Natural Gas:

Status, Challenges and Opportunities for Heating Fuels Systems in Ontario

Keith BoultonDirector Energy Conservation Strategy

Union Gas

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Union Gas. For the energy.

Status: Natural Gas Basics

• Natural gas is the cleanest burning conventional fuel:• 45% less CO2 than coal• 30% less CO2 than oil

• Domestically available:• 98% of natural gas consumed in Canada & US is produced in North

America

• Efficient:• 90% of natural gas’ energy value is delivered to customers• Customers today use 40% less natural gas than 40 years ago

• Abundant:• Over 100 years of proven supply

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Union Gas. For the energy.

Union Gas Distribution Area

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Union Gas. For the energy.

Status: Natural Gas in Ontario

• 3.2 million residential, commercial and industrial customers serviced by Enbridge Gas Distribution and Union Gas Ltd.

• In the residential market:• 95+% of customers use it for heating• 85+% use it for domestic water heating• 20-25%% use it for cooking• 20-25% use it for clothes drying

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Union Gas. For the energy.

Opportunities: Energy Efficiency

• Since 1997, through DSM programs, Union Gas has helped customers:

• save 820 million cubic meters of natural gas• 1.6 million tones of CO2 emissions – the equivalent of taking more

than 295,000 cars off North American roads

• Moving from a “programmatic” view of energy efficiency to a “market transformation” view, ie:

• high efficiency furnaces• Energy Star for new homes

• Importance of full fuel cycle cost analysis• right fuel for the right application

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Union Gas. For the energy.

Emergence Of NA Shale Resource

Shale reserves are helping to provide 100+ years worth of supply6

Union Gas. For the energy.

Shale Projection

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Union Gas. For the energy.

Future Supply into Ontario /Dawn

New Supplies – US ROCKIES

New Supplies - MARCELLUS

Declining Western Canada Supplies

New Supplies –MID-CON &

GULF COAST SHALES

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Union Gas. For the energy.

Opportunities: Fuel switching water heaters, dryers, furnaces, ranges: 10 year potential

• 1,100 MW (DD) to 6,400 MW (CD) saved

• 6 million tonnes of GHG emission reduced (gross)

• Average cost per MW saved:• $58,000 (CD) to $335,000 (DD) • 10% (CD) to 60% (DD) of gas fired generation per MW• 3% (CD) to 20% (DD) of renewable generation per MW

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Union Gas. For the energy.

Gas Water Heater

Electric Water Heater

15.5% Transmission & Distribution Loss1

35.5% Generation Efficiency1

3.2% Transmission & Distribution Loss1

Total gas water heater efficiency:49.0%*

(.59 energy factor)

Total electric water heater efficiency:28.3%**

(.88 energy factor)

84.5%

32.3%

1. Natural Gas and Electric Residential Appliance Efficiency and GHG Emissions: A Complete Fuel-Cycle Perspective

• Assuming a 40 Gal natural gas water heater with an EF of 0.59** Assuming a 40 Gas electric water heater with an EF of 0.88

Full Fuel Life Cycle Cost Comparison

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Union Gas. For the energy.

NUG Market•Union North 777 MW 1990-1997•Union South 185 MW 1996

Lennox Conversion•1050 MW 1998•1050 MW 2000•Nanticoke Ignition 1998

Early Movers•SRCP 505 MW 2003•BBPS 550 MW 2004• IOL 95 MW 2004

CES Coal Closure•St. Clair 577 MW 2008•GEC 1005 MW 2008•Sithe Goreway 839 MW 2009

CES Ministerial Directive•Portlands 550 MW 2009•EWC 84 MW 2009•HHGS 680 MW 2010•Thorold 236 MW 2010•York Region 393MW 2011

Major Gas Fired Power GenerationOntario Power Market Growth Phases

~1,000 M

W

~3,100 MW

~4200 MW

~6,700 MW

~9,000 MW

Ontario long Term Energy PlanPotential to~15,000MW

Union Franchise

Enbridge FranchiseOther

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Union Gas. For the energy.

Going Forward: Integrated Energy Systems

• The majority of natural gas power generation in Ontario is still confined to large scale centralized systems

• Decentralized and integrated energy systems is the next path to lead

• Fundamental to this thinking is to move from the current discussions of “smart grid” to a wider view of constructing a “smart energy network”:

• CHP and Micro-CHP• Micro-grids• District Energy Systems• On-site integration of natural gas and renewables: passive solar

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Union Gas. For the energy.

Smart Electric Grid

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Union Gas. For the energy.

A Vision for Integrated Community Energy

Conceptual Scheme of the Smart Energy Network

Diagram fromTokyo Gas

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Union Gas. For the energy.

Quality Urban Energy Systems of Tomorrow

• The Canadian Gas Association was instrumental in founding QUEST five years ago

• The mission is to have every community in Canada operating as an integrated energy system:

• Improve Efficiency• Optimize Exergy• Manage Heat• Manage Waste• Use Renewable Sources• Use Grids Strategically

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Union Gas. For the energy.

Opportunities: Biomethane

• Biogas from anaerobic digestion and gas from landfill sites can be upgraded to biomethane and injected into the natural gas system

• Enbridge & Union are working jointly to establish a Biomethane Reference Gas Price:

• Enable the biomethane market by establishing appropriate pricing and supply contracts

• Looking to the future new “gasification” technologies can further transform the market by allowing biomass to be moved via pipeline

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Union Gas. For the energy.

Natural Gas future in Ontario

• Over the last decade, natural gas has often been referred to as a “bridge fuel”—going forward it is a “foundation fuel”

• The transformation of Ontario to a lower carbon future requires the flexibility of natural gas

• The significant infrastructure of the natural gas transmission and delivery system in Ontario needs to be leveraged through integration with community energy systems

• As “green gas” sources are developed (biogas and gasification of biomass), the existing infrastructure can help in directly delivering a lower carbon future

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