NPC Industrial Demand Group Study Summary Ray Ratheal 8/19/2010

APPA, Implications of Greater Reliance on Natural Gas for Electric Generation Modeled by Aspen for APPA, July 2010 Premise: Carbon legislation prompts a massive shift from coal fired to gas fired power generation. Total demand goes from 23 TCF to 36 TCF, with 2/3 of demand for power Investments in pipeline capacity - $348M Storage Capacity increase – 1.4 TCF, $12.5B Operational considerations will create more price volatility in spite of infrastructure growth East Coast, Central Plains have more storage and capacity problems Retrofit of coal fired units not likely, new gas plant construction favored - $330B Supply is adequate, but prices will go up, supply curve implies over $10/MMBtu to meet EG demand Industrial demand is the most price sensitive sector, and will continue to erode demand as price increases

RFF, Natural Gas, A Bridge to a Low Carbon Future? NEMS model, 12/2009 Premise: new shale gas offers bridge for carbon restricted future Four scenarios: BAU, low and high shale production, Carbon constrained, low and high shale production Industrial demand goes down in all cases except no C constraints, high shale (+10%, 2030) High shale alone increases energy consumption and increases C emissions High shale, C constraints reduce industrial demand, primarily through energy efficiency due to low opportunity for fuel switching