1. 1 Domestic Heating Fuel Choice Study (aka The Direct Use of Gas) Michael Schilmoeller NW Power and Conservation Council web presentation for the web presentation for the RTF DUG Task Force Monday, August 16, 2010

2. 2 GAS TANK 58% EFFINSTANT GAS 82% EFF ELEC TANK 93% EFF HPWH 200% EFF GAS PIPE & DISTRIB 99% EFF COMBUSTION TURBINE 48% EFF GAS PIPE & DISTRIB 99+% EFF 57%81% 38% Hot Water Thermodynamic s ELEC TRANS & DISTRIB 86% EFF

3. 3 GAS TANK $283/Tank INSTANT GAS $911/Tank ELEC TANK $286/Tank HPWH $1300/Tank GAS PIPE & DISTRIB $/cuft-year COMBUSTION TURBINE $92/kW-year GAS PIPE & DISTRIB $/cuft-year Hot Water Economics ELEC TRANS & DISTRIB $45/kW-year

4. 4 Study Objectives What’s better economically? –Costs and decisions use total resource cost, with wholesale prices for electricity and gas –The study should consider carbon penalty costs and other sources of risks –Conversion can go either way : direct gas to electricity or electricity to direct gas Recognize uncertainty and imperfect foresight Determine if incentives or disincentives improve the outcome

5. 5 Analyze Customer Segments and Develop Model Data A Regional Technical Forum (RTF) advisory group scoped the study –e.g., study will consider residential conversions only Northwest Gas Association, Puget Sound Energy, and the RTF provided funding Global Energy Partners, LLC, (GEP) won the contract January 2009 GEP completed their tasks September 2009 –Completed 60+ large tables of RPM input data –Reduced to 87 the 212 customer conversion options that are available to 19 customer segments –Built an Excel ® model to evaluate conversions

6. 6 Key Assumptions Limited to existing construction Assume that energy requirement per household for water and space heating is seasonal but insensitive to natural gas and electricity price Assume that a fixed portion of existing stock turns over each year, which determines the conversion potential

7. 7 Existing Segments Customer segments were determined primarily by existing circumstances –Single- or multi-family building –Existing space heating appliance –Existing water heating appliance –Whether or not a gas main is available, and if so, whether service already exists or an extension from the gas main is necessary

8. 8 Existing Segments Market segments include single- (s) and multi-family (m) homes FAF refers to forced air furnaces DHW refers to domestic hot water Conversion opportunities distinguish segments 2 and 3

9. 9 Conversion Options Note that there are only four choices for retrofit domestic hot water: heat pump water heats (HPWH), electric resistance, gas tank, and instant gas.

10. 10 Selected Combinations Only water heating conversion is available to segment 2; only space heating conversion is available to segment 3.

11. 11 Least-Cost Solution one market segment, fixed gas price Total Cost (real levelized 2006$/10 3 BTU) Electricity Price (2006$/MWh)

12. 12 Schedule The RTF reviewed some of the early work on June 29 RTF participants studying the assumptions Upcoming meetings –August 3 RTF meeting –Conservation Resource Advisory Committee (CRAC) meeting on policy implications in September? –Results to the Power Committee of the Council in September?

13. 13 GEP Model The following equations represent, to the best of my ability, the relationships in the GEP Gas Conversion Model The Council staff is actively considering alternative representations, such as –Relation of household size to equipment cost and energy usage –Relation of household circumference to ductwork cost

14. 14 Representation of Fixed Cost The indices k and j correspond to the households and systems, respectively. In the fixed cost calculation, we basically have cost elements that are ĉ s – one-time equipment purchase and installation costs ($), that are assumed independent of the house size (square feet), family type, etc., but may be subject to a utilization factor. These include all new appliances except electric FAF, which is taken as proportional to house size in the GEP model. ĉ a – one -time costs that are strictly proportional to house floor area in square feet ($). The electric FAF has installation cost is the only factor proportional to square footage in the GEP model. continued on next slide

15. 15 Representation of Fixed Cost ĉ l – one -time costs that are proportional to house circumference in feet ($). The only such cost is for installation of hydronic systems in the GEP model. – annual operations and maintenance costs ($/year) ĉ d – one-time duct work costs ($). These are independent of the house size, family type, etc. in the GEP model. While they are a function of whether or not a family has a basement, this influence is handled by using a household-weighted cost. ĉ g – one -time gas service acquisition costs that depend on family type and on availability of gas main ($).

16. 16 Representation of Usage The requirements for gas (MMBTU/hour) for household k and system j will be

17. 17 Representation of Usage The corresponding electricity equation is identical except for a conversion constant, MWh per MMBTU, about 3.414

18. 18 Initial Results

19. 19 Initial Results

20. 20 Initial Results

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