160 2016 is expected to be 106 million gallons. 140  ICF forecasts propane demand 120 to increase to 110 million gallons by 2025. Million Gallons 100  A 4% increase from 2015 to 2025. 80  Residential propane demand 60 is the largest sector within 40 Arkansas and is expected to decline from 45 million 20 gallons in 2016 to 36 million 0 in 2025. Residential Commercial Resellers Industrial Agriculture Internal Combustion Source: ICF Propane Demand Forecast Model 5

Arkansas Delivered Natural Gas and Electricity Prices  Arkansas Residential Natural Gas prices have increased 2.7% from 2012 to 2015.  Arkansas Electricity prices have increased 7.1% from 2012 to 2015. Arkansas Monthly Natural Gas Prices Arkansas Monthly Electricity Prices 25 12 10 20 Cents per Kilowatt-Hour 8 15 $/MMBtu 6 10 4 5 2 0 0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Residential Commercial Industrial Residential Commercial Industrial Sources: ICF, EIA 6

Arkansas Winter Fuel Price Comparison of Propane and Heating Oil  Arkansas first began reporting Arkansas Winter Fuel Prices Residential Propane prices in 2014/15. 350 – Residential prices declined to 194 cents per 300 gallon in 2015/16, a 13% decrease from the prior year. 250  $Cents per Gallon Over the past two years, Arkansas Residential Propane prices have 200 averaged -9 cents per gallon below National Residential Propane prices. 150 – Arkansas Residential Propane prices have been on average 158 cents per gallon 100 above Mont Belvieu prices during the same time period. 50  Arkansas does not report Residential - Fuel Oil Prices. US Propane Average Mont Belvieu Gulf Coast No.2 Heating Oil Arkansas Residential Propane Sources: ICF, EIA SHOPP 7

Propane Space Heating Customers in Arkansas Propane Space Heated Households 140  Propane space heated households Households (Thousands) 120 have been declining since 2006 100 when there were 115,000 80 households using propane. 60  In 2014, there were over 81,000 40 households that used propane as the 20 primary space heating fuel - accounting for 7% of households.  Electricity had a 50% share of home Change in Propane Space Heated Households heating households and natural gas Households (Thousands) 4 had a 39% share. 2  ICF forecasts propane households to - (2) continue to decrease through 2025. (4) (6) (8) (10) Sources: ICF, American Community Survey 8

Major Natural Gas Transmission Lines in Arkansas Sources: ABB Velocity Suite, ICF 9

2014 Propane Space Heated Households Sources: ICF, American Community Survey 10

2014 Propane Market Share Sources: ICF, American Community Survey 11

2014 Top Heating Fuel Sources: ICF, American Community Survey 12

Fuel with Largest Market Share Gain between 2010 & 2014 Sources: ICF, American Community Survey 13

Fuel with Largest Market Share Gain where Propane Declined between 2010 & 2014 Sources: ICF, American Community Survey 14

Fuel with Largest Market Share Loss where Propane Increased between 2010 & 2014 Sources: ICF, American Community Survey 15

2014 Market Share of Fuel Oil + Wood Sources: ICF, American Community Survey 16

Propane Load Growth Opportunities 17

Residential Propane Load Growth Opportunities by Application 35,000 Space Heating Thousand Gallons 30,000  Propane’s opportunity for load growth in the Residential 25,000 Sector is greatest from Wood Household Conversions. 20,000  In 2015, space heating applications consumed over 30 15,000 million gallons of propane (gray bar). 10,000  Potential conversions to propane space heating from fuel 5,000 oil and wood could increase the size of the propane - space heating market. Fuel Oil Space Heating Conversions to Propane  Fuel oil = 790,000 gallons (blue bar)  Wood = 31 million gallons (orange bar) Wood Space Heating Conversions to Propane 14,000 Water Heating 12,000  In 2015, water heating applications consumed Thousand Gallons 10,000 5.5 million gallons of propane (gray bar). 8,000  Conversions of water heaters to propane 6,000 presents 13 million gallons of load growth potential. 4,000 2,000 0 Potential Conversion to Propane Water Heaters Current Water Heating Market Propane Consumption 18

Annual Propane Load Growth Potential from Conversions of Fuel Oil Space Heated Households Sources: ICF, American Community Survey 19

Annual Propane Load Growth Potential from Conversions of Wood Space Heated Households Sources: ICF, American Community Survey 20

Propane Load Growth Potential from Conversion of Electric Water Heaters in Propane Heated Homes Sources: ICF, American Community Survey 21

Arkansas State Propane Profile ICF 9300 Lee Hwy Fairfax, VA 22031