Strategies and Principles to Decarbonize Your Local Gas Utility

Photo Credit: Canva

This blog was co-authored by Jolette Westbrook, Director and Senior Attorney, Equitable Regulatory Solutions.

“What will it take to decarbonize the gas distribution system?” That was the key question that a group of stakeholders from the non-profit and utility sectors across the United States tried to answer over the last year. There are many changes required to decarbonize a system that is currently designed around the transport and distribution of a fossil fuel. So how do we do it?

In the first convening of its kind at a national scale, these stakeholders produced a new report setting out guiding principles and strategies to inform decarbonization of the gas utility and corresponding end uses. Despite uncertainties about particular technologies, fuels, and customer adoption, all of the roundtable stakeholders share the belief that urgent action is necessary. The report provides key considerations for policymakers and regulators on how to navigate this transition that will guide future utility investment and decision-making toward economy-wide decarbonization.

In order to decarbonize a gas utility, the stakeholders envision a set of six strategies:

1. Improving Gas Infrastructure Planning
2. Designing Decarbonization Plans for Customer and Community Benefit
3. Creating New Gas Utility Innovation Programs and Funding
4. Evolving the Gas Utility Business Model
5. Achieving a Deeply Efficient and Flexible Buildings Sector
6. Establishing Low-Carbon Heating and Fuel Standards

In light of decarbonization, gas infrastructure planning will need to change. Policymakers should develop an inclusive, comprehensive, and iterative long-term planning process at the state level recognizing that investment strategies will be different. This work has already started in places like California and Massachusetts. A planning process should cover a time horizon that is adequate for long-term infrastructure planning while engaging with communities to identify specific priorities and needs, particularly for those communities with high energy burdens. Decarbonization planning processes must be inclusive, provide information about and access to clean energy options, and consider equity and affordability. As utilities and regulators develop decarbonization plans, it will be necessary to employ different strategies for various customers, as benefits and costs for residential and non-residential customers may not be the same.

Effective decarbonization will require gas utilities to develop a different approach and business model. Utility regulators should encourage out-of-the-box thinking and solicit and incent a variety of pilots (along with funding sources) to help develop decarbonization pathways. Examples include voluntary “green gas” tariffs, targeted electrification, non-pipeline alternatives, and networked geothermal. The gas utility business model should evolve to both meet decarbonization objectives and address emerging needs as well as prioritize equitable access to a safe, reliable, affordable, and clean energy system.

The largest number of customers on the gas system are in residential buildings. Making these buildings highly energy efficient will be critical to decarbonizing the gas system. Efficiency is one of the most cost-effective ways to drive greenhouse gas emissions reductions. Energy efficiency and demand response programs and policies should be expanded so that as many buildings as feasible will have completed comprehensive energy efficiency retrofit work.

Several states have passed or are actively considering passing a low-carbon heating and fuel standard. These actions could reduce the carbon intensity of energy and drive GHG emissions reductions through a portfolio target or targets for specific technologies or fuels. These standards can allow for multiple types of technologies that reduce emissions and will aim to make technologies more affordable by spurring the market and lowering barriers to adoption.

For each of these six strategies, policymakers will need to consider a mixture of competing priorities. To help inform the right balance in the tradeoffs, the stakeholders put forward a set of guiding principles:

1. Climate urgency and action: The urgency of climate change requires bold action in the near term.
2. Expanded regulatory framework: The status quo will not work – we should expand the regulatory framework to enable the evolution of gas utility business models and new investments.
3. Affordability: Energy and heat must be affordable to all customers—with special attention given to low- to moderate-income communities—whether or not those customers are early adopters of new technologies or participants in new programs.
4. Equitable access: All customers, regardless of race, socioeconomic status, or homeownership, must have access to affordable clean energy that meets their needs.
5. Safety, reliability, and resilience: Regardless of which strategy, set of technologies are chosen, it is essential that customers have access to a safe, reliable, and resilient energy system, both during the transition and after full decarbonization.
6. Inclusive processes: Decarbonization planning processes must be transparent and accessible, designed to ensure broad participation across diverse stakeholders.
7. Comprehensive system planning: In order to meet the energy and climate goals of the future, comprehensive, coordinated, and flexible planning is needed across the entire energy system, considering impacts to both electric and gas sectors.
8. Context-specific solutions: The technology and solution mix will vary across regions and end uses. No single solution can address the needs of the entire energy system. Regulatory decisions will accordingly need to reflect the specificity and diversity of solutions across geographies and customers.
9. Innovation: Meeting the energy and decarbonization needs of the future will require both technical and non-technical innovation, including but not limited to: new technologies, innovative financial mechanisms, and non-traditional regulatory processes.
10. Diverse funding streams: The full cost of decarbonizing the energy system will require diverse and non-traditional funding streams to support customers and finance the transition, including federal grants, state funding, private partnerships, and other innovative funding streams.

These strategies and guiding principles are the first step in a process that will require further discussion among stakeholders. There are clear omissions and points where individual stakeholders hold vastly different opinions. However, there is extreme value in getting a diverse set of stakeholders to agree on the common goal – that decarbonization is an urgent climate matter. These strategies and principles can inform policymakers, regulators, and gas utilities across the country.

The pace of change needed to achieve decarbonization targets needs to be accelerated. Decarbonizing our system in a way that is affordable and equitable means that we can no longer act in a business-as-usual manner. That’s what it will take to decarbonize the gas distribution system.