The Role of Natural Gas in a Deeply Decarbonized Northwest June 6, 2019 Northwest Gas Association and Alliance of Western Energy Consumers Annual Energy Conference
A LOW CARBON FUTURE We believe there is a climate imperative NW Natural has an important role to play in a smart and affordable Northwest climate strategy OUR OBJECTIVES: 2 3 1 Reduction Long-term Lead the way on opportunities take goal of deep natural gas advantage of the decarbonization innovations and infrastructure that leaves no share broadly for in place. one behind. larger impact.
Pacific Northwest Pathways to Decarbonization Achieving an 80% reduction in economy-wide greenhouse gas emissions by 2050 NW Natural Study Results November 2018 Dan Aas Sharad Bharadwaj Amber Mahone Zack Subin Tory Clark Snuller Price
NW Natural asked E3 to evaluate scenarios to achieve deep decarbonization in PNW Oregon and Washington are taking steps reduce emissions, but exactly how deep decarbonization will be achieved remains uncertain. This study evaluates different strategies to achieve an 80% reduction in greenhouse gases (GHGs), aka deep decarbonization by 2050. Oregon and Washington Deep Decarbonization Trajectory 200 175 GHG Emissions (MMTCO2e) 2013: 155 MMT 150 1990: 144 MMT 125 100 2050 goal: 80% reduction 75 below 1990 levels 50 25 2050: 29 MMT 0 1990 2000 2010 2020 2030 2040 2050 4
CURRENT REGIONAL EMISSIONS Pie sizes represent GHG emissions (in CO2 equivalent) of the state and the region. Source of data: latest year from the GHG emissions inventories published by the Oregon, Montana, and Idaho Department’s of Environmental Quality and the Washington Department of Ecology
OREGON DIRECT USE NATURAL GAS EMISSIONS
NORTHWEST RESIDENTIAL SPACE HEATING Single family housing primary space heating system shown. Pie sizes are representative of relative number of housing units in the region. Source of data: 2016-2017 Northwest Energy Efficiency Alliance (NEEA) Residential Building Stock Assessment E3 estimated that 68% of regional space heating needs are served by direct use natural gas, and less than 30% is currently served by electricity
ELECTRIC UTILITY AND NATURAL GAS LDC PEAKS ARE CONCURRENT During last severe cold snap: The region’s electric system experienced the largest peak in the region in the last few years during the 7am hour on Jan 5 th 2017, with a load less than 30 gWh During the same hour, the direct use of natural gas system also experienced its largest peak in recent years and delivered about 1.5 million therms of natural gas to homes and businesses in the PNW In BTUs : 1.5 million therms ≈ 44 gWh
How this study differs from prior decarbonization studies Cost impacts of building electrification under cold temperatures are examined in depth • Explicit modeling of building electrification demand impacts under peak heating conditions; prior studies do not appear to assess the performance of heat pumps in cold temperatures Natural gas heat pumps included in one scenario • Prior studies exclude natural gas heat pumps Wide range of electric heat pump performance and costs are considered • The performance of electric air-source heat pumps and electric air- source “cold climate” heat pumps are both modeled under a range of temperature conditions • A wide range of capital costs are evaluated including use of historical Energy Trust of Oregon heat pump install costs; prior studies rely only on national cost estimates 9
All scenarios must meet the same emissions target The study compares four emissions reduction scenarios, named after the primary space heating equipment used in that scenario 1. “Natural gas furnaces” 2. “Natural gas powered heat pumps” 3. “Electric heat pumps” 4. “Cold-climate electric heat pumps” All four scenarios meet the 2050 emission reduction goal and follow a similar emissions trajectory 10
Significant mitigation efforts are required across all sectors in all scenarios All scenarios include some measures from each pillar The image part with relationship ID rId4 was not The image part with relationship ID rId6 was found in the file. not found in the file. The image part with relationship ID rId8 was not found in the file. Energy Reduce non- Low-Carbon Electrification efficiency & combustion Energy conservation GHGs Low-carbon Methane ü ü Smart-growth Electrification of ü ü electricity reductions driven VMT industry OR reductions buildings Low-carbon Replacement of ü ü biofuels high global Whole-home Electrification of ü ü warming retrofits & new passenger Potentially ü potential gases construction vehicles renewably codes produced Industry process ü Electrification of ü hydrogen emissions Electric heat trucks and ü reductions pumps freight displacing transportation resistance heat 11
Electricity generation portfolios are broadly similar in 2050 All Scenarios: Generation in 2050 All scenarios rely on wind, hydro, solar and nuclear power to provide low- carbon electricity Both of the gas scenarios have higher solar generation to serve new industrial electrification and hydrogen electrolysis loads 12
Electrification of space heating increases peak electricity demand New loads from electrification of space heating will, net of displaced resistance load, be incremental to existing peak demands Cold Climate Electric Heat Pump Scenario: 2050 Electric Heat Pump Scenario: 2050 Contribution to Contribution to Northwest System Peak Demand (GW) Northwest System Peak Demand (GW) +41 +32.2 -8.8 +24.7 +15.9 -8.8 2020 peak 13
By 2050, generation capacity needs vary by scenario Installed generation capacity is based on an approximation of a 1 in 10 weather planning standard RESOLVE selects the portfolios below given modified loads and carbon constraints • The gas scenarios include new capacity to serve electrified industrial end-uses and, in the case of the Gas Furnace scenario, electrolysis loads • The electrification cases include large amounts of new gas capacity to serve winter space heating peaks • In all scenarios, gas generators operate at very low capacity factors 14
By 2050, incremental gas capacity is 5-10 times higher in electric heat pump scenarios compared to gas scenarios Electric scenarios include 17 – 37 GW of new gas capacity by 2050 to serve winter space heating peaks (at 1-in-10 winter temperatures) Additional electric sector costs are $3B - $9.5B in 2050 in electric heat pump scenarios, relative to gas heat pump scenario Energy storage could displace some of this new gas capacity, but more detailed reliability analysis of storage as a winter peak solution is needed 2050 incremental gas capacity 2050 electricity sector cost (GW) relative to Reference ($ Billions) 15
No new gas sensitivity relies on energy storage to meet peak demand If no new gas capacity is allowed to be built, the RESOLVE model relies on 21 GW of storage. The relative cost of storage compared to gas depends on the duration of storage required and the additional generation required to ensure energy sufficiency throughout a winter peak event. • More analysis is needed to determine the duration of storage and amount of additional zero-carbon resources needed to reliably serve loads during extended periods of low hydro, wind or solar output 2050 Capacity and Costs, Cold-Climate Heat Pump Scenario Capacity (GW) Gas serves peak 10-hr storage serves peak RESOLVE costs relative to Reference ($ billions) Gas serves peak 10-hr storage serves peak 16
Biofuels: 2050 Usage and Expenditures All scenarios rely on advanced sustainable, carbon-neutral biofuels as a source of carbon reductions • Gas Heat Pump and Gas Furnace scenarios rely on higher levels of renewable natural gas (RNG) Biofuels have a cost of $4 - $5 B/year by 2050 2050 Biofuel Use by Scenario 2050 Biofuel Expenditures, (Tbtu) Incremental to Reference ($B) 17
Direct use gas decarbonizes significantly across all scenarios in 2050 Biofuels and hydrogen account for between 13% to 31% of the direct use gas supply in 2050 2050 Regional Direct Use Pipeline Gas by Scenario(Tbtu) Direct Use Pipeline Gas (Tbtu) Note: percentages denote percent of pipeline gas throughput in each scenario 18
The scenarios have a different allocation of emissions by end-use in 2050 2050 Greenhouse Gases (MMTCO 2 e) Natural gas is the largest source of 2050 energy sector emissions in all scenarios • Gas scenarios have higher emissions from direct uses of natural gas Gas for Electricity Gas for • Electrification scenarios have higher Electricity emissions from natural gas used for electricity Gas Gas direct direct use use Gas Heat Gas Cold-climate Electric Gas Pumps Furnaces Heat Pumps Heat Pumps Furnaces 19
Economy-wide scenario costs in 2050 are similar for three scenarios, electric heat pump scenario is highest cost due to winter peak capacity need The 2050 economy-wide scenario costs range from $3 - $16 billion/year in 2050, relative to Reference scenario • Equivalent to ~1% of projected 2050 regional Gross Domestic Product Cost forecasts are uncertain and sensitive to assumptions about technology costs for building heat equipment and biofuel prices Total Annual Scenario Cost in 2050 ($ Billions, incremental to Reference) 20
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