Natural Gas Pathways: Towards a Clean and Renewable Energy Future for California Southern California Gas Company September 24, 2015.

Natural Gas Pathways: Towards a Clean and Renewable Energy Future for California

Southern California Gas Company September 24, 2015

California’s Dual Emissions ChallengeFederal Clean Air Act and California Climate Change Initiative

Measures to Reduce Smog and GHG Emissions Drive Today’s Energy and Environmental Agenda

Natural Gas will Play an Increasing Role as a Solution

FEDERAL CLEAN AIR ACTReduce SMOG by

75-80% before the next 20 years

CA CLIMATE GOALS (AB32) GOVERNOR’S EO:

By 2050, reduceGHG emissions to

80% of 1990

THE TRANSPORTATION SECTOR

80% of the region’s SMOG

40% of its GHG emissions

And, we have a

CLEAR FOCUS

Major Ozone (NOx) Emissions Sources in South Coast Air Basin

It’s NOT Either/Or. It IS Both/And!

California focused on electrifying end uses and “de-carbonizing” electricity

Electrify transportation Electrify energy end uses De-carbonize generation

SoCalGas focused on “near-zero” end use technology and “de-carbonizing” the pipeline

Near-zero NGV’s Near-zero gas technology Decarbonize gas supply

• Hydrogen blending• Renewable methane feedstocks

California Climate Change PolicyMake Room for “Near-Zero” End Uses and Low Carbon Gas

2030 Targets- 50% RPS- 50% more EE savings- 50% Petroleum reduction

- 40% GHG reduction below 1990 levels

LegislationSB350SB32GHG Reduction Fund

New “Near-Zero” Truck Engine to be Ready for Prime Time

Near Zero Emission Natural Gas Engine<0.02 g NOx

• SoCalGas working with agencies and engine manufacturers to deliver truck engine 90% lower emissions for 2018!

• Tailpipe emissions the same as emissions from generating electricity to run similar truck on electricity, years before heavy-duty EV trucks ready for the market

5

NGV Game Changer

6

Expands upon 2012 Science article

Natural Gas Energy Efficiency A Resource of First Choice for Multiple End Uses

Energy Efficiency has been a

critical part of state policy for

more than two decades.

EE maximizes uses, reduces

GHG emissions, creates jobs

New EE goal is unachievable

without including “To-Code”

Savings in EE Programs.

State needs to shape Policies to

increase EE Savings.

7

Codes & Standards:The Driver of Energy Efficiency and Zero Net Energy

From Technology Conceptualization to Code Compliance

Aggressive aspiration goals for Zero Net Energy (ZNE)

• All Residential New Construction by 2020

• All Commercial New Construction by 2030

• 50% of existing buildings to be retrofit to ZNE by 2030

As codes advance, “above-code” becomes difficult to justify

The move toward “near-zero” emission technology focuses on:

Distributed Generation Community-scale Generation Matched with

Renewables Power Generation with Carbon Capture

De-Carbonizing Electricity:Natural Gas Stationary Use Pathways

Not just

Solar and

Wind…

• Fuel Cells

• Micro-turbines

• Combined Heat

& Power

De-Carbonizing the Pipeline: Renewable Natural gas

Convert waste from dairies, farms and landfills

into biogasusing anaerobic digestion

extract the methane

put in the pipeline for future use

SOURCE: Bioenergy Association of California, CARB May 2014 Look-Up Table30

POWER

2-3 million homes

WHAT’S POSSIBLE

REPLACE

75% of all diesel used by CA vehicles

When used for transportation, Biogas from food and green waste can actually

REMOVE GHGs from the atmosphere

De-Carbonizing the Pipeline: Power-to-Gas

carbon captured from factories and plants

excessrenewable

energygoes throughelectrolysis

which splits the molecule

hydrogen & carbon combine through

methanization

methane can be stored in the pipeline for future use

RD&D of cleaner, more efficient natural gas technologies, inc. P2G at UC Irvine.

Offering tariff services to support new markets Compression Services to facilitate development of

NGV market Biogas Conditioning Services to facilitate

development of renewable natural gas market Proposing Distributed Energy Services tariff to

facilitate more efficient use of heat and power

Portfolio of Energy Efficiency Programs

Supporting Legislative and Regulatory Policies that are: Fuel and Technology Neutral Maintain Customer Choice Cost Effective

SoCalGas Facilitating Cleaner Energy Options for Our Customers

Appendix

Technology Transfer and Transportation Pathway

Current State GHG Pathway Power To Gas Projects German Energy Agency on P2G E3 2050 Study – Low Carbon Gas Pathway SB350 Overview

Technology Transfer and Transportation Pathways

LocomotivesShort/Long

Haul

Transit/Fleet Vehicles

Off-road High Horsepower/ Construction Equipment

Marine VesselsHeavy Duty Trucks

Short/Long Haul

CNG LNG

Current Focus Expanding Focus

SoCalGas’ Transportation Pathway focuses on natural gas vehicles in heavy duty sectors, which represent the largest share of both ozone/greenhouse gas problem. Technology transferrable to other sectors:

2010 2015 2020 2025 2030 2035 2040 2045 20500%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Rem

ain

ing E

mis

sio

ns R

ela

tive t

o 2

010

2050 CARB Statewide

GHG Target

75 ppb ozone standard

Current State GHG Pathway -- Focused on Electrification

Will Miss Ozone Deadlines

80 ppb ozone standard

Natural GasOpportunity

Reductions need to

be achieved Faster

& Sooner than

current statewide

GHG reduction goals

CA Statewide CO2 South Coast Target NOx Reduction necessary to meet Federal Ozone Standards

Use of Natural Gas

in Transportation

Sector can help

achieve ozone

standard sooner

South Coast Air Quality Management District

2MW Power-to-Gas Demonstration Plant (Falkenhagen, Germany)

First power-to-gas plant to inject hydrogen into the natural gas grid (August 2013)

Hydrogenics Plant (Stuttgart, Germany)

Uses a PEM electrolyzer to produce H2 from water. Uses CO2 from biogas plant. Injects CH4 in pipeline system

Power-to-Gas Projects: Provides green hydrogen pathway and grid storage

30 projects

launched in

Europe to date

German Energy Agency on Power-to-Gas: “System Solution”

• DENA Website (German Energy Agency)

With the Power-to-Gas Strategy Platform, the Deutsche Energie-Agentur GmbH (dena) – the German Energy Agency – and its partners are supporting the use and development of the Power-to-Gas system solution.

• CAISO (on the “Duck Curve”)

…steps must be taken to mitigate over generation risk. These steps include increasing exports…and requiring renewable generation curtailment. The ability to export power depends on the needs of neighboring entities…the resource mix would also benefit from resources with energy storage capabilities…

• Pipeline de-carbonization works together with electrification towards Climate Change objectives

• Pipeline de-carbonization offers Cost Effective and Resilient Pathways

• De-carbonization can play an important role Integrating Variable Renewable Generation Resources

• Pipeline de-carbonization reduces emissions in sectors that are otherwise difficult to electrify, including heavy duty vehicles; residential and commercial end uses, and industrial end uses

• Managing “Energy Grid” (gas and electric together) = efficiency and cost avoidance

Strategic use of gaseous fuels supports near- and long-term goals

• In nearer term, opportunities for efficiency, “near zero” technology and new uses for natural gas (transportation)

• In medium- to long-term, new low-carbon sources of gas need development and introduction

17

Expands upon 2012 Science article

E3 Study: Integration of New Low/Zero Carbon Options

18

Expands upon 2012 Science article

Senate Bill 350 – Clean Energy and Pollution Reduction Act of 2015 (Sen. Kevin de Leon)

Purpose: Create jobs, grow the state’s economy, and improve public health by setting

new standards for California’s Renewable Portfolio Standard, reducing petroleum

use, and increasing energy efficiency in existing buildings.

Original Legislation: Called for doubling the existing energy efficiency goals

SoCalGas Position – Doubling of goal is unachievable without key policy changes

Amendments – SoCalGas lobbied to include substantive EE policy changes,

including:

Allowing for “to-code” customer incentives and energy savings

Ensures that customers receive the incentive payment amount that was committed throughout the project

Allows for pay for performance energy efficiency programs

Continued Gaps

Amended language was removed that would ensure equal treatment to all EE program administrators

Amended language was removed that would create a more advantageous energy efficiency cost-

effectiveness methodology

19

Expands upon 2012 Science article

Shaping Policy to Increase EE Savings

Challenge: CPUC policy generally limits customer incentives to

“above-code” savings.

Tougher for customers to participate in EE programs.

The standards gap between existing buildings and code requirements is widening.

Governor's goal is unachievable without including “To-Code”

Savings

Current incentives are not enough for customer participation

SoCalGas is working with stakeholders to improve energy efficiency

program policies:

CPUC authorized IOUs to implement a “To-Code” Pilot

SoCalGas has lobbied for amended language that incorporates EE policy changes

Joint Party Proposal