There are plenty of reasons to consider abandoning your gas stove. Electric cooking won’t slowly poison you with nitrogen dioxide or send planet-warming carbon dioxide into the atmosphere. Many cooks — including The New York Times’ Melissa Clark — are surprised at how much they prefer today’s state-of-the-art electric cooktops, known as induction stoves, despite initial skepticism.
But there’s another factor that’s a lot more likely to send people fleeing from the blue flame. Despite the culture war skirmish over gas stoves this past winter, which saw conservatives talking about the appliances as if they were constitutionally-protected AR-15s and progressives hand wringing about beloved Wolf and Viking ranges, widespread adoption of induction won’t happen through comparison shopping. It will happen because cooking with gas could become ridiculously expensive.
At the moment, the opposite is true. Newer induction ranges cost more than gas alternatives, and may even require a pricy electrical upgrade. Gas is also still generally cheaper than electricity.
But the thing about your gas bill is that it doesn’t just cover the cost of the fuel itself. It also covers the construction and maintenance of all the infrastructure required to deliver it to your home. Those costs are spread across the entire customer base. And that customer base is set to contract.
A handful of climate-forward cities and states have stopped allowing newly constructed buildings to hook up to natural gas. More importantly, billions of dollars of incentives in President Biden’s Inflation Reduction Act, along with state-level subsidies, are designed to push Americans to electrify their homes, including their space heating and hot water systems, as well as their stoves. Higher natural gas costs in recent months stemming from the war in Ukraine have also made decarbonizing where you live a lot more attractive.
But as the overall pool of gas customers shrinks and demand for gas declines, the cost of maintaining the system may not. That means those clinging to their gas stoves could see the cost of roasting a chicken skyrocket as they become saddled with a larger portion of the bill for maintaining a vast network of gas delivery pipelines.
Often referred to as the gas utility “death spiral,” the phenomenon is self-perpetuating. Higher bills motivate more customers to get off gas, leading to higher bills, and so on. In a 2019 report looking at how this could play out in the context of California’s aggressive decarbonization policies, the consulting firm Gridworks called it “a quintessential train wreck unfolding in slow motion.” The first 10% reduction in gas demand would only increase rates by about 10%, but as demand drops further, the effect starts to compound.
“There's this hockey stick curve that gets steeper and steeper,” said Mike Henchen, who leads the carbon-free buildings program at the clean energy nonprofit RMI, and was not involved in the Gridworks report. “By the time you cut gas demand about 60%, gas rates have doubled. By the time you cut gas use 80%, they’ve more than tripled.”
Gridworks modeled a scenario with high levels of electrification, shown to be the lowest cost path to achieving California’s emissions targets, and found that residential gas rates could increase from about $1.50 per therm to $19 by 2050.
That’s just one estimate. It’s hard to predict how many people will take advantage of these currently voluntary programs, or how quickly remaining customers will see the effects in their utilities bills. But another study conducted by economists at the University of California, Berkeley, confirms that the risk is real. The authors looked at historical evidence showing that when U.S. gas utilities have lost customers in the past, rates for those remaining have increased. They used the data to predict how a shift to electric buildings could affect gas ratepayers in the future, and estimated that if the pool shrank by 15% by 2030 and 40% by 2040, it would translate into annual bill increases of $31 and $116 per remaining customer, respectively.
It’s not just those early adopters who go all-electric that contribute to the problem. Gas companies, whose business model is threatened by electrification, would prefer a transition to pumping low-carbon fuels like hydrogen and renewable natural gas through their pipelines. Rather than anticipating reduced demand for their product, they’re pouring record amounts of cash into expanding. Data collected by the American Gas Association, a trade group for gas utilities, show that the industry’s annual capital expenditures have more than tripled since 2010. Growing even faster is the amount utilities spend on the distribution system that delivers gas to people’s homes, which has quadrupled.
“Spending is going up even as the long term outlook for demand is going down,” said Henchen. “So those two trends are gonna create problems.”
The reasons are twofold. Even though the push to electrify is ramping up, the customer exodus hasn’t hit yet and many utilities are actually expanding their systems to reach new customers. Meanwhile, older pipelines are plagued by leaks and other safety hazards. Utilities spend millions of dollars a year replacing pipes — costs that are then recovered through rates over the course of decades.
“It is unreasonable to expect that these costs can be recovered from ratepayers over many decades,” the Building Decarbonization Coalition, a nonprofit working on getting fossil fuels out of buildings, wrote in a recent report looking at the issue in New York State. The group questioned how utilities would be able to recover pipeline expansion and replacement costs when New York’s climate policies are encouraging households to leave the gas system. It urged the state’s utility commission to “intervene before the economics of the state’s gas networks unravel.”
These warnings are worth taking seriously because it’s not just Senator Joe Manchin of West Virginia and other gas diehards who’ll be affected by the gas market falling apart. The aforementioned studies about the death spiral point to higher costs disproportionately falling on lower-income households and people of color.
Researchers who have studied the gas death spiral say there are a number of ways policymakers and regulators can manage the transition to avoid steep rate hikes.
One option is to repeal existing laws in many states that say gas utilities have a “duty to serve” customers and must hook them up to gas for free, allowing them to subsidize the cost of extending gas mains across their customer bases. California became the first state to take this step last year, and the move is estimated to save customers more than $160 million annually.
Another is to re-imagine pipe replacement programs, and strategically electrify neighborhoods that need replacements. But nothing like this has been tried yet, and it’s not yet clear how to pay for it, or what to do if any of the households refuse to make the change.
Other ideas include requiring those who leave the gas system to pay an exit fee, or to accelerate the depreciation schedules of new assets to better reflect how long they will be needed in a decarbonizing world.
Even if spiraling costs can be mitigated, Henchen said they’re unlikely to be entirely avoided. “It’s going to be this lagging trend that takes time to build up,” he said. “People probably won’t see it for 15 years or more from now.”
You may not be dreaming about an electric stove today, but let’s talk again in 2038.
Seems significant. CGEP