Natural Gas: Status, Challenges and Opportunities for Heating Fuels Systems in Ontario Keith Boulton Director Energy Conservation Strategy Union Gas 1

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 2

Union Gas. For the energy. Union Gas Distribution Area 3

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 4

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 CO 2 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 5

Union Gas. For the energy. Emergence Of NA Shale Resource Shale reserves are helping to provide 100+ years worth of supply 6

Union Gas. For the energy. Shale Projection 7

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 8

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 9

Union Gas. For the energy. Gas Water Heater Electric Water Heater 15.5% Transmission & Distribution Loss % Generation Efficiency 1 3.2% Transmission & Distribution Loss 1 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 10

Union Gas. For the energy. NUG Market Union North 777 MW Union South 185 MW 1996 Lennox Conversion 1050 MW 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 Generation Ontario Power Market Growth Phases Union Franchise Enbridge Franchise Other 11

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 12

Union Gas. For the energy. Smart Electric Grid 13

Union Gas. For the energy. A Vision for Integrated Community Energy Diagram from Tokyo Gas 14

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 15

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 16

Union Gas. For the energy. Natural Gas future in Ontario Over the last decade, natural gas has often been referred to as a bridge fuelgoing 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 17