The Role of Natural Gas in a Deeply Decarbonized Northwest June 6, - - PowerPoint PPT Presentation

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

Long-term goal of deep decarbonization that leaves no

• ne behind.

Lead the way on natural gas innovations and share broadly for larger impact.

OUR OBJECTIVES:

1 2 3

Reduction

• pportunities take

advantage of the infrastructure in place.

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

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NW Natural asked E3 to evaluate scenarios to achieve deep decarbonization in PNW

Oregon and Washington Deep Decarbonization Trajectory 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.

2050 goal: 80% reduction below 1990 levels

1990: 144 MMT 2013: 155 MMT 2050: 29 MMT

25 50 75 100 125 150 175 200 1990 2000 2010 2020 2030 2040 2050 GHG Emissions (MMTCO2e)

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 5th 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

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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

• f 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

How this study differs from prior decarbonization studies

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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

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Significant mitigation efforts are required across all sectors in all scenarios

Electrification

ü Electrification of industry OR buildings ü Electrification of passenger vehicles ü Electrification of trucks and freight transportation

Reduce non- combustion GHGs Energy efficiency & conservation Low-Carbon Energy

ü Smart-growth driven VMT reductions ü Whole-home retrofits & new construction codes ü Electric heat pumps displacing resistance heat

ü Low-carbon electricity ü Low-carbon biofuels ü Potentially renewably produced hydrogen ü Methane reductions ü Replacement of high global warming potential gases ü Industry process emissions reductions

All scenarios include some measures from each pillar

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Electricity generation portfolios are broadly similar 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

All Scenarios: Generation in 2050

13 +24.7

• 8.8
• 8.8

+41 +32.2 +15.9

2020 peak

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

Electric Heat Pump Scenario: 2050 Contribution to Northwest System Peak Demand (GW) Cold Climate Electric Heat Pump Scenario: 2050 Contribution to Northwest System Peak Demand (GW)

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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

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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

(GW)

2050 electricity sector cost

relative to Reference ($ Billions)

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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

• utput

Gas serves peak 10-hr storage serves peak

2050 Capacity and Costs, Cold-Climate Heat Pump Scenario

Capacity (GW) RESOLVE costs relative to Reference ($ billions) Gas serves peak 10-hr storage serves peak

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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

Biofuels: 2050 Usage and Expenditures

2050 Biofuel Use by Scenario (Tbtu) 2050 Biofuel Expenditures, Incremental to Reference ($B)

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Biofuels and hydrogen account for between 13% to 31% of the direct use gas supply in 2050

Direct use gas decarbonizes significantly across all scenarios in 2050

2050 Regional Direct Use Pipeline Gas by Scenario(Tbtu)

Note: percentages denote percent of pipeline gas throughput in each scenario

Direct Use Pipeline Gas (Tbtu)

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The scenarios have a different allocation

• f emissions by end-use in 2050

2050 Greenhouse Gases (MMTCO2e)

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

• Electrification scenarios have higher

emissions from natural gas used for electricity

Gas Furnaces

Gas direct use Gas direct use Gas for Electricity Gas for Electricity

Gas Furnaces Gas Heat Pumps Cold-climate Heat Pumps Electric Heat Pumps

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)

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Scenario costs relative to Reference increase in early years but stabilize or fall in later years

Cold Climate Heat Pump Natural Gas Heat Pump Gas Furnace Electric Heat Pump

Study findings (1 of 2)

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Maintaining gas heat in buildings requires:

• RD&D and commercialization of

advanced renewable natural gas (also used in the electrification scenarios but RNG is less pivotal in those cases)

• Either natural gas heat pumps or

hydrogen blended into the pipeline

• Additional sources of GHG mitigation

in other sectors (e.g. industrial electrification) H2

Efficiency

There are multiple pathways in the Pacific Northwest to achieve deep decarbonization with different strategies in buildings; Each faces significant challenges and risks Retrofitting to electric heat in buildings requires:

• Rapid consumer adoption, major

building retrofits, and market transformation of cold climate electric heat pumps

• Expansion of the electricity system to

accommodate winter peak demand, e.g. new gas peaking power plants and/or storage. Ensuring winter peak reliability is a key challenge

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Northwest electric demands are already at their highest in the winter; this means that new electric space heating loads require additional peak capacity Winter peak needs continue to be met mostly with gas in all of the decarbonization scenarios through 2050, with:

• Gas-fired electric generation (could be partly displaced by energy storage,

though reliability of storage is less certain), or

• Direct use of gas

Widespread deployment of electric heat pumps leads to 5 – 10 times increase (17,000 – 37,000 MW) in winter peak electricity demands, relative to gas scenarios

• This increase is compared to the entire hydroelectric system of ~33,000 MW

Total economy-wide scenario costs in 2050 are similar between scenarios given uncertainties, with the exception of the non- cold climate electric heat pump scenario. That scenario is the most expensive due to the cost of serving winter peak demand.

Study findings (2 of 2)