Pacific Gas & Electric has become the first combined natural gas and electric utility in California to express support for an emerging plan to require "efficient, all-electric new construction" in the state, telling regulators that it wants to “avoid investments in new gas assets that might later prove underutilized” under the state’s long-term decarbonization goals.
Thursday’s letter from PG&E Vice President Robert Kenney to the California Energy Commission is a notable concession by the state’s largest utility to the constraints its natural-gas operations will face under California’s push to attain zero-carbon emissions by 2045.
The CEC is considering stakeholder proposals for a revision to state building code Title 24 that would ban natural-gas equipment installations for new buildings constructed in the state starting in 2022. If taken up by the CEC, it would be the first such move by a state agency. Kenney wrote that “PG&E supports state and local government policies that promote all-electric new construction when it is feasible and cost-effective.”
Switching buildings from gas to electricity for heating and cooking, along with electrifying transportation, is considered to be a vital step in cutting emissions outside of electricity generation. California has taken a leading role in this effort, both at the state and local level.
Last year, the Northern California city of Berkeley became the first in the nation to ban gas lines for new residential construction, with a few limited exceptions. Since then, more than 30 cities and counties in the state have passed ordinances prohibiting new natural-gas hookups, instead requiring all-electric appliances or otherwise limiting the role of natural gas in buildings, according to a June report by Rob Rains, analyst at Washington Analysis.
“California is obviously leading this,” Rains said in a Friday interview. After California, “Massachusetts is dipping its big toe in,” with the city of Brookline approving a ban on natural gas for new construction late last year that is awaiting approval from the state attorney general’s office, and several other cities also considering bans.
Utilities taking sides
PG&E’s public support for such a move is a rarity among utilities invested in natural-gas infrastructure, Stephanie Greene, a principal at the Rocky Mountain Institute, said in a Friday interview. “As far as we know, they’re the first investor-owned combined gas and electric utility that supports an all-electric building code.”
But California’s mandate to reduce economywide carbon emissions to zero by 2045 will require its natural-gas utilities to drastically reduce their reliance on the fuel. For PG&E, which just won approval for its $58 billion plan to emerge from bankruptcy, "the best thing to do is to strategically manage a transition, acknowledging that gas use has to decline significantly,” Greene said.
Gas industry groups and utilities are fighting against building electrification. An American Gas Association study declared that natural-gas bans would be “burdensome to consumers and to the economy” and result in a spike in peak electricity demand, a conclusion challenged by clean-energy groups.
Southern California Gas Co., one of the country’s largest natural-gas utilities, has funded a pro-gas advocacy group, Californians for Balanced Energy Solutions, seeking to prevent local governments from enacting all-electric building ordinances.
Conversely, Southern California Edison, the state’s only all-electric investor-owned utility, is well positioned to find growth opportunities in the state’s push for electrification. “We think it’s going to be very difficult to have a significant amount of traditional natural gas powering building heating and cooling, and water heating and cooling,” Drew Murphy, senior vice president of strategy and corporate development at Edison International, told GTM in February.
The costs and benefits of going all-electric
Around 70 million American homes burn natural gas, oil or propane for space and water heating, according to Navigant Research. But electric-powered heat pumps that shift hot and cold air to adjust indoor temperatures are more efficient at both heating and cooling than fossil-fuel-fired furnaces or boilers, advocates say.
“All-electric new construction is less expensive than natural gas,” Greene said, as a recent report from RMI found for new homes being built in the cities of Houston, Chicago, Providence, Rhode Island, and Berkeley neighbor Oakland, Calif. Even retrofitting of existing fossil-fueled space and water heating to electric is cheaper in some circumstances, such as replacing gas-fired heaters and air conditioners with heat pumps, or bundling rooftop solar with electrification.
Other California regulators are joining the state electrification effort. The California Public Utilities Commission has a $200 million program to provide incentives for low-carbon space and water heating technologies in new and existing buildings, and it recently approved another $45 million for heat pump water heater incentives through 2025. The CPUC has also revised outdated rules to make electric space and water heaters eligible for billions of dollars in ratepayer-funded energy efficiency program rebates.
The role of renewable and synthetic gas
PG&E’s letter noted that it supports a “multi-faceted approach” to meeting the state’s goals, including electrification and “decarbonizing the gas system with renewable natural gas and hydrogen.”
Renewable natural gas — methane captured from landfills, dairy farms and other sources — could replace a small portion of the fossil natural gas now filling pipelines. So could synthetic gas, whether hydrogen generated by renewable electricity or methane created by combining hydrogen with carbon captured from other emissions to reduce its greenhouse gas impact.
But both replacements are highly unlikely to be able to grow to the scale needed to replace the volume of fossil natural gas now used in the U.S., according to a recent report from the Natural Resources Defense Council.
Instead, renewable or synthetic natural gas should be reserved for highest-value uses such as industrial processes or aviation, leaving buildings to rely on electricity increasingly powered by renewable sources to replace lower-value uses like building heating and cooking, Greene said. A recent report prepared for the California Energy Commission found that “building electrification is likely to be a lower-cost, lower-risk long-term strategy compared to renewable natural gas.”