FEATURE

*

Gas utilities look for ways to ready for energy transition

*

Some plan to retire pipelines in switch to electricity

*

Consumer advocates warn of cost, demand comprehensive plan

By Carey L. Biron

WASHINGTON, July 18 (Thomson Reuters Foundation) - N atural gas still heats the water and cooks evening meals in housing at California State University's Monterey Bay campus - but under plans for a multimillion-dollar electrification project, the fuel could soon be a thing of the past.

The roughly $17-million project being led by one of the state's largest utilities, Pacific Gas & Electric (PG&E), highlights how some U.S. gas providers are adjusting their business model as part of efforts to cut planet-heating carbon emissions.

"They're explicitly looking for opportunities to stop expanding the gas system and prune it back in a well-managed way," said Mike Henchen, principal on the carbon-free buildings team at RMI, a think-tank, told the Thomson Reuters Foundation, saying more such "proactive planning" was needed nationwide.

Under the proposal, which is currently before regulators, 32,000 feet (9,700 meters) of gas pipeline that has served nearly 400 buildings for decades would be taken out of service, with boilers, heaters and other appliances replaced with electrical versions.

PG&E estimates that the project would cost less than spending on upgrades to gas infrastructure.

Such "targeted electrification" is a key part of the company's effort to decarbonize, said communications manager Melissa Subbotin, noting a goal to create a net zero energy system by 2040.

But such projects are also aimed at minimizing "stranded assets" in the firm's gas system, she added.

Concern is growing in the industry that it could become difficult to recover current investments in gas infrastructure in coming decades due to the shift towards electricity - which can be powered by renewable sources such as wind or solar.

It is a potential disconnect that is receiving increased attention amid demands for comprehensive planning for the transition to cleaner energy, and concerns that poorer households could be left behind - unable to pay themselves to switch to electricity.

Natural gas supplies nearly 187 million Americans, but decisions on investments in the system's future are being made on a piecemeal basis by utilities and regulators, said David Lapp, the Maryland people's counsel, an independent government agency that advocates for residential utility customers.

Instead, he called for a "comprehensive look" at what declining sales mean going forward for utility customers and the state's ability to meet its climate and environmental goals.

Without action, he warned of a possible "death spiral" in which gas sales decline and rates go up, trapping some households unable to switch energy sources.

"Customers could become homeless because of it," he said. "There's huge consequences."

MANAGED ENERGY TRANSITION

In Colorado, some residents say they got a taste of what suddenly rising natural gas costs could mean this winter, when prices doubled, according to a state government commission.

Topazz McBride, environmental justice chair for civil rights group the National Association for the Advancement of Colored People (NAACP) in Aurora, Colorado, said her church's gas bill more than quadrupled and many residents saw costs rise by more than $100 a month.

"That was an extreme inconvenience to say the least, and a hardship for many," she said.

In response, Governor Jared Polis in May signed a bill that seeks to protect consumers from such volatility, in part by boosting long-term planning for gas use, said Kiki Velez, who focuses on gas distribution for the National Resources Defense Council, an advocacy group.

Similar steps have been taken in California, where the state's public utilities commission in December adopted a framework to "help the state transition away from natural gas-fueled technologies and avoid stranded assets."

Nine states and Washington D.C. have some kind of regulatory planning process in place around a gas transition, according to the Building Decarbonization Coalition, a nonprofit.

What is needed now is much more detail, said Velez.

"We want all the utilities ... to develop maps of their systems and identify pipelines by age, when they need to be retired, which customers they serve."

The gas industry, however, questions the presumption that electrification is the only way forward, rendering their gas infrastructure obsolete.

"There's going to be an energy transition ... I can't think of a single utility that's not interested in decarbonizing," said Juan Alvarado, managing director for energy markets at the American Gas Association.

"But I don't necessarily buy the idea that there's going to be stranded costs," he added, saying gas infrastructure can continue to play an important role, for example in projects creating "renewable" gas from manure and other waste, or piping water heated by geothermal energy.

CARBON NEUTRAL

Several utilities are already trying to carve out a new role amid the energy transition.

Philadelphia has a goal of being carbon neutral by 2050 but also owns Philadelphia Gas Works (PGW), the country's largest municipal gas utility.

"This poses a complex challenge," Saleem Chapman, director of the city's sustainability office, said in an email.

"How might the City and PGW reduce emissions from natural gas, while maintaining customer affordability and supporting PGW's workforce?"

Today the Gas Works, which has 1,600 employees and 500,000 customers, is seeking to diversify its business – including exploring alternative power sources such as geothermal, said spokesman Richard Barnes.

Gas utility VGS in Vermont, which has also committed to becoming net zero by 2050, has focused on weatherization, and started selling and installing electric heat pumps and water heaters, said Chief Executive Neale Lunderville.

It is also looking at purchasing renewables, exploring geothermal and undertaking a "green hydrogen" pilot project.

"If we do nothing and pretend like climate change isn't an issue and everything is fine, the eventual outcome – and the right outcome – is we'd be forced out of business," Lunderville said. (Reporting by Carey L. Biron in Washington; Editing by Helen Popper; The Thomson Reuters Foundation is the charitable arm of Thomson Reuters. Visit https://www.context.news/)

Related Quotes