Electrification Can Save Gas Customers Money
Posted on April 6, 2023 by Bob Jenks
Tags, Energy
Oregon’s utilities need to clean up their system to meet state climate regulations. For electric utilities, the pathway is pretty well established. Natural gas utilities, however, have to figure out how to reduce emissions from a system almost entirely based on emissions-causing fossil fuels.
CUB’s analysis shows that electrification, switching to electricity for many appliances, may be the best option for most gas customers. And it is clear that all gas customers benefit when new homes are not connected to the gas system.
Gas Utilities’ Options for Meeting Climate Regulations
In Oregon under state regulations, gas utilities have to reduce emissions by 50% by 2035 and 90% by 2050. This means that the company has to decrease its emissions from current customers by about 3% per year and eliminate all emissions from any new customers added to the system.
There are two ways gas companies can reduce emissions with current technology:
- Renewable natural gas (see editor’s note below)
- Reducing demand for fossil natural gas
Editor’s Note: Renewable natural gas is a term used by utilities for methane gas that comes from sources other than fossil fuels. This alternative is either captured methane (from factory farms, sewer waste, or other places) or gasified biomass. The term “renewable” is frequently criticized by environmental groups. Although renewable natural gas is not from fossil fuels, it is still methane, which is a powerful greenhouse gas.
The Problem with Alternative Natural Gas
Renewable natural gas is expensive. There are two types of renewable gas: captured methane and biomass turned into gas. Not only are they expensive to buy on the market, but they are also not widely available. This means that meeting gas system needs through renewable natural gas is investing in even more expensive projects to produce these non-fossil resources.
Non-Fossil Gas Options are More Expensive
For the cheaper renewable natural gas options – the stuff that comes from landfills, wastewater treatment plants, and factory farms – NW Natural projects a price of $12/therm (therm is a standard unit for measuring gas, heat energy). For the more expensive option, gasification of biomass, NW Natural projects a price of $18.5. But the current price in the market for these products is between $30 and $35 per therm.
In recent years, fossil gas has been $2 to $4. So we are talking about alternatives that are between 4 to 15 times more expensive than current gas. As more of this displaces fossil gas to reduce emissions, customers’ bills are going to go up. CUB is concerned that customers are not prepared for the sharp rise in gas bills that are associated with cleaning up the gas system.
Renewable Natural Gas is Not Widely Available, Expensive to Create
But the problem isn’t just the price, it is the availability. There are not enough alternatives to fossil gas on the market, which means you cannot go out and buy large quantities of these fuels. Gas utilities have to go out and finance the development of projects to either capture methane or create gas from biomass.
Decarbonizing the system with non-fossil gas is going to be extremely hard, and if it is even possible, will be really expensive.
NW Natural just filed to bring their Dakota City renewable natural gas project into customer bills. Dakota City is Tyson Foods’ largest meat packing plant. The project cost $12.5 million and will capture enough methane to serve 0.14% of NW Natural’s load. 14/100s of 1 percent, a tiny amount.
To meet the emissions reductions target for the existing load with alternative gas, NW Natural would have to develop about 30 of these each and every year. But NW Natural wants to keep growing its residential customer base by 1.2% each year. It will need another 5 projects of this size to meet that load. So, if we were going to reduce emissions solely with renewable natural gas, we are talking about 35 projects of similar size as Dakota City. This would cost hundreds of millions of dollars every year.
It bears repeating that Dakota City is Tyson Foods’ largest meat packing plant. It employs about 4500 people. One of the largest facilities that could reasonably supply captured methane is only able to supply 0.14% of NW Natural’s needs with its largest plant. And we need 35 of these each and every year.
Where do gas utilities propose they going to get enough alternative fuels to reduce emissions with this option? CUB proposes moving away from this option and towards the cheaper and more readily available option: moving customers to electricity where possible.
The Cheapest Option: Reducing Demand for Gas Through Electricity
If we can’t affordably or physically decarbonize with renewable natural gas, then the way forward is to reduce the demand for gas. This can be reasonably done by moving our homes and buildings to electricity. Solutions are available for both new construction and existing buildings.
Renewables Are Less Expensive Than Traditional Electricity
While non-fossil gas is much more expensive than fossil gas, renewable electricity actually costs less than coal. So meeting the electrical demand caused by electrification will not have the same cost impact as it does on the gas side.
Before any government subsidies, wind energy costs between $0.04 - $.07/kWh (kWh is a standard unit for electricity service). Coal is between $0.07-$0.16/kWh. With the addition of federal and state subsidies, renewable energy does not face the same issues of cost as we transition to clean energy.
Electrification Avoids More Gas Expenses
Electrifying new buildings doesn’t just reduce demand for gas, but it avoids capital investment in expanding the gas system. Every new building is connected to the gas system with a pipe that has a 58-year useful life. It is 2023, and 58 years from now is 2081. Are there going to be any customers on the gas system to pay for this pipe in 38 years, let alone 58 years?
Highly Efficient Electric Appliances Add Extra Bill Savings
Heat pumps are incredibly efficient. An efficient gas furnace is 90-96% efficient, meaning that a percentage of the energy content of the gas is converted to heat. But a heat pump is 250-300% efficient. This means that these appliances save not just energy and emissions but also money on an energy bill.
While this seems like it breaks the laws of thermodynamics, it doesn’t. Heat pumps don’t use electricity to produce heat. They use it to move warm air from outside to inside or the other way in the summer. They provide efficient heating and efficient cooling at a lower cost than even a standard electric HVAC system.
If you have a gas furnace, it is time to begin thinking about electrification. You can add a heat pump, and keep your gas furnace for backup in cold weather. This reduces your space heating emissions by about 80% and helps protect you from future gas cost increases. Or you can wait until your furnace needs to be replaced, but then you should consider going to a higher capacity heat pump without gas backup.
Federal Funds Are Available to Support Going Electric
The federal government wants to help. There are tax credits for up to $2000 available today. Later this year there will be rebates available for low- and moderate-income households. These rebates can be up to $8000 and can be used with tax credits.
New funds will also soon be available for renewable energy projects, bringing the utility costs down, too. This will only continue to make electrification a better pathway to reducing utility emissions, and bills.
CUB Advocates for Consumers
CUB is a consumer advocate. We are really concerned that Oregon families are not prepared for the increased costs associated with the future of gas in Oregon. The gas system of the future will cost much more than the gas system of the past.
We worry about what will happen to customers who stay on the gas system. If someone buys a new furnace today, that person may be in for a rude awakening because that furnace will be operating in a much different cost environment.
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05/09/23 | 0 Comments | Electrification Can Save Gas Customers Money