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Commercial sector gas use could rise 26% by 2030, industry group projects

Commercial demand for gas may be a growth opportunity for local distribution companies if they can take advantage of economic expansion and state initiatives, the American Gas Association said Jan. 31.

"Commercial natural gas prospects are strong. As the economy grows, so too will the commercial sector as a whole. During the past decade, the natural gas shares of the commercial market stayed relatively constant as a whole," the industry group said in a white paper. "If these trends persist then as the overall commercial sector grows, so will natural gas if it continues to capture a share of the growing commercial buildings market."

Although overall advances in energy efficiency have kept the volume of gas used in commercial operations relatively flat, the number of commercial customers using gas has risen steadily over the years, AGA noted. The number of commercial gas users has risen at an average rate of about 1.2% for the past 45 years, and as of 2015, there were more than 5.4 million commercial gas users, the white paper said.

Primarily used for heating, though it also underpins a portion of cooking and water heating in the commercial sector, gas has more growth opportunities within the commercial realm, the association noted during a Jan. 31 conference call.

"It's a very dynamic market, in addition to being one of our core markets," Chris McGill, AGA's vice president of energy analysis and standards, said during the call. "We see many new customers being added."

In 2013, commercial customers accounted for about 22% of gas utilities' total revenues, contributing $21.4 billion to local distribution companies' incomes. AGA's modeling tools indicate that demand for natural gas from commercial customers will increase 26% by 2030, driven in large part by consistently low prices in the U.S.

The commercial industry with the highest expected growth is advertising its supporting services, AGA said. Though the advertising industry accounted for only $25 million in gas sales in 2013, the association projected that the sector could grow to spend more than $330 million on gas by 2030.

Between 2003 and 2012, the most recent two years in which the U.S. Energy Information Administration surveyed commercial gas users, natural gas' share of the energy supply pie did not increase when measured on a square-footage basis. In both 2003 and 2012, natural gas supplied energy to 68% of the total commercial sector floor space.

Looking at sector trends, the average size of commercial buildings has been growing in recent years, and the larger the building, the more likely it is to be served by natural gas, AGA's Richard Meyer, director of energy analysis and standards, noted during the call. This bodes well for gas' prospects, he said.

AGA noted that many states also have gas distribution infrastructure replacement and expansion incentives, which could help drive some of the anticipated uptick in commercial gas use.

The New York State Public Service Commission, for instance, is considering a proposal that would have utilities evaluate the impacts of of converting commercial and multifamily homes not using gas for heating purposes, while a Tennessee law gave the state Regulatory Authority the power to allow cost recovery for gas infrastructure expansion for the purpose of economic development.