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July 12, 2022

From the CEO’s Desk Newsletter

Predicting and reducing disconnections

EBCE Studies Gas System Pruning

EBCE is studying strategies that shift spending from natural gas to building electrification.


Source: Look and Learn (public domain)

California’s journey to a carbon-free future will require getting natural gas out of buildings. While the process of converting individual homes and buildings from gas to electric is well known, it can be slow and expensive.

Plus, as more buildings turn off their gas connections, fewer and fewer customers will shoulder the cost of maintaining the gas infrastructure, boosting gas bills for those customers. A coordinated approach, where portions of the gas system can be taken offline while the buildings they serve are fully electrified, could save all ratepayers money and provide the basis for a strategic and equitable transition to an all-electric future.

But such an approach has never been tried at scale, and raises a number of questions. To start getting answers, EBCE is participating in a new research project funded by the California Energy Commission to explore strategic decommissioning or “pruning” portions of the natural gas system, and using the savings to convert buildings to all electricity.

Strategic decommissioning involves identifying portions of the natural gas distribution system that will likely need upgrading or repair, and exploring the possibility of taking that portion of the distribution system offline instead. This involves converting all customers served by that portion of the system to fully electric buildings at once so the gas line can be capped off.

A focus on pruning creates a number of benefits compared to the current strategy of incentivizing one building at a time. If the gas line is in need of maintenance or replacement, pruning the line can avoid the cost. Those saved funds could be directed instead into upgrading the electric distribution system, or to building electrification.

Map of PG&E gas distribution network (major lines). Smaller distribution lines run to virtually every building. Source: PG&E.

Pruning can also remove the need for future maintenance and replacement costs. Since most urban gas lines run under streets, pruning can help avoid the cost and disruption of ripping up streets in the future.

In the long run, as some customers leave the gas grid, those remaining on it may have to pay more to cover the fixed costs, like repairs and paying off debt. A deliberately planned transition away from the gas system can mitigate such impacts, making it fairer to all.

Complications

But trying to convert all the buildings in a neighborhood at once has its own set of complications.

The first is the high cost of converting existing homes. Data from 1,880 heat pump installations in California between December 2021 and May 2022 found an average installation cost for electric heat pumps for space heating and cooling of $17,287. Full electrification can also involve replacing a water heater, oven, and dryer, and frequently upgrading the main electric panel.

The second is the classic “split incentive” problem for apartments and rented homes, where the building owner pays the cost of appliances but the tenant pays energy bills. And 46 percent of Alameda county housing units are rented.

And then there is the need to convince every single customer on a gas line to voluntarily go electric. While research shows that customers have little preference for gas over electric space heating, water heating, or dryers -- provided they have heat when they want it -- some customers are attached to gas cooktops (PDF) in their kitchen.

Lastly, switching to electric will drive up electricity demand in neighborhoods, especially for winter space heating. This could require an upgrade in the electric distribution grid.

The municipal utility for Palo Alto looked into this question, estimating the utility costs (PDF) of converting from gas to electric. They found a total cost to upgrade the electric distribution system to range between $30 million and $75 million, including replacing nearly all distribution transformers. If financed over 30 years it would cost their ratepayers between $1.6 million and $3.9 million per year, adding about 10 percent to their capital improvement budget.

The total cost to decommission the gas infrastructure in the Palo Alto study was estimated to range from $11 million to $54 million, but would save between $26 million and $34 million total over ten years by not having to replace gas mains and service lines.

The Pruning Project

To get answers to some of these questions, EBCE is participating in the Targeted Gas Decommissioning Project. The team includes Bay Area think tanks Energy and Environmental Economics (E3) and Gridworks, while PG&E provides technical insights into their gas and electric systems.

The project seeks to answer the question “How can tactical gas decommissioning paired with targeted electrification provide net gas system savings when compared with a scattershot building electrification scenario?”

The project will develop methods to identify opportunities in the gas grid, then find three pilot sites in EBCE’s territory. The next step will be to engage with customers and local communities on the switch from gas to electric, with an eye toward environmental justice and equity. Finally, the researchers will report back to stakeholders and policymakers within and beyond California on barriers and how to address them, funding sources, and recommendations for next steps.

Already underway

Gas pruning will be able to build on a number of efforts already underway.

The CEC launched two programs in 2020, called Technology and Equipment for Clean Heating (TECH) and Building Initiative for Low Emissions Development (BUILD).

TECH uses a “market transformation” approach to low-emissions space and water heating technologies by working upstream with manufacturers, distributors, and vendors, and through consumer education and contractor training. BUILD provides technical assistance and incentives for new all-electric low-income residential buildings that reduce GHG emissions.

The TECH program, which received $120 million in incentives for building electrification, exhausted all incentive funds available in less than a year and is currently seeking more funding in the California budget process. The BUILD program was recently launched, and will provide $80 million over 4 years. Both programs are funded from the state’s cap and trade program.

BayREN, the Bay Area administrator of public energy efficiency funds, run by the ​​Association of Bay Area Governments, offers rebates for electrification and energy efficiency upgrades. And EBCE local programs work on electrification, such as by providing incentives for the installation of heat pump water heaters, commercial induction ranges, and through lending out electric induction cooktops through local libraries.

While electrification may not be easy, the fight against global warming demands it. Being proactive can help make it cheaper, faster, and fairer.