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What if, instead of maintaining old pipelines, gas utilities paid for homes to electrify?

California just hit a critical climate milestone: On September 1, Pacific Gas and Electric, the biggest utility in the state, raised natural gas rates by close to $6 due to shrinking gas demand.
I didn’t say it was a milestone worth celebrating. But experts have long warned that gas rates would go up as customers started to use less of the fossil fuel. PG&E is now forecasting enough of a drop in demand, whether because homeowners are making efficiency improvements or switching to electric appliances, that it needs to charge everyone a bit more to keep up with the cost of maintaining its pipelines.
Shortly after the rate increase went into effect, however, Governor Gavin Newsom signed a bill aimed at addressing this exact problem. The new law gives PG&E and other utilities permission to use money they would have spent to replace aging, leaky pipelines to pay for the electrification of the homes served by those pipes — as long as electrifying the homes is cheaper. Instead of investing millions of ratepayer dollars into the gas system, utilities can start to decommission parts of it, shrinking gas use and fixed costs in tandem.
PG&E actually already has the freedom to do this, and has even completed a fair number of projects. But the utility has had limited success, mainly because of an anti-discrimination law that gives building owners the right to stick with natural gas. It only takes one gas stalwart to thwart a whole neighborhood’s prospects for free electric appliances, since in order to keep delivering gas to that one household, the utility has to invest in the entire section of pipeline serving the area. A 2023 report showed that while PG&E had completed more than 100 projects, it hadn’t been able to convince clusters of customers larger than five at a time to convert.
The new law doesn’t fundamentally change the anti-discrimination rule, known as a utility’s “duty to serve,” but it does relieve PG&E and others of this duty if at least two-thirds of the homeowners served by a given section of pipeline consent to getting off gas. For now, the legislation limits utilities to executing 30 such projects. But for those 30, as long as two-thirds consent, the utility can now tell the holdouts that it is retiring the pipeline, and that they have no choice but to get on the electric bandwagon.
“If a supermajority wants it, it can move forward,” Matt Vespa, a senior attorney from Earthjustice who worked on the legislation, told me. “Which I think is probably a good place to start from. You want to have a place where there’s significant buy-in.”
This strategy, sometimes called “zonal decarbonization” or “targeted electrification,” is one that many climate groups are advocating for as a way to achieve an orderly and equitable transition off of natural gas. The approach most states have taken so far — providing subsidies that gently prod consumers into going electric — results in a random pattern of adoption that can benefit some homeowners while harming others. It also does nothing to deter gas utilities from investing hundreds of millions of dollars in maintaining, replacing, or building new pipelines each year — investments that are set up to be recouped from ratepayers over the course of decades.
California isn’t the first place in the world to experiment with targeted electrification. The Swiss city of Zurich began systematically shutting down sections of its gas system in 2021, giving affected users about a decade of warning and offering partial compensation for the cost of new equipment. In Massachusetts, the utility Eversource is piloting a unique neighborhood-scale electrification project. The company hooked up 32 residential buildings and a few commercial businesses in the city of Framingham to a new underground network of pipes that carry water rather than natural gas, which in turn connect to geothermal heat pumps that use the water to heat or cool the air inside. There are more than a dozen such “thermal energy network” pilot projects in various stages in Massachusetts, New York, Colorado, Washington, Vermont, Maryland, and Minnesota.
But the new California program is unique in its scale and approach. For one thing, it applies to all gas utilities in the state. Beginning next summer, they will each need to submit maps to the utility commission that identify potential pipeline replacement projects; then, in 2026, regulators will use those maps to designate priority areas, giving precedence to low-income communities and households that lack heating or cooling. By July of that year, the commission must establish the rules of the pilot program, including a methodology for utilities to determine when electrification is more cost-effective than pipeline replacement, and rules for how utilities can pay for the projects and recover costs.
PG&E supported the bill and worked closely with its authors on the language. The utility declined an interview, but emailed me a statement saying the legislation “enables cost-effective, targeted electrification projects which will help avoid more expensive gas pipeline replacements, reducing gas system operating costs, and support the state’s and PG&E’s decarbonization goals.”
Utilities will still be spending ratepayer money on the electrification projects, but far less than they would have spent on pipeline infrastructure. For the remaining gas customers, it’s still possible rates will go up, though by less than they would have otherwise. Mike Henchen, a principal in the carbon-free buildings program at RMI, told me these pilot projects alone are not going to pull so many customers away from the gas system that it will put upward pressure on rates. The law caps the program at no more than 1% of a utility’s customers.
Vespa, the Earthjustice attorney, told me he originally worked on a more ambitious version of the bill that would have required utilities to avoid any new investments in the gas system when electrification was a cheaper alternative. But it was pared back and made voluntary in order to get it through the legislature. “The hope is that we'll get projects off the ground, we’ll get proof-of-concept,” he said. “I think there was a need to demonstrate some successful stories and then hopefully expand from there.”
While these pilots make sense, economically, for a dual gas and electric company like PG&E, one big question is whether the state’s gas-only utilities like Southern California Gas will take the initiative. (SoCalGas did not respond to my inquiry prior to publication, but the company did support the legislation.)
Looking ahead, even if lawmakers do expand the program to authorize every cost-effective project, this model can’t transition the entire state away from gas. These projects are more likely to pencil out in places with lower housing density, where a given section of pipeline is serving only a handful of homes. A fact sheet about the bill published by its lead sponsor, state senator David Min, says that “zero emissions alternatives” to pipeline replacement are only technically feasible and cost effective for about 5% of PG&E’s territory. “Gas customers won't be able to pay for the decommissioning of the whole gas system, or even 50% of it,” said Henchen.
In the meantime, however, there’s lots of low-hanging fruit to pluck. Targeted electrification of just 3% to 4% of gas customers across the state could reduce gas utility spending by $15 billion to $26 billion through 2045, according to an analysis by Energy and Environmental Economics.
“It’s a modest step,” said Vespa of the new law. “But I do think it’s meaningful to start moving forward and developing the frameworks for this.”
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The electric vehicle-maker’s newly unveiled, lidar-equipped, autonomy-enabled R2 is scheduled to hit the road next year.
When Rivian revealed the R2 back in the spring of 2024, the compelling part of the electric SUV was price. The vehicle looked almost exactly like the huge R1S that helped launch the brand, but scaled down to a true two-row, five-seat ride that would start at $45,000. That’s not exactly cheap, but it would create a Rivian for lots of drivers who admired the company’s sleek adventure EV but couldn’t afford to spend nearly a hundred grand on a vehicle.
But at the company’s “Autonomy and AI Day,” held on Thursday at Rivian’s Palo Alto office in the heart of Silicon Valley, company leaders raised the expectations for their next vehicle. R2 wouldn’t just be the more affordable Rivian — it would be the AI-defined car that vaults them into the race to develop truly self-driving cars.
First, the hardware. Rivian said that the R2 will come with 11 camera and five radar units spread around the vehicle to improve the car’s ability to comprehend the world around it. But the crucial, headline-grabbing addition is a lidar, or light-based radar, unit. Lidar shoots laser pulses and measures the time it takes for the reflected light to return, thereby building a three-dimensional picture of the environment it surveys.
Those twirling bobs you might have seen on the top of Waymo’s driverless cars as they roam the streets, mapping the world around them, are lidar. The technology’s ability to see the world in detail across distances is necessary for the upper levels of automotive autonomy — the ones where the car can basically do it all and the humans can take their hands off the wheel and their eyes off the road.
Lidar units to date have been large and expensive, which is one reason they’re seen in pods that protrude from the top of a vehicle. Rivian, however, figured out how to mount one within the vehicle, in the area at the top of the front windshield near the rear-view mirror. The forward-facing lidar gives the vehicle 300 meters of forward vision. Demos the company showed during autonomy day revealed just how much more a constellation of cameras, radar, and lidar can see than a system without lidar, especially in dark or foggy conditions.
The other “wow” reveal on Thursday was that the R2 will process all that camera data on a chip that Rivian built from scratch to handle the AI and autonomous driving workload of its vehicles, rather than sourcing chips from some other tech company. CEO R.J. Scaringe said during his presentation to open the event that this kind of vertical integration was meant to allow the company to keep pace with the AI race as opposed to having to work with whatever third-party components it could get.
The result is a leap forward in capability over what Rivian offered with the R1S SUV and R1T pickup truck. Those vehicles had a hand-free system that let the EVs drive themselves with minimal human oversight on a little more than 100,000 miles of roads that were well-marked and well-mapped. James Philbin, the vice president of autonomy and AI, promised on Thursday that the lidar and processing improvements would allow hands-free driving on more than 3 million miles of roads — basically anywhere that the lines on the highway are clear enough for the R2’s cameras to see. And what’s next, Rivian promises, is true autonomy. The SUV will drive itself entirely from point to point when the conditions allow, and as the AI continuously improves over time, you might eventually see driverless Rivians out there competing with the likes of Waymo.
All this stuff costs money, of course. The Rivian Autonomy+ package would add $2,500 or a monthly fee of $50 to the purchase price. But the fact that this tech is coming to a car that starts in the $40,000s is telling. It is how many people will get their first taste of true vehicle autonomy.
Thursday’s event wasn’t all about self-driving, either. Rivian also built an AI software assistant for the cabin that can be summoned with a “Hey Rivian” and perform all kinds of in-car functions, such as changing the driving mode or adjusting the climate control. The achievement here is one of natural language. In Rivian’s demos, the assistant could ably fulfill the driver’s wishes with a command like “make it a little toastier in here” as opposed to formal instructional language like “turn the driver’s temperature to 70 degrees and set the seat heater to level one.”
At times this feels unnecessary, like AI looking for something to do to justify its existence. It doesn’t take that many button-pushes to alter the climate, after all. I admit, though, that having test-driven Rivians on road trips this summer, one of their weak points is my struggle to remember exactly which menu contains which controls. AI, in a way, helpfully solves a problem created by the modern EV that has amazing capability, but routes that capability through a large touchscreen that’s annoying (and dangerous) to navigate while driving.
Rivian is playing catch up with Tesla when it comes to autonomy, of course, as Elon Musk’s company has been touting its Full Self Driving feature for years and is now building the Cybercab, which is meant to be a car that humans will never drive. But Tesla has struggled to meet its timelines and targets for autonomous systems, giving rivals like Rivian a window to develop their own technology.
And so, what’s clear after Rivian’s event is that car companies, especially EV makers, are going to be key players in this autonomy and AI age. Nowhere was it written that electric vehicles had to be synonymous with self-driving vehicles. Battery-powered cars could be dumb and not smart, ruled by buttons instead of touchscreens. It just so happens that EVs are finally coming of age during the simultaneous ascent of artificial intelligence — and that the leading EV-only startups are Silicon Valley tech companies, or at least started out that way.
Tesla has forgotten about acting like a car company and staked its future on being the one that will crack true self-driving and reap the windfall. Rivian, which hadn’t made nearly as much noise about AI and autonomy before this week, has put forth a compelling case for its in-house autonomous systems and AI models, ones that will continue to improve as they’re trained on data provided by thousands of R2s hitting the road starting in 2026.
The market is reeling from a trio of worrisome data center announcements.
The AI industry coughed and the power industry is getting a cold.
The S&P 500 hit a record high on Thursday afternoon, but in the cold light of Friday, several artificial intelligence-related companies are feeling a chill. A trio of stories in the data center and semiconductor industry revealed dented market optimism, driving the tech-heavy NASDAQ 100 down almost 2% in Friday afternoon trading, and several energy-related stocks are down even more.
Here’s what’s happening:
Taken together, the three stories look like an AI slowdown, at least compared to the most optimistic forecasts for growth. If so, expectations of how much power these data centers need will also have to come down a bit. That has led to notable stock dips for companies across the power sector, especially independent power producers that own power plants, many of whose shares have risen sharply in the past year or two.
Shares in NRG were down around 4.5% on the day on Friday afternoon; nuclear-heavy Constellation Energy was down over 6%; Talen Energy, which owns a portfolio of nuclear and fossil fuel plants, was down almost 3% and Vistra was down 2%. Shares in GE Vernova, which is expanding its gas turbine manufacturing capacity to meet high expected demand for power, were down over 3.5%.
It’s not just traditional power companies that are catching this AI chill — renewables are shivering, as well. American solar manufacturer First Solar is down over 5%, while solar manufacturing and development company Canadian Solar is down over almost 9%.
Shares of Blue Owl, the investment firm that is helping to fund the big tech data center buildout, were down almost 4%.
The fates of all these companies are deeply intertwined. As Heatmap contributor Advait Arun wrote recently, ”The commercial potential of next-generation energy technologies such as advanced nuclear, batteries, and grid-enhancing applications now hinge on the speed and scale of the AI buildout.” Many AI-related companies are either invested in or lend to each other, meaning that a stumble that looks small initially could quickly cascade.
The power industry has seen these types of AI-optimism hiccups before, however. In January, several power companies swooned after Chinese AI company DeepSeek released an open source, compute-efficient large language model comparable to the most advanced models developed by U.S. labs.
Constellation’s stock price, for example, fell as much as 20% in response to the “DeepSeek Moment,” but are up over 45% this year, even factoring in today’s fall. GE Vernova shares have doubled in value this year.
So it looks like the power sector will still have something to celebrate at the end of this year, even if the celebrations are slightly less warm than they might have been.
Activists are suing for records on three projects in Wyoming.
Three wind projects in Wyoming are stuck in the middle of a widening legal battle between local wildlife conservation activists and the Trump administration over eagle death records.
The rural Wyoming bird advocacy group Albany County Conservancy filed a federal lawsuit last week against the Trump administration seeking to compel the government to release reams of information about how it records deaths from three facilities owned and operated by the utility PacifiCorp: Dunlap Wind, Ekola Flats, and Seven Mile Hill. The group filed its lawsuit under the Freedom of Information Act, the national public records disclosure law, and accused the Fish and Wildlife Service of unlawfully withholding evidence related to whether the three wind farms were fully compliant with the Bald and Golden Eagle Protection Act.
I’m eyeing this case closely because it suggests these wind farms may fall under future scrutiny from the Fish and Wildlife Service, either for prospective fines or far worse, as the agency continues a sweeping review of wind projects’ compliance with BGEPA, a statute anti-wind advocates have made clear they seek to use as a cudgel against operating facilities. It’s especially noteworthy that a year into Trump’s term, his promises to go after wind projects have not really touched onshore, primarily offshore. (The exception, of course, being Lava Ridge.)
Violating the eagle protection statute has significant penalties. For each eagle death beyond what FWS has permitted, a company is subject to at least $100,000 in fines or a year in prison. These penalties go up if a company is knowingly violating the law repeatedly. In August, the Service sent letters to wind developers and utilities across the country requesting records demonstrating compliance with BGEPA as part of a crackdown on wind energy writ large.
This brings us back to the lawsuit. Crucial to this case is the work of a former Fish and Wildlife Service biologist Mike Lockhart, whom intrepid readers of The Fight may remember for telling me that he’s been submitting evidence of excessive golden eagle deaths to Fish and Wildlife for years. Along with its legal complaint, the Conservancy filed a detailed breakdown of its back-and-forth with Fish and Wildlife over an initial public records request. Per those records, the agency has failed to produce any evidence that it received Lockhart’s proof of bird deaths – ones that he asserts occurred because of these wind farms.
“By refusing to even identify, let alone disclose, obviously responsive but nonexempt records the Conservancy knows to be in the Department’s possession and/or control, the Department leaves open serious questions about the integrity of its administration of BGEPA,” the lawsuit alleges.
The Fish and Wildlife Service did not respond to a request for comment on the case, though it’s worth noting that agencies rarely comment on pending litigation. PacifiCorp did not immediately respond to a request either. I will keep you posted as this progresses.