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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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A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.
Long Islanders, meanwhile, are showing up in support of offshore wind, and more in this week’s edition of The Fight.
Local renewables restrictions are on the rise in the Hawkeye State – and it might have something to do with carbon pipelines.
Iowa’s known as a renewables growth area, producing more wind energy than any other state and offering ample acreage for utility-scale solar development. This has happened despite the fact that Iowa, like Ohio, is home to many large agricultural facilities – a trait that has often fomented conflict over specific projects. Iowa has defied this logic in part because the state was very early to renewables, enacting a state portfolio standard in 1983, signed into law by a Republican governor.
But something else is now on the rise: Counties are passing anti-renewables moratoria and ordinances restricting solar and wind energy development. We analyzed Heatmap Pro data on local laws and found a rise in local restrictions starting in 2021, leading to nearly 20 of the state’s 99 counties – about one fifth – having some form of restrictive ordinance on solar, wind or battery storage.
What is sparking this hostility? Some of it might be counties following the partisan trend, as renewable energy has struggled in hyper-conservative spots in the U.S. But it may also have to do with an outsized focus on land use rights and energy development that emerged from the conflict over carbon pipelines, which has intensified opposition to any usage of eminent domain for energy development.
The central node of this tension is the Summit Carbon Solutions CO2 pipeline. As we explained in a previous edition of The Fight, the carbon transportation network would cross five states, and has galvanized rural opposition against it. Last November, I predicted the Summit pipeline would have an easier time under Trump because of his circle’s support for oil and gas, as well as the placement of former North Dakota Governor Doug Burgum as interior secretary, as Burgum was a major Summit supporter.
Admittedly, this prediction has turned out to be incorrect – but it had nothing to do with Trump. Instead, Summit is now stalled because grassroots opposition to the pipeline quickly mobilized to pressure regulators in states the pipeline is proposed to traverse. They’re aiming to deny the company permits and lobbying state legislatures to pass bills banning the use of eminent domain for carbon pipelines. One of those states is South Dakota, where the governor last month signed an eminent domain ban for CO2 pipelines. On Thursday, South Dakota regulators denied key permits for the pipeline for the third time in a row.
Another place where the Summit opposition is working furiously: Iowa, where opposition to the CO2 pipeline network is so intense that it became an issue in the 2020 presidential primary. Regulators in the state have been more willing to greenlight permits for the project, but grassroots activists have pressured many counties into some form of opposition.
The same counties with CO2 pipeline moratoria have enacted bans or land use restrictions on developing various forms of renewables, too. Like Kossuth County, which passed a resolution decrying the use of eminent domain to construct the Summit pipeline – and then three months later enacted a moratorium on utility-scale solar.
I asked Jessica Manzour, a conservation program associate with Sierra Club fighting the Summit pipeline, about this phenomenon earlier this week. She told me that some counties are opposing CO2 pipelines and then suddenly tacking on or pivoting to renewables next. In other cases, counties with a burgeoning opposition to renewables take up the pipeline cause, too. In either case, this general frustration with energy companies developing large plots of land is kicking up dust in places that previously may have had a much lower opposition risk.
“We painted a roadmap with this Summit fight,” said Jess Manzour, a campaigner with Sierra Club involved in organizing opposition to the pipeline at the grassroots level, who said zealous anti-renewables activists and officials are in some cases lumping these items together under a broad umbrella. ”I don’t know if it’s the people pushing for these ordinances, rather than people taking advantage of the situation.”