International Gas Union Natural Gas Facts Figures

International Gas Union Natural Gas Facts & Figures March 2012 1

Navigation-tool for the “Natural Gas – Facts & Figures” slide-pack 1. Markets for Gas Ø Power Generation Ø Industry Ø Chemical Feedstock Ø Ø Ø Commercial Sector Residential Sector Transportation Sector 2. Natural Gas Resources, Supply & Transport Ø Reserves: Conventional & Unconventional Ø Gas Transport Ø LNG 3. Environmental Impact Ø Power generation from gas with / without Carbon Capture & Storage (CCS) Ø Efficient Partner for Wind (and other intermittent energy sources) 4. Prospects for Developments of Further Technological Options 2

Goals and Objectives Highlight the value of natural gas to ensure its fullest economic and environmental contribution in low carbon energy systems 3

Cost estimates Note: The cost estimates in this package have been based on reliable, verifiable data. However they may not concur with cost estimates in other publications. This may be due to a variety of factors and assumptions, e. g. : • Prices of fossil fuels • CO 2 prices • Location factors • Size of plants • Costs of steel • EPC costs • Discount factors • Lifetime of plants All cost comparisons in this package should therefore be considered as indicative. While capital costs of different options may vary considerably in absolute terms, in relative terms there is very little variance (For reasons of consistency all cost data used in this package have been taken from the June 2010, Mott Mac. Donald (MMD) report for the UK DECC) 4

1 Markets for Gas Cost effective, Convenient and Efficient 5

Growing Global Demand for Gas Source: IEA, The Golden Age of Gas, 2011 (GAS scenario) 6

Power Generation 7

Meeting Electricity Demand EXPLANATORY NOTES PEAK-LOAD, MID-LOAD and BASE-LOAD SUPPLY Same demand ranked in descending order illustrated by a “load duration curve” and corresponding supply Electricity demand fluctuates from hour to hour over a year Wind Solar PEAK-LOAD SUPPLY Hydro Nuclear MID-LOAD SUPPLY BASE-LOAD SUPPLY Embryonic Expansion Maturity Decline Jan Dec Source: IGU/ Clingendael International Energy Programme (CIEP) 8

Gas-fired Power Generation CCGT (Combined Cycle Gas Turbine) Very efficient generation technology Modern combined cycle 1000 MW power plant (CCGT) Diagram CCGT, a combination of a gas turbine and a steam turbine. Efficiency ~ 59 %. 9

Gas-fired Power Generation CCGT (Combined Cycle Gas Turbine) Very efficient generation technology High efficiency (relative to other options) Less thermal waste & less cooling needed Compact equipment Lower investment and operating costs than oil or coal plant Shorter construction time and easier permitting process Few environmental problems (relatively clean) Less CO 2 emission rights needed than for oil or coal Suitable for meeting base-load and mid-load demand Source: based on MMD, June 2010 10

Gas-fired power generation Lowest capital costs per MW installed Capital costs of options may vary considerably in absolute terms, but very little in relative terms Indicative, cost levels million $/MW 5 4 3 2 1 Source: MMD, June 2010 11

Gas: A competitive option for new generation Low All-in Unit Costs per kwh produced Competitive for meeting Base-load Demand $/MWh Prices (at plant inlet) Based on: 7000 hrs operation for gas and coal per year Gas : 8 $/MMBtu 2500 hrs for onshore wind per year Coal: 80 $/t 3600 hrs for offshore wind per year 7800 hrs for nuclear per year Source: MMD, June 2010 Capital costs of options may vary considerably in absolute terms, but very little in relative terms 12

Gas: A competitive option for new generation Low All-in Unit Costs per kwh produced Flexible and Competitive for meeting Mid-load Demand $/MWh Prices (at plant inlet) Gas : 8 $/MMBtu Coal: 80 $/t Based on: 4300 hrs operation for gas and coal per year * Costs do not take account of effect of interruptibility on the plant efficiency Capital costs of options may vary considerably in absolute terms, but very little in relative terms Source: MMD, June 2010 13

Gas-fired Power: Efficient Smaller plant size reduces risk of overcapacity Minimum size to capture economies of scale (in MW) 1000 -1600 -1000 450 Source: MMD, June 2010 14

Gas-fired power: Efficient Short construction time reduces risks of demand uncertainty. years Plus shortest time for permitting etc Source: Energy Technology Perspectives, IEA 2010 15

CHP: A very energy-efficient option CHP: Combined Heat & Power. Also: "cogeneration“ Proven technology To reduce thermal waste from power production and use the heat. Higher efficiency than separate generation Saves energy and emissions Total efficiency ~80 %. Can take biogas Source: Energy Delta Institute 16

Industry 17

Gas: Convenient & Efficient Source of Energy Economic and Clean Easy handling, lower installation and maintenance cost Good controllability of processes and high efficiency Direct heating or drying of products or materials Clean and environment-friendly Less CO 2 emission rights needed (where applicable) 18

Gas: Convenient and Efficient Source of Energy (examples) Steam drums for paper manufacturing Ceramic foam infrared heater (1150 o. C) 19

Gas: The Efficient Source of Energy (examples) Batch grain dryer Infrared (IR) paint drying 20

Chemical Feedstock 21

Industry chemical feedstock More than 165 bcm/year Gas conversion industry uses gas as an efficient and valuable source for chemical conversion into other products which are sold worldwide Ammonia converts: some 135 bcm/year → for production of fertilizer, fibers, etc Methanol converts: 30 bcm/year Source: IGU/ Clingendael Institute (CIEP) 22

Chemical feedstock Many high quality and high value applications From Natural Gas Source: Dutch State Mines (DSM) 23

Commercial Sector 24

Gas: The Efficient Source of Energy Commercials Offices, schools, hospitals, leisure centers and hotels… Shops, restaurants, café's, … Small businesses, workshops, garages … • • • Easy handling once infrastructure is present Lower investment cost compared to other fuels High efficiency heating equipment available (incl. condensation) 25

Gas: The Efficient Source of Energy (examples) Green houses – use Boiler house in green house. Gas use temperature dependent. Assimilation illumination + Use of CO 2 from exhaust gases as fertiliser 26

Residential Sector 27

Residential Efficient and environmentally friendly fuel for heating, hot water and cooking Clean and easy handling once infrastructure is present Low installation cost vs. other fuels High efficiency heating equipment available High comfort factor Individual heating systems in apartment blocks High efficiency heating system (hot water boiler) with storage vessel High efficiency heating system 28

Micro CHP: Commercial applications in various countries Micro CHP: • Heat and power from one apparatus • High efficiency system with generator • Your own home power plant - 29

Residential Cogeneration System Grid Power Heating 暖房 乾燥 City Gas GE 　 Power PEFC Unit 本体 Heat 貯 Recovery 湯 Unit 槽 Buckup 追い焚き シャワー Shower Air Conditioning エアコン Lighting 照明 TV ＴＶ Bath 風呂 Hot Water 給湯 Floor Heating 床暖房 Source: Courtesy Osaka Gas 30

Transportation Sector 31

Automotive Fuels: CNG and LNG CNG : Compressed Natural Gas stored in vehicle at high pressure (200 bar) LNG : Liquefied Natural Gas stored in liquefied form at atmospheric pressure (requires cryogenic tank and regasification equipment ) Best in heavy vehicles and ships Alternatives : Gasoline, diesel, LPG Position gas : Clean, low on emissions Feasibility depends on fiscal regime Best in vehicles with limited travel radius and many stop-starts Reduces dependence on/import of oil 32

LNG as automotive fuel for heavy vehicles LNG is used in increasingly many places for road transport fleets: Buses, Dust Carts, Chilled Container Transporters – it gives good engine performance and a vehicle range comparable with other fuels LNG is suitable to fuel high-consumption transport where space for the LNG storage is readily available: e. g. trains and sea ferries LNG is less-suitable for small privately-owned vehicles because of more complex procedures and more expensive fuelling stations with special requirements regarding their location. Heavy vehicles do not lend themselves to be run on electric power. 33

CNG and LNG as automotive fuel for heavy vehicles (example) US builds Interstate Clean Transportation Corridor North America’s fuelling infrastructure has been built over the past 100 years, giving oil-based fuels an advantage over newer alternatives, like natural gas or hydrogen. Now, there is project to develop a new network of alternative fuel filling stations for long-haul trucking fleets in western United States. The Interstate Clean Transportation Corridor (ICTC) proposes a network of LNG and CNG facilities connecting heavily trafficked interstate trucking routes between Utah, California, and Nevada. The aim is to promote the conversion of heavyduty fleets from diesel to natural gas in order to cut down emissions, reduce oil dependence and save fuel costs. Source: Interstate Clean Transportation Corridor 34

LNG as fuel for ships Application of LNG as bunker fuel is rising rapidly LNG propelled ferry, Norway 35

CNG based road transport a growing business (examples) Examples New VW Passat Estate TSI Eco. Fuel model powered with turbocharged CNG engine 1. 4 -liter TSI 110 k. W (148 hp) emitting 119 – 124 g CO 2 / 100 km With average consumption of 4. 4 – 5. 2 kg / 100 km and 21 kg reservoir possible range with one filling is around 450 km Turbocharged CNG engines 36

CNG based road transport a growing business (examples) Source : NGV Journal 07/2011 37

CNG based road transport 38

Natural gas for road transport Source: Gasunie ‘Natural gas, part of an efficient sutainable energy future, The Dutch case’, Feb 2010 39

2 Natural Gas Resources, Supply & Transport 40

Natural Gas reserves: plenty & more to come Proven conventional reserves are growing In addition: Unconventional gas has come within technological & economic reach Conventional Unconventional Coal bed methane Tight gas Shale gas Volume The total long-term recoverable conventional gas resource base is more than 400 tcm, another 400 tcm is estimated for unconventionals: only 66 tcm has already been produced. - IEA-Golden Age of Gas 201141

Conventional Reserves: plenty and more to come tcm Growing proven reserves 200 Europe Latin America 160 North America 120 Africa Asia-Pacific 80 E. Europe/Eurasia Middle East 40 0 1980 1990 2000 2010 Global proven gas reserves have more than doubled since 1980, reaching 190 trillion cubic metres at the beginning of 2010 Source: IEA World Energy Outlook 2011 42

Types of Unconventional Gas Tight Gas Shale Gas Coalbed Methane Occurs in ‘tight’ sandstone Natural gas trapped between layers of shale Low porosity = Little pore space between the rock grains Low porosity & ultra-low permeability Natural gas in coal (organic material converted to methane) Low permeability = gas does not move easily through the rock Production via triggered fractures Permeability low Production via natural fractures (“cleats”) in coal Recovery rates low Source: Shell 43

Growth of unconventional gas production Impact on US supply Developments of shale production in the United States have a major effect on the US market and will impact rest of the world US shale production grows to about 45 % of total production by 2030 Source: James Baker Institute, Rice, 2010 44

World gas resources by major region (tcm) significant unconventional prospects world-wide Inventorization of unconventional gas is still at an early stage Source: IEA Golden Age of Gas, 2011 45

The prospects of unconventionals Unconventional gas offers potential for more domestic production in many countries Particularly for countries like China and Poland this could help to reduce dependence on coal First exports of unconventional gas under development Australia: First LNG export project based on Coalbed Methane (8. 5 mt/a committed with potential to expand) US: Various LNG export projects in planning stage due to successful development of shale gas 46

The prospects of shale gas Shale gas is so far only produced in North America. Its true potential is still a matter of uncertainty. Environmental concerns revolve around ground water contamination resulting from hydraulic fracturing. Governments, together with industry, are addressing new regulation for shale extraction to protect public health and environment. Energy used for production and its CO 2 emission is higher than for conventional gas (see next slides). 47

Well-to-burner greenhouse emissions shale gas vs conventional gas Mt CO 2 -eq per bcm Incremental for shale gas: Flaring & venting Production All types of gas: Production, flaring, venting & transport Combustion Source: IEA Golden Age of Gas, 2011 48

Gas Transport 49

Energy Transportation daily equivalents Basis: equivalent of 50 million m 3/day of natural gas (1 large pipeline 48” or 56”) (diesel) Source: Energy Delta Institute 50

Natural Gas and Electricity Transmission Gas pipelines offer: Lower losses and lower costs of large volume and/or long distance energy transmission More energy transportation capacity for different customers in different segments of the energy consumption Lower visual impact Better and more economic storage options Source: Clingendael International Energy Programme (CIEP), 2012 51

Natural Gas and Electricity Transmission Gas pipelines offer more energy transportation capacity Lower visual impact from transport of gas vs overhead electricity lines For high volume energy transportation: 8 power transmission masts of 3 GW each are equal to 1 gas pipeline (48 inch) Source: Gasunie 52

Natural Gas and Electricity Transmission Lower costs of energy transmission A specific advantage of gas transmission compared to electricity transmission is that for gas in growth markets much larger economies of scale can be realised than for power transmission and thus much lower costs per kwh. For electricity, a maximum scale of 2 -3 GW is technically achievable, after which multiple (parallel) lines are required*. However, gas pipelines have a capacity between 10 and 25 GW. Gas transportation for electricity generation can be combined with gas for other consumers in other market segments, leading to substantial economic advantages. * for very long distances (over 800 km) UHVDC lines can offer scale advantages up to 6 -7 GW Source: Clingendael International Energy Programme (CIEP), 2012 53

Natural Gas and Electricity Transmission Lower costs of energy transmission with economies of scale Overhead power transmission Capital costs: at least 2 -3 x more expensive per unit of energy than gas pipelines sized for high volume transmission only in the case a gas pipeline is laid only to transmit gas for power generation, as may be the case in an emerging market, the capital costs are of the same order of magnitude Underground power transmission Capital costs: at least 10 -15 x more expensive per unit of energy than gas pipeline sized for high volume transmission Source: Clingendael International Energy Programme (CIEP), 2012 54

Natural Gas and Electricity Transmission Lower losses from energy transmission Losses pipelines: 0. 2 -0. 4% per 100 km Losses (AC): 2 -4% per 100 km Losses (DC): 0. 2 -0. 4% per 100 km plus 1% one-off conversion loss Source: Clingendael International Energy Programme (CIEP), 2012 55

Natural Gas and Electricity Transmission Example of large scale, long distance transmission Indicative transmission costs of gas and electricity (ct€/k. Wh for 200 km) (24 GW or 48” pipeline over 200 km) Load Factor = 5500 hrs Overhead electricity transmission (and underground gas pipeline) Underground electricity transmission (and underground gas pipeline) Source: Clingendael International Energy Programme (CIEP), 2012 56

Natural Gas and Electricity Transmission EXPLANATORY NOTES Input parameters for calculation of indicative costs of gas vs electricity transmission Discount factor: 10% Load factor of electricity/gas transport: 5500 Lifetime: 25 years Energy losses AC transmission: 3% per 100 km Energy losses DC transmission: 0, 3% per 100 km + 1% loss during AC-DC-AC conversion Energy losses gastransport: 0, 3% per 100 km. Capex gas pipeline 24 GW: 0, 2 mln €/MW per 100 km Investment costs of AC overhead transmission, AC underground cable and DC underground cable are based on Parsons Brinckerhoff "Electricity Transmission Costing Study“ (Jan 2012) for the case “Lo (3 GW)“ for 75 km. Investment costs of DC overhead line based on ABB "The ABCs of HVDC Transmission Technology", Case 500 kv Investment costs of large scale gas pipeline (24 GW) is based on the average of building costs of existing pipelines (BBL, Blue stream, Green stream, Europiple II, Franpipe, Langeled, North stream) Source: Clingendael International Energy Programme (CIEP), 2012 57

The LNG market: Connecting regions 58

LNG Production Growing in all Global Regions Source: IGU World LNG Report, June 2011 (PFC) 59

Growing Liquidity in the LNG Market “Flexible LNG” The LNG industry has a total of around 1 660 bcm of LNG available for sale from existing production over the period 2009 -2025 IEA WEO 2009 “Flexible” LNG makes the LNG industry very responsive to changing demands of the global market LNG adds to the diversification of the supply sources 60

The LNG market: Very accessible Considerable growth of LNG import capacity in all regions matches the flexibility of the LNG industry to supply (production vs capacity of receiving terminals) Source: IEA Golden Age of Gas, 2011 61

LNG: More flexibility through new technology On-board regasification offers low cost and convenient option to supply gas to new and existing markets 62

LNG: More flexibility through new technology Small scale LNG offers opportunities to produce otherwise stranded gas and reduce gas flaring Gas source Source: Skaugen 63

Overland transport of LNG: By road trucks and railcars LNG is transported by road truck in many countries Trucked LNG has many small-scale uses: Domestic and commercial piped gas supply from satellite re-gasification terminals located in places remote from pipelines Small industrial users (electric power, engine tests, glass, paper) Commercial users (trains, buses, ferries, institutions) Supply to peak-shaving plants Supply to pipeline network during repairs or maintenance 64

Costs of Production and Supply 65

Indicative Cost Curve Long-term gas production cost curve Indicative supply cost * per $ 1$ * Delivered Note: 5 $/MMBtu compares to less than 30 $/bbl Source: IEA WEO 2009 66

3 Environmental Impact (examples are focussed on power generation) 67

Natural Gas with or w/o CCS: Cleanest fossil fuel for power generation Metric Tons CO 2 per MWH 1 Oil (0. 80) Coal (0. 85) 0, 75 0, 5 Natural Gas (0. 35) 0, 25 0 Solar Nuclear Wind (0) ”Clean” Natural Gas* (0. 04) * With CCS ”Clean” Coal* (0. 09) GHG Emissions Source: IGU based on CERA 68

Natural Gas fired generation: Smallest ecological footprint for power generation Land use in acres to have 1, 000 MW of capacity Acres 40, 000 Solar Wind 10, 000 10 Natural Gas Source: based on data from Union Gas Ltd. 69

Gas: Cleanest Fossil Fuel Lowest emission of CO 2 Emission of CO 2 (in kg CO 2/MWh) 1, 200 (340%) Lignite-fired power 850 (230%) Hard coal-fired power Gas-fired CCGT 350 (100%) Source: US Department of Energy (DOE), US Energy Information Administration (EIA) 70

Gas: The Cleanest Fossil Fuel Also lower on SOX and NOX Kg/MWh -6 Mercury emission from coal: 4. 3 10 kg/MWh Global warming effect of NOX is considerably higher than that of CO 2 (up to 300 times for 100 years (source ICBE)) Source: US Department of Energy (DOE): National Energy Technology Laboratory (NETL) 2010 71

Particulate emissions from heating systems mg/k. Wh * Emissions based on use of briquettes and lignite from the Rhineland-area in Germany ** Emissions based on use of briquettes LUWB Landesanstalt für Umwelt, Messungen und Naturschutz Baden-Württemberg; Average emission factors for small and medium combustion installations without exhaust gas after treatment. Status: 2006, BGW; Source: www. asue. de 72

Replacing coal with gas for electricity generation Cheapest & fastest way to meet CO 2 reduction targets The next decade is critical. If emissions do not peak by around 2020 and decline steadily thereafter, achieving the needed 50% reduction by 2050 will become much more costly. In fact, the opportunity may be lost completely. Attempting to regain a 50% reduction path at a later point in time would require much greater CO 2 reductions, entailing much more drastic action on a shorter time scale and significantly higher costs than may be politically acceptable. IEA, ETP 2010 • Over 40% of global CO 2 emissions comes from Power Generation • Over 70% comes from coal-fired Generation Karstad IGU A near-term initiative to displace coal generation with additional generation from existing natural gas combined cycle capacity could result in reductions in power sector CO 2 emissions on the order of 10%. MIT, 2010, on the US market 73

Power generation: CCS for gas and coal 74

CCS EXPANATORY NOTES CCS = Carbon Capture and Storage Process of carbon sequestration from fossil fuels, based on existing technology. CCS currently regarded as economic at CO 2 -emission “tax” levels well above 50 $/tonne. This section discusses only so-called post combustion carbonsequestration. For the analysis a distinction is made between the CO 2 capture and transportation / storage of CO 2. To date no commercial application of CCS exists, neither for coal- nor for gas-fired generation 75

Lower CO 2 emission after CCS Residual CO 2 emission in kg CO 2/MWh Hard coal-fired power Gas-fired CCGT 85 35 Estimate: 90 % capture of CO 2 emission Source: MMD, June 2010 76

Gas: CCS – Efficient Low Cost of Carbon Capture Low Incremental Capital Costs ($/kw) and Low Incremental Unit Costs per kwh ($/MWh) Source: MMD, June 2010 77

CCS for Gas vs Coal Less CO 2 to be captured, transported and stored CO 2 captured in kg per Mwh of electricity produced (based on 90% CO 2 removal) Compared with CCS for Coal: Per kwh of electricity produced 45% less CO 2 to be transported 45% less CO 2 to be stored Source: MMD, June 2010 Resulting in Lower costs of CO 2 transportation Lower call on (scarce) CO 2 storage capacity 78

Gas with CCS: Low all-in unit costs Baseload: 7000 hrs of operation CO 2 “tax”: 80$/t $/MWh Prices (at plant inlet) Gas : 8 $/MMBtu Coal: 80$/t Note: CCS reduces plant efficiency Capital costs may vary considerably in absolute terms, but very little in relative terms Source: MMD, June 2010 79

Gas with CCS: Low all-in unit costs Midload: 4300 hrs of operation CO 2 “tax”: 80$/t $/MWh Prices (at plant inlet) Gas : 8$/MMBtu Coal: 80$/t Note: CCS reduces plant efficiency * Costs do not take account of effect of interruptibility on plant efficiency Capital costs may vary considerably in absolute terms, but very little in relative terms Source: MMD, June 2010 80

Power generation: Gas and Wind 81

Meeting Electricity Demand – Merit order based EXPLANATORY NOTES DEMAND FOR ELECTRICITY CAN BE MET FROM A VARIETY OF SOURCES WHICH WILL CONTRIBUTE BASED ON A SO-CALLED “MERIT ORDER”: For installed power plants the order in which these sources called upon to meet the demand is based on variable cost of production, leading generally to the following ranking preferences. 1. Renewable energy • Hydro • Wind • Solar • Biomass* 2. Nuclear power plants 3. Coal-fired power 4. Gas-fired power * Not necessarily the lowest variable cost option but often favoured for its low CO 2 contribution 82

When You Need Electricity You Can’t Flick a Switch and Turn on the Sun and Wind • Variability creates complex grid balancing and supply security issues • Gas-fired generation can play a key role in maintaining grid stability and supply security 83

Meeting Electricity Demand – Wind Power EXPLANATORY NOTES Wind power is a growing part of the generation mix. It is attractive because it is renewable and does not emit CO 2. However, the contribution of wind power can vary significantly. solar onshore offshore Example: Poyry 2011 estimates over a 4 months period This overview deals with the consequences of extended absences of wind power (more than 4 hours) for which combined cycle gas-fired power generation is a suitable partner Source: CIEP/ Poyry 2011 estimates 84

The Impact of Variability can be Significant EXAMPLE OF CONTRIBUTION OF VARIABLE WIND POWER TO ACTUAL DEMAND (LOAD) DURING HIGH PRESSURE WEATHER IN TEXAS Demand (=Load) vs actual Wind Output DEMAND WIND SUPPLY conventional sources (gas) are needed to supply (with extra flexibility) Source: National Review Online: Bryce, August 2011 85

Meeting Electricity Demand – Wind Power EXPLANATORY NOTES Installed wind power displaces fossil sources of power supply, but will it be gas or coal? The main purpose of wind power is to reduce power supply from fossil fuel and thus reduce CO 2 emission An effective CO 2 reduction will be achieved if coal-based electricity is displaced by wind power However, in energy systems with both gas- and coal-based generation, more gasbased electricity is generally displaced than coal, as long as the variable costs of gasfired generation are higher than those of coal (see also example Spanish Market). This significantly reduces the effectiveness of CO 2 reduction from wind: 1 MWh of wind power replacing gas-fired power leads to a reduction of 350 kg CO 2 1 MWh of wind power replacing coal-fired power leads to a reduction of 850 kg CO 2 Once CO 2 emissions are priced/taxed or other performance measures are introduced this order could be reversed Source: Clingendael International Energy Programme (CIEP), 2012 86

Natural Gas complementing electricity supply from Wind In MWh EXAMPLE OF IMPACT OF VARIABLE WIND POWER ON SUPPLY FROM GAS- AND COAL-FIRED GENERATION (Spanish electricity market) Source: REE, Heren, 2010 87

Meeting Electricity Demand The Wind and Gas-fired Power Partnership Wind power capacity always needs backup from other sources Installed wind power capacity needs backup from other power supply sources to maintain the required level of security of supply at times of reduced wind supply High and low pressure zones can extend over vast geographical areas so that generally there can be little compensation from wind power elsewhere in a region. Dependent on regions, interconnections and availability of renewable alternatives , in most areas between 80 and 95% back-up from conventional sources will be required. Other CO 2 -free back-up options are not generally available on a sufficient scale to complement a growing share of variable wind energy Gas-fired generation is a flexible and reliable partner for wind at the lowest incremental CO 2 emission (and at the lowest incremental costs) Source: Clingendael International Energy Programme (CIEP), 2012 88

Meeting Electricity Demand EXPLANATORY NOTES Power supply is often expressed in running “hours”, as a fraction of total design capacity. In following examples onshore wind supply accounts for 2, 500 hrs in any year. In the same examples average market demand is approx. 5, 500 hrs. Residual demand, to be supplied from gas-fired capacity thus becomes 3, 000 hrs. Source: Clingendael International Energy Programme (CIEP), 2012 89

Gas: A suitable option for complementing wind Low emission per kwh produced from wind and gas combined Based on 2, 500 hrs of onshore wind and 3, 000 hrs of complementary supply from gas or coal CO 2 Emissions in kg/Mwh without CCS with CCS The example illustrates that wind combined with gas reduces CO 2 emission. Wind combined with coal back-up produces more CO 2 than a gas plant on its own Source: Clingendael International Energy Programme (CIEP) based on MMD 90

Gas: A suitable option for complementing wind Also lower all-in Unit Costs per kwh produced All costs are based on 5, 500 hrs of power supply* The combination of wind and gas or coal represents 2, 500 hrs of onshore wind and 3, 000 hrs of complementary supply from gas and coal $/MWh Prices (at plant inlet) Gas : 8 $/MMBtu Coal: 80 $/t * Costs do not take account of effect of interruptibility on the plant efficiency Capital costs of options may vary considerably in absolute terms, but very little in relative terms Source: MMD, June 2010 91

4 Prospects for Developments of Further Technological Options 92

Potential for future developments Innovative steps for more climate protection More efficiency and climate protection Fuel cells Green gas Micro-CHP Condensing boiler technology & Solar Gas heat pump Market readiness Innovation Future technology Source: based on E. ON Ruhrgas 93

Green Gas Source: Senternovem 94

Fuel cells 1. Produce H 2 using electricity from solar cells or other renewables or from natural gas in a reformer 2. Fuel cell : 2 H 2 + O 2 2 H 2 O + electricity + heat 95

Fuel cells – Some characteristics Silent, low maintenance High electrical efficiency ; total efficiency 80 to 90 % No CO 2 emissions (with likely exception for production of H 2 from natural gas) Fuel cells have stationary applications (buildings, plants, telecommunications) and transportation uses (cars, buses, trucks and machinery) Today still high cost per installed k. W 96

Terminology (1) AC bbl bcm BTU CBM CCGT CCS CHP CNG Coal supercritical CO 2 DC EPC Alternating Current Barrel Billion (109) cubic meter British Thermal Unit Coal Bed Methane Combined Cycle Gas Turbine, the current efficient type of gas-fired power generation Carbon Capture and Storage Combined Heat & Power Compressed Natural Gas Most efficient process of coal fired power generation Carbon dioxide Direct Current Engineering, Procurement and Construction Green House Gas Load Factor Liquefied Natural Gas LNG supply potential, not committed to a single market under a long term contract A demand load curve but the demand data is ordered in descending order of magnitude, rather than chronologically 97

Terminology (2) LPG MWh NOX OHT Peak shaving Natural Gas Resources Reserves, proven & probable SOX tcm TWh UHVDC Liquefied Petroleum Gas Mega Watt hour Nitrogen Oxide Overhead transmission Processes of dealing efficiently with peak demand of electricity or gas Generally a broad indication of the potential availability of gas reserves Volume of oil or gas that has been discovered and for which there is a 90% probability that it can be extracted profitably on the basis of prevailing assumptions about cost, geology, technology, marketability and future prices* Proven reserves plus volumes that are thought to exist in accumulations that have been discovered and have a 50% probability that they can be produced profitably* Sulphur Oxide Trillion (1012) cubic meter Tera Watt hour Ultra High Voltage Direct Current * IEA WEO 2010 98