A Cost-Effective Way to Convert Buildings from Gas to Electric

By Nick Chaset and Bentham Paulos

Source

COMMENTARY | Strategically decommissioning, or “pruning,” portions of the gas system could offer a cost-effective and coordinated approach to convert whole neighborhoods from gas to electric.

America’s journey to a carbon-free future will require getting natural gas out of buildings. That effort just got a boost from the Inflation Reduction Act, which offers billions of dollars of incentives for building electrification.

While the process of converting individual homes and buildings from gas to electric is well known, it can be slow and expensive. Plus, as more buildings turn off their gas connections, fewer and fewer customers will shoulder the cost of maintaining the gas infrastructure, boosting gas bills for remaining customers.

A coordinated approach, where portions of the gas system can be taken offline, while the buildings they serve are fully electrified could save all ratepayers money and provide the basis for a strategic and equitable transition to an all-electric future.

But such an approach has never been tried at scale and raises several questions. To start getting answers, East Bay Community Energy, or EBCE, is participating in a new research project funded by the California Energy Commission to explore strategic decommissioning or “pruning” portions of the natural gas system and using the savings to convert buildings to all electric.

Strategic decommissioning involves identifying portions of the natural gas distribution system due for upgrades or repairs and taking that portion of the distribution system offline instead. This involves immediately converting all customers served by that part of the system to electric energy only so the gas line can be capped off.

Pruning creates several benefits compared to the current strategy of incentivizing one building at a time. It avoids the cost of having to repair or replace gas lines and allows those saved funds to be redirected to building electrification. Similarly, pruning helps avoid the cost and disruption of ripping up streets in the future.

Map of major lines in the PG&E gas distribution network. Smaller distribution lines run to virtually every building. Source: PG&E.

Lastly, as customers leave the gas grid, those remaining behind pay an increasing share of the fixed costs, like repairs and paying off debt. These higher costs can fall on those who can least afford it. A deliberately planned transition away from the gas system can mitigate such impacts, making it fairer to all.

Trying to convert all the buildings in a neighborhood simultaneously is complicated. The first is the high cost of converting existing homes. Data from 1,880 recent installations in California found an average cost for electric heat pumps for space heating and cooling of $17,287. Full electrification can also involve replacing a water heater, oven and dryer, and frequently upgrading the home’s main electric panel.

The second is the classic “split incentive” problem for apartments and rented homes, where the building owner pays the cost of appliances but the tenant pays energy bills. (Forty-six percent of housing units in our county are rented.)

And then there is the need to convince every single customer on a gas line to voluntarily go electric. Research shows that customers have little preference for gas over electric when it comes to space heating, water heating or dryers—provided they have heat when they want it. But some customers are attached to gas cooktops in their kitchen and won’t easily want to give them up.

Lastly, switching to electric will drive up electricity demand in neighborhoods, especially for winter space heating. This could require an upgrade in the electric distribution grid. The municipal utility for Palo Alto looked into this question, estimating the utility costs of converting from gas to electric. Upgrading their electric distribution system would increase their capital improvement budget by about 10%. Decommissioning their gas infrastructure would run from $11 million to $54 million but would save a total of between $26 million and $34 million over ten years by not having to replace gas mains and service lines.

To test the pruning strategy, EBCE is working with researchers on the Targeted Gas Decommissioning Project. The project will develop methods to identify opportunities in the gas grid, then find three pilot sites in EBCE’s territory. Then, the research team will engage customers and local communities on the switch from gas to electric, with an eye toward environmental justice and equity. Finally, the researchers will report back to stakeholders and policymakers within and beyond California on barriers and how to address them, funding sources and recommendations for next steps.

Gas pruning can build on several efforts already underway. The California Energy Commission is using a “market transformation” approach that works upstream with manufacturers, distributors and vendors to seize on the benefits of transitioning to electric energy, and downstream through consumer education and contractor training. Another program provides technical assistance and incentives to home builders for new all-electric low-income residential buildings.

BayREN, the Bay Area administrator of public energy efficiency funds, offers rebates for electrification and energy efficiency upgrades. And EBCE’s local programs offer incentives for the installation of heat pump water heaters and commercial induction ranges, and lends electric induction cooktops through local libraries. New federal funds from the recently passed Inflation Reduction Act will help accelerate and expand these efforts.

While electrification may not be easy, the fight against global warming demands it. Being proactive can help make it cheaper, faster and fairer.

Nick Chaset is the CEO of East Bay Community Energy. Bentham Paulos is a consultant for East Bay Community Energy.