{"id":22169,"date":"2022-12-07T10:25:22","date_gmt":"2022-12-07T15:25:22","guid":{"rendered":"https:\/\/blogs.edf.org\/energyexchange\/?p=22169"},"modified":"2022-12-07T12:57:36","modified_gmt":"2022-12-07T17:57:36","slug":"proposed-acquisition-of-new-jersey-utilities-must-be-consistent-with-climate-goals","status":"publish","type":"post","link":"https:\/\/blogs.edf.org\/energyexchange\/2022\/12\/07\/proposed-acquisition-of-new-jersey-utilities-must-be-consistent-with-climate-goals\/","title":{"rendered":"Proposed Acquisition of New Jersey Utilities Must be Consistent with Climate Goals"},"content":{"rendered":"

\"\"<\/a>Two New Jersey gas utilities owned by South Jersey Industries, SJI,\u2014 South Jersey Gas and Elizabethtown Gas \u2014 are petitioning the New Jersey Board of Public Utilities, BPU, for approval to be acquired<\/a> by JP Morgan-backed investment firm IIF. The companies\u2019 proposal<\/a> relies on a business model of continued expansion of the natural gas distribution system, and suggests that decarbonization can be achieved by blending hydrogen and biomethane into gas pipelines. But increasing gas use is not aligned with state climate policy, and the proposed blending options are not assured climate solutions. The BPU should impose conditions on the proposed transaction to ensure consistency with state climate goals. Additionally, all New Jersey policymakers must recognize the importance of avoiding wasteful investments in gas system expansion \u2014 in particular, legislation<\/a> promoting gas utility spending on biomethane and hydrogen raises serious concerns<\/a>.<\/p>\n

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New Jersey must reduce natural gas reliance<\/strong><\/p>\n

The NJ Global Warming Response Act requires an 80% reduction in statewide greenhouse gas emissions by 2050, and Executive Order 274 calls for a 50% reduction by 2030, below 2006 levels. Achieving these targets is essential to protect New Jersey communities from the harmful impacts of the climate crisis. Residential and commercial buildings account for 26% of New Jersey\u2019s greenhouse gas emissions \u2014 primarily from the combustion of natural gas for heating \u2014 making the building sector the second-largest source of emissions in the state, after transportation. The 2019 New Jersey Energy Master Plan<\/a> provides guidelines for electrifying 90% of buildings and a significant decrease in pipeline gas demand by 2050 to achieve necessary emission reductions. Analysis<\/a> for the BPU indicates that statewide natural gas consumption should decrease by 25% or more by 2030 to remain on track under the Plan.<\/p>\nProposed Acquisition of New Jersey Utilities Must be Consistent with Climate Goals <\/a><\/span>Share on X<\/a><\/span>\n

Meanwhile, the foundational premise of the proposed SJI acquisition deal<\/a> is that gas utilities \u201cwill continue to operate and grow in their respective service territories just as they do today.\u201d This business-as-usual approach is inconsistent with the urgent need to reduce natural gas reliance. Regulators and gas utilities should be planning<\/a> for a managed contraction of the gas distribution pipeline system and reduced gas demand. Long-term investments in gas infrastructure today may become stranded assets<\/a> in the decades to come, and consumers shouldn\u2019t be saddled with the costs of polluting infrastructure.<\/p>\n

Deploying hydrogen and biomethane into gas pipelines is not a comprehensive climate solution<\/strong><\/p>\n

South Jersey Industries asserts that its acquisition by IIF will facilitate \u201cclean energy and decarbonization initiatives\u201d by using hydrogen and biomethane in the existing pipeline system. But this proposal is premised on inaccurate assumptions and will not cost-effectively reduce greenhouse gas emissions on the scale required to achieve state climate goals.<\/p>\n

Hydrogen<\/em><\/strong><\/a> is a leak-prone<\/a>, indirect greenhouse gas that is expected to play an important but limited role in decarbonization. Blending hydrogen into a complex natural gas distribution pipeline network should not be pursued without clear justification \u2014 partly because transporting hydrogen is likely to increase leakage, creating climate<\/a> and safety concerns. This can also be costly and inefficient \u2014 it is more energy intensive to use renewable (or fossil) power to develop and pipe hydrogen into a home for heating than it is to heat a home directly with renewably generated electricity. Expert analyses<\/a> indicate that hydrogen will be most useful for hard-to-abate sectors such as heavy industrial processes, while electrification remains preferable for buildings.<\/p>\n

Biomethane<\/em><\/strong><\/a> (also referred to as renewable natural gas or RNG) is still methane \u2014 just like natural gas \u2014 but is derived from organic sources. Combustion of biomethane must achieve a net reduction in methane emissions in order to yield any climate benefits, which happens only when the methane is captured from already-emitting<\/em> sources like landfills. Developing new feedstocks solely to create additional<\/em> biomethane supply, however, is not beneficial. Because supplies of climate-beneficial biomethane are limited<\/a>, it is not a viable path to fully decarbonize gas distribution systems. Furthermore, leaking methane<\/a> \u00a0and local air<\/a> pollution<\/a> from gas combustion in buildings remain ongoing concerns for biomethane, just like fossil fuel methane.<\/p>\n

Despite issues with biomethane and hydrogen, recent proposed legislation in New Jersey, S1366<\/a>, inappropriately promotes biomethane and hydrogen as a climate solution. The legislation states without analytical support, that \u201cgas public utilities can reduce greenhouse gas emissions from the direct use of natural gas by procuring renewable natural gas and investing in renewable natural gas infrastructure.\u201d<\/p>\n

Any deal to acquire South Jersey Industries must protect the environment<\/strong><\/p>\n

State law requires that utility ownership transactions must ensure \u201csafe and adequate\u201d utility service, which includes protection of the environment. If the BPU approves the proposed acquisition of SJI, it should impose conditions to ensure that the deal is consistent with state climate policies to reduce greenhouse gas emissions and natural gas use.<\/p>\n

The BPU has approved EDF\u2019s intervention into the case, and in testimony from experts, the organization proposes a number of recommended conditions that the utility regulator should require utilities to ensure the transaction benefits the environment and public health in New Jersey:<\/p>\n