Building Decarbonization Cuts Pollution While Boosting The Economy. Utilities And State Regulators Can Accelerate Both.

Posted to Energy Innovation: Policy and Technology LLC in the Utility Management Group
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  • Aug 5, 2020

Building decarbonization – through electrification and energy efficiency – is key to expanding the clean energy economy and reaching ambitious climate goals, but it’s one area where even governments with the strongest clean energy targets are falling short.

Because buildings and their components are rarely replaced, a challenge known as capital stock turnover, they are among the slowest to decarbonize. America’s residential and commercial buildings generate at least 600 million metric tons of carbon dioxide equivalent annually, and up to 1 billion metric tons if including estimated methane leakage.

Utility regulations alone cannot sufficient address the full scope of the building decarbonization challenge – in many states they may actually increase fossil fuel demand and emissions. But a strategic combination of policies can help utilities work with state legislators and regulators to unlock deep decarbonization while strengthening the economy. Rocky Mountain Institute’s (RMI) recent report, Regulatory Solutions for Building Decarbonization, outlines comprehensive regulatory reforms required for building decarbonization across more than 40 specific recommended actions.

Energy Innovation Communications Director Silvio Marcacci interviewed RMI Senior Associate Sherri Billimoria, one of the report’s co-authors, to learn how utilities, their regulators, and state legislators can accelerate building decarbonization.

Silvio Marcacci: This report makes a strong case for regulators to accelerate building decarbonization policies – why is acting sooner rather than later so important when it comes to electrifying buildings?

Sherri Billimoria: In order to avoid warming more than 1.5C, we must eliminate greenhouse gas emissions by 2050 and cut them in half in the next decade. Indeed, the coming ten years are the “decisive decade” and will set the course for whether we meet our climate goals or not.

Most buildings will only replace their heating and cooling equipment once or twice between now and 2050, let alone in the next decade—so ensuring that new devices are all-electric is crucial. If we continue to invest in fossil-fuel devices and building systems, we will lock in those emissions for years to come. If we instead choose efficient, all-electric devices, we are setting ourselves on a path towards meeting our climate goals.

With today’s electric grid, building electrification reduces greenhouse gas emissions
With today’s electric grid, building electrification reduces greenhouse gas emissions. ROCKY MOUNTAIN INSTITUTE

SM: Which states do you think have the most to gain from ambitious building decarbonization regulations?

SB: Our recent analysis shows that electrifying now reduces greenhouse gas emissions in 46 out of 48 states, so all states can benefit from building electrification strategies. Places where the electric grid is clean but fuel oil is common heating sources will see the most carbon benefits—for example, Rhode Island has significant carbon savings today.

It may be easiest to take near-term ambitious action in states that have established aggressive climate targets. For example, the Climate Leadership and Protection Act in New York sets an economy-wide carbon neutrality goal by 2050. New York, California, and Massachusetts have all taken recent action to consider the long-term future of gas planning in their states.

Top ten states for direct building emissions
Top ten states for direct building emissions.  ROCKY MOUNTAIN INSTITUTE

SM: What are the top three considerations for regulators to keep in mind as they shift away from natural gas infrastructure in buildings toward electrification?

SB: First, states need to establish a long-term vision. A clear, enforceable mandate from state leadership that the state will have fully electrified buildings by a given date, or that the gas infrastructure system will be wound down by another, means regulators can make decisions with a clear understanding of where they are going, and have the authority to get there.

Ten key strategies for building decarbonization
Ten key strategies for building decarbonization. ROCKY MOUNTAIN INSTITUTE

Second, we have to build out the market for heat pump technologies. Regulators can do this by supporting a number of programs and initiatives—heat pump incentives, time-varying electricity rates, demand flexibility programs, and more. It’s crucial to update energy efficiency programs to support building electrification, by changing resource standards and cost tests where appropriate.

Third, states should stop expanding the gas delivery system. Each new investment in gas infrastructure, risks stranded assets, or missing our climate goals. New construction is cost-effective to electrify today. Several utilities, large and small, have begun to understand that gas infrastructure cannot continue to grow as it has in the past. Pacific Gas & Electric PCG -1.8%, one of the largest combined gas and electric utilities, has publicly supported the shift toward all-electric construction that has become popular across California. In their recent rate case settlement, Rochester Gas & Electric agreed to structure gas planning to achieve a net-zero increase in gas use, choosing non-pipes alternatives as far as possible.

U.S. gas distribution system expenditures 2009-2017
U.S. gas distribution system expenditures 2009-2017.  ROCKY MOUNTAIN INSTITUTE

SM: If states are proactively electrifying buildings, do regulators also have to consider preventing new gas hookups or shrinking the existing gas distribution system? Could existing or new gas distribution systems become economic liabilities for utilities in an electrified world?

SB: Yes, the gas distribution system must evolve to meet our climate goals. Without a managed transition, when customers electrify and leave the gas distribution system, the costs of maintaining the system will fall to a smaller group of customers—leading to rising prices. The customers remaining on the system are likely to be lower-income, renters, or come from disadvantaged communities and be unable to weather dramatically increased bills.

Research from Gridworks has shown that an “unmanaged” transition can lead to gas rates around four times more expensive than a “managed” transition. Gas utilities will need to either transition to new business models or be carefully wound down.

Pathways for gas utilities in a carbon-free future
Pathways for gas utilities in a carbon-free future.  ROCKY MOUNTAIN INSTITUTE

SM: Why does ensuring equity in the transition from gas to electric figure so prominently in your report, and what should regulators keep in mind here, especially when it comes to lower-income customers?

SB: Ensuring that the transition from gas to electric happens equitably will require specific focus and attention—frontline communities need to be central to decision-making processes.

If many customers leave the gas distribution system, lower-income customers who cannot or do not electrify could see significant rate increases. In order to avoid these potential outcomes, equity needs to be centered from the very beginning. Recent reports from Greenlining and Emerald Cities Collaborative discuss what equitable electrification can look like.

SM: How can building decarbonization provide economic benefits, and how can regulators ensure its job creation potential is fully captured?

SB: Successfully electrifying the 70 million homes and businesses in the United States will require a trained workforce able to install heat pumps. Without this workforce, heat pumps will not be as widely available. High-quality installation will also help to ensure that the systems are operating at their intended efficiency. State and city workforce agencies can support training and development programs to ensure that these new jobs are well-paying, high-road jobs.

Michael Keller's picture
Michael Keller on Aug 10, 2020

Decarbonization is just another attempt to siphon money from the poor and middle class by utilities and industries that cannot compete.

Use the most cost effective energy source, which varies depending upon location.

Natural gas has superior economics that crushes the competition. That is why the green energy crowd is so intent on "all electric".

Trying heating your house in the Midwest with electricity and then compare your bill with a neighbor using a high efficiency gas furnace. 

Stop with the gas-to-to-electric nonsense. Simply wastes money so the undeserving can line their pockets with other peoples money.

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