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"Is Banning Natural Gas For Residential Heating Smart?"

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Ron Miller's picture
Principal Reliant Energy Solutions LLC

Ron Miller is an energy industry expert creating value by analyzing assets, markets, and power usage to identify, monetize, and implement profitable energy and emission reduction projects. He is...

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  • Jun 4, 2021
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There is a U.S. movement to ban natural gas for residential heat to reduce CO2 emissions, but are there downsides that we should consider? What is the cost of residential heating electrification to utility ratepayers, and is this efficient?

U.S. Energy Demand

In the 39 years from 1980 to 2019, U.S. natural gas residential demand grew 9.5% in total, from 4.73 quadrillion BTUs to 5.18 quadrillion BTUs. Electricity demand doubled during that period from 2.45 quadrillion BTUs to 4.90 quadrillion BTUs.

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Graph 1 depicts the historical residential sector energy consumption in the U.S.

Graph 1 – U.S. Residential Sector Energy Consumption By Energy Source, 1950-2019

Source: https://www.eia.gov/energyexplained/use-of-energy/homes.php

 

Key Constraints

Electrifying existing U.S. residences to bring the same energy now served by natural gas would require a doubling of electricity generation for the residential market. Will this increased production come from natural gas, solar, wind, or other sources?

For winter heating demand now supplied by natural gas, solar energy production is much lower in those winter heating months due to the shorter days in North America, thus requiring supplemental supply sources to meet electric heating demand.

Once the energy is produced, our residential transmission/distribution system will need to be doubled to accommodate more energy going to urban areas which comprise a larger share of residential electricity use. Supplying those dense urban areas where existing distribution systems are now stressed at peak demand will be significantly more difficult due to constraints on right-of-way and NIMBY public perception. Dealing with existing distribution line congestion will make doubling the residential electricity demand harder and more expensive to ratepayers to satisfy.

In addition to transmission/distribution line construction, the line losses in the system from generator to end-user will also reduce the efficiency of satisfying consumer heating demand with electricity.

In the Energy In Depth website article, “New York City’s Cost To Electrify Would Be More Than $25,000 Per Family”, the costs are quantified for this change in policy. Source: https://www.energyindepth.org/report-new-york-citys-cost-to-electrify-would-be-more-than-25000/ In Menyae Christopher’s March 24, 2021 article, the “Consumer Energy Alliance’s latest report calculated a $25,600 price tag per New York City household if the city continues to follow short-sighted goals of banning natural gas use in buildings. The cost to residents will be felt each winter and poses significant challenges to businesses recovering from the COVID pandemic in the short term.”

New York City recent laws have reduced the options for residential heating to electricity via Local Law 97 enacted in 2019. This will drive the movement from natural gas to electricity for large commercial and residential buildings by 2050, and will ban natural gas connections from new buildings starting in 2030. The report indicated that NYC policies will result in higher energy costs, replacing natural gas appliances, remodeling, and re-wiring for these utility customers.

Analyzing the energy market in New York State, it charges the ninth highest electricity prices in the United States, while more than 30% of the electricity is generated by natural gas power plants. Using the 2021 Federal Register of Average Unit Costs of Electricity, we find that electricity to serve heating load will cost four times as much as natural gas this year with a huge price difference felt in winter, where all-electric homes will pay 111 percent more for space heating than natural gas customers.

By removing the low-cost natural gas option for commercial and residential markets, NYC is stressing the electric grid’s ability to reliably deliver energy while shifting natural gas use upstream to generating units at the cost of rate-paying residents.

In the article, “Lost in Transmission” published on July 21, 2020 by Jake Rubin, there is a huge difference in conversion efficiency between using natural gas at the point of demand vs. for electricity generation and electrifying the demand at the consumer level. For natural gas electricity generation, only 32% of the energy from electricity makes it to the customer, while using natural gas for heat is 92% efficient from production to customer, as shown below in Figure 1.

Figure 1 – Natural Gas Conversion Efficiency

https://www.energyindepth.org/wp-content/uploads/2021/03/AGA-Energy-Transfer-1.jpg

Source: http://www.truebluenaturalgas.org › lost-in-transmission

A home that uses natural gas directly saves an average of $879 per year compared to homes using electricity for those applications.

Summary

Natural gas has given New York City the firm heating power capacity to keep the lights and furnaces on in the city, while keeping heating costs low for rate-payers.

Banning natural gas for residential customers will directly harm consumers who rely on affordable energy for home heating and cooking, and damage a robust service economy that serves millions every day.

Copyright © May 2021 Ronald L. Miller All Rights Reserved

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Matt Chester's picture
Matt Chester on Jun 4, 2021

A home that uses natural gas directly saves an average of $879 per year compared to homes using electricity for those applications.

Is this an average looking across every region? Because I imagine with current economics we'd be looking at it making more sense for certain climates to shift away from gas, such as those where winter heating needs are less, while those colder areas are likely still tied to gas until the relative costs shift further. 

Ron Miller's picture
Ron Miller on Jun 5, 2021

Thanks for the question, Matt. This is a national average, however, your premise for colder climates is their energy bill will be higher, as the $879 per year number is based on bringing equivalent BTU value into the home for gas vs. electric. Electric rates for this comparison do not include utility upgrades (higher costs) to increase capacity to bring more electricity to homes that is currently available.

Bob Meinetz's picture
Bob Meinetz on Jun 4, 2021

Whether banning natural gas for residential heating is smart depends on whether "smart" means increasing utility profits or protecting the environment.

If it means increasing utility profits, and if electricity will continue to be generated at gas-fired plants, it's not smart - it's brilliant. It puts electricity customers, who are billed for fuel costs in their electric bills, to heat their homes by burning even more gas at electricity plants. As they talk about improving efficiency, utilities are paid to use fuel less efficiently.

As usual, profit comes at the expense of the environment.

Ron Miller's picture
Ron Miller on Jun 5, 2021

Thanks for the question, Bob. By banning natural gas, the current electricity delivery system from generation to transmission to distribution will have to be expanded to meet demand. This will require more capacity, infrastructure, copper, steel et al, while taxing our ability to produce more of these commodities. When we include the costs to mine and process more iron and copper for this infrastructure expansion, perhaps this ban is not good for either the environment or ratepayers. To comply with the ban/laws, the utility will just pass the costs onto ratepayers. Perhaps consumers and ratepayers should consider this inconvenient truth.

Bob Meinetz's picture
Bob Meinetz on Jun 6, 2021

Ron, though in the U.S. copper is still used for short run, buried distribution lines, since the late 1800s overhead transmission has used predominantly aluminum-core cable, reinforced with steel. Global aluminum (bauxite) reserves are expected to last for centuries.

The costs imposed by overhead transmission are infinitesimal compared to future costs imposed on society and species diversity by climate change. If not for oil/gas companies, sacrificing the health of Earth's ecosystems for the next 100,000 years to avoid the costs of clean energy now would be a foolish investment strategy. More consumers and ratepayers are realizing that's the inconvenient truth.

Ron Miller's picture
Ron Miller on Jun 8, 2021

Bob, you bring up some excellent points. As we look at different strategies to decarbonize, we need to evaluate each option as its emissions "bang for the buck" to prioritize the best projects.

Roger Arnold's picture
Roger Arnold on Jun 6, 2021

Ron, everything you say here is true -- IF one assumes that the only alternative to natural gas for residential and commercial heating is electrical resistance heating. That means electrical energy used in the same amount as the thermal energy previously delivered by gas.

That's a stupid alternative, but it is the cheapest option for building owners, in terms of new equipment and remodeling costs. It will undoubtedly be widely adopted, if a ban on natural gas arbitrarily forces existing users to transition away from gas.

That's not what most of the cities that have adopted bans have actually done. The bans mostly apply only to new construction. For new construction -- and especially for new development projects -- there are much smarter and more efficient alternatives to natural gas. A new residential housing development near Austin, Texas, for example, implements a super-efficient system for district heating and cooling. It's based on heat pumping and seasonal storage of geothermal energy. So not only is there no gas usage, but the average electrical load for homes in the development is far lower than it would be with gas service. That's in both summer and winter.

The project developer in that case was public-minded, and adopted a plan that made economic and environmental sense. He wasn't forced to do it by local building codes or legislative mandate. I'd personally prefer to see things left that way throughout the states. Good solutions should be able to succeed on their merits. But I'm not prepared to take up the cause against banning natural gas. I don't think bans are necessary, and if carelessly formulated, they could turn into fiascos. But I don't see the "electrify everything possible" idea as inherently bad.

Ron Miller's picture
Ron Miller on Jun 8, 2021

Roger, I agree with you on the market being the most efficient way of getting improvements in both our economic and environmental quality of life. Government mandates with good market incentives are usually doomed for failure. Good government and business in tandem can move the dial to significant environmental improvement.

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