AGA residential survey finds steady growth for natural gas

Pipeline & Gas Journal, April, 2008 by Bruce McDowell

The American Gas Association (AGA) has conducted the annual Residential tural Gas Market Survey for the past 59 years. The data collected for 2006 provide a unique and comprehensive portrait of the residential natural gas market. Detailed information is presented by state and region, including customers, market share, inventory additions from new homes, and conversions from other energy sources.

A total of 54 natural gas utility companies responded to this year's survey. Data regarding new private housing completions as well as existing homes from the U.S. Bureau of the Census is different than the statistics compiled from the survey respondents. Therefore, they should be evaluated separately.

2006 U.S. Housing Market

Home-building remained strong in 2006, with 1,979,000 homes being built, a 2 percent increase from 2005. Gas heat continued to dominate the new single-family home market. According to the U.S. Bureau of the Census, new single-family completions heated by gas exceeded 1 million for the third consecutive year (1,034,000) in 2006, down from 1,082,000 in 2005 (U.S. Bureau of the Census, Characteristics of New Housing, 2006. www.census.gov/const/www/charindex.html). Gas heating market share fell to 62% in 2006, compared to 66% in 2005. The 2006 electric heating market share of new home completions reached 35%, an increase from 2005. Single-family home completions heated by gas exceeded electric completions for the 20th consecutive year.

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In the 2006 new multi-family housing arena, gas market share for space heating stayed at the 2005 level of 43%. The total number of multi-family units completed in 2006 increased to 325,000, or 9.8%, compared 2005. Market share for electric heat increased by one percentage point compared to 2005, reaching 56% in 2006. Gas-heated multi-family units numbered 141,000, a decline of 23% from 2005 levels.

When both single and multi-family units are considered, the market share of new housing heated by gas in 2006 was 59%. The overall 2006 electric house heating market share increased by four percentage points to 39% compared to 2005.

The Census data provide a regional breakdown of units completed by type of fuel. Single-family home completions heated by gas outnumbered electric completions in all regions except the South. The regional gas market shares were as follows: West, 88%; Midwest, 85%; Northeast 75%; and South 40%. In the multi-family sector, gas completions exceeded electric in all regions but the South.

Existing Housing. According to the U.S. Census Bureau, more than half of the existing housing units in 2006 used natural gas to heat their homes, accounting for more than 56 million (or 51%) of the almost 111 million occupied housing units in the United States (U.S. Census Bureau, 2006 American Community Survey www.census.gov/acs/www/).

Gas holds the largest market share in the Midwest, where 70% of the homes have gas-heating systems. Gas heating beats out the competition in the Northeast and West regions of the country. Natural gas house-heating market share in the Northeast was 50% while the natural gas share was 61% in the West. Gas has the lowest market share in the warmer climate of the South, with about 33% of the houses using natural gas space heating in 2006.

The nature of household space-heating energy has changed over time, according to the Census Bureau. In the 1940s and 1950s, coal or coke was the dominant fuel, with wood accounting for a large market share. Since then, use of those fuels in homes has dropped dramatically. Fuel oil gained its largest market share in the 1960s, but its popularity has declined. Propane has gained in market share somewhat over the time period. Electricity increased significantly since 1950, particularly after 1970 when the heat pump gained market share. Natural gas's popularity increased substantially since 1940 when the advent of the interstate pipeline system and the expansion of local distribution networks increased the availability of this fuel. Natural gas has been the preferred home-heating energy source since 1960.

2006 Residential Gas Customers

Based on the Energy Information Administration's (EIA) Form 176 database, the total number of residential natural gas customers exceeded 64 million in 2006 (U.S. EIA, data from Form 176 database used to create the Natural Gas Annual http://www.eia.doe.gov/oil_gas/natural_gas/data_publications /natural_gas_annual/nga.html). That is a 1.3% increase from 2005.

House-Heating Customers

Based on AGA survey responses and Census information, approximately 84% of all residential natural gas customers used gas to heat their homes. The East North Central region of the country had the highest penetration, in excess of 94% in 2006, while the New England region had the lowest penetration, around 66%.

Natural Gas Customer And Unit Additions. The number of natural gas customers increased 812,500, or 1.3%, in 2006. The South Atlantic region had the highest percentage increase in customers (more than 3 percent) while the East North Central region registered a small decline in customers. Most of the additions were believed to be from new construction. Based on data from the survey respondents, 15% of customer additions were from conversions from another fuel.