It’s Time to Flip the Script on Gas Utility Planning
- March 12, 2019
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It’s time for the country’s gas utilities to take a different approach to their system planning.
Under the traditional model, each utility annually presents a portfolio of gas supply arrangements to its regulator, aiming for the right portfolio of supply contracts to meet the gas demand of their customers. Unfortunately, that process, which takes place with relatively little transparency, is not working very well for customers.
In many states, the traditional planning process has resulted in costly new natural gas infrastructure that is inconsistent with critical climate goals and will become obsolete as customers seek cleaner alternatives in the future. Meanwhile, while new infrastructure buildout has not been pursued in New York, Con Edison has proposed a moratorium on hooking up new gas customers, claiming that rising demand cannot be met without more supply. Other utilities in the state have suggested that they may soon follow with similar proposals, also citing system constraints.
In comments filed today with the New York Public Service Commission, we argue that it’s time for utilities to flip the script. Instead of asking what gas supply arrangements are needed to meet growing demand, they should instead ask first: “What investments in clean non-pipeline alternatives can we make in order to avoid the need for new gas infrastructure?” Doing so will allow states like New York to proactively plan for an energy system that is consistent with their climate and clean energy goals.
To be fair, Con Edison has been relatively proactive and thoughtful in exploring non-pipes alternatives to date, having already secured approval for a $222 million portfolio of non-pipe solutions—but there’s no question that the time is overdue for market participants, stakeholders from across the political and socioeconomic spectrum, along with regulated entities and regulators alike, to roll up our sleeves and get ahead of such scenarios. Otherwise, we’ll be right back on this cliff of suboptimal decision points on an increasingly regular basis.
Indeed, it is becoming clearer by the day that a more holistic planning process that fully leverages the potential benefits of energy efficiency and clean electric heating and cooling solutions will yield better results for customers across New York State and the region. Utilities can invest in energy efficiency by giving incentives to developers to carry out building improvements like adding insulation, sealing drafts, and installing more efficient appliances. These measures lower customers’ bills, create clean jobs, and avoid pollution by reducing the amount of gas needed to serve the system.
On top of that, building improvements yield the greatest dividends on the coldest days of the year when gas demand is highest (as discussed here). Utilities (particularly in geographic footprints such as Westchester where the same company is responsible for gas and electric service) can also encourage customers to move beyond gas heating, by installing new highly efficient clean electric heating and cooling systems that rely on ground source or air source heat pumps. As discussed here, the costs of those technologies are rapidly falling, making now an excellent time to fully incorporate them into system planning. According to a report by the Vermont Energy Investment Corporation, with the right policies in place, as many as 5 million customers in New York could switch to clean electric heating and cooling by 2030.
As our comments emphasize, New York should institute a new regulatory proceeding to adopt a system planning process that fully assesses the benefits and costs of these clean solutions, including the benefits of avoided greenhouse gas emissions and other pollution, and encourage utilities to make such investments whenever cost-effective solutions can reduce the need for new gas supply infrastructure. The first step in that process should be a comprehensive study that assesses projected gas demand, along with the full potential of cleaner solutions. In adopting such a process, New York would join California as a national leader in the space, and the two states could share best practices. The California Energy Commission has embarked upon a similarly comprehensive exercise to examine the future of the gas system (discussed here), which likewise promises to unlock the benefits of building decarbonization (NRDC offers some recommendations for building decarbonization here and here).
Through holistic planning, New York and other states can facilitate clean heating solutions that have the greatest potential to reduce gas demand, deploying them in areas where they have the greatest benefits for the system. For example, greater incentives for clean non-pipe solutions could be deployed in areas where such measures would do most to avoid the need for maintenance and upgrades to the gas distribution infrastructure system in the future. And programs could be tailored to best complement existing infrastructure. For example, incentives for new construction (where gas pipes have yet to be laid) could facilitate shared clean district heating systems which rely on a central heat pump powered by clean electricity to serve multiple buildings, similar to those already deployed in Europe (one example is discussed here).
Daunting challenges bring with them golden opportunities for groundbreaking solutions. With our world already feeling the effects of an urgent climate crisis, the business as usual approach to gas utility planning simply won’t cut it. Rather than building out the gas system in a manner that conflicts with climate and clean energy goals, states like New York can adopt new, more thoughtful approaches to system planning. Fortunately, thanks in part due to the rapidly declining costs of clean solutions, that new paradigm offers the potential to transform the state’s buildings while unlocking the benefits of a cleaner economy for all New Yorkers.