Colorado's natural gas pivot - Mountain Town News

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Colorado begins conversation about how to crimp natural gas use in new buildings

Colorado has started talking about how to curtail natural gas in new buildings necessary to achieve the dramatic reductions in greenhouse gas emissions during the next 10 to 30 years as specified by state law.

Agreement has been reached among several state agencies and the four distribution companies regulated by the state’s Public Utilities Commission to conduct discussions about future plans for pipelines and other infrastructure projects of more than $15 million. The agreement proposes to take a long view of 10 to 20 years when considering natural gas infrastructure for use in heating, cooking and hot-water heating.

The four utilities—Xcel Energy, Black Hills Colorado, Atmos Energy, and Colorado Natural Gas—altogether deliver gas to 1.73 million customers, both residential and business.

Unlike a toaster or even a kitchen stove, which you can replace with relative ease and cost, gas infrastructure comes with an enormous price tag—and expectation of a long, long time of use. For example, it would have cost $30,000 per unit to install natural gas pipes at Basalt Vista, an affordable housing project in the Roaring Fork Valley. Alternative technology is being used there.

Gas infrastructure is difficult to replace in buildings where it exists. As such the conversation getting underway is primarily about how to limit additional gas infrastructure.

“Given the long useful lives of natural gas infrastructure investments, the (Colorado Energy Office) suggests that this type of forward-looking assessment should include any significant upgrades to existing natural gas infrastructure or expansion of the gas delivery system to new residential developments,” the state agency said in a June 8 filling.

This is adapted from the July 23, 2020, issue of Big Pivots. Subscribe for free to the e-magazine by going to Big Pivots.

Meanwhile, the three Public Utility Commission plans one or more informational session later this year to learn about expectations of owners of natural gas distribution systems by Colorado’s decarbonization goals and the implications for the capital investments.

HB 19-1261, a Colorado law adopted in May 2019, charged state agencies with using regulatory tools to shrink greenhouse gas emissions from Colorado’s economy 50% by 2030 and 90% by 2050.

Utilities in Colorado have said they intend to close most of the coal plants now operating no later than 2030. The coal generation will be replaced primarily by renewables. That alone will not be nearly enough to meet the state’s ambitious decarbonization goals. Carbon emissions must also be squeezed from transportation—already the state’s leading source of carbon dioxide— buildings, and other sectors.

“No single strategy or sector will deliver the economy-wide greenhouse gas reductions Colorado needs to meet its science-based goals, but natural gas system planning is part of the silver buckshot that can get us there,” said Keith Hay, director of policy at the Colorado Energy Office in a statement.

“When it comes to gas planning, CEO is focused on opportunities to meet customers’ needs that will lead to a more efficient system, reduce overall costs, and reduce greenhouse gas pollution.”

Roughly 70% of Coloradans use natural gas for heating.

While gas utilities cannot refuse gas to customers, several real estate developers from Arvada to Pueblo and beyond have started crafting homes and other buildings that do not require natural gas. Instead, they can use electricity, passive solar, and a technology called air-source heat pumps to meet heating, cooling and other needs. Heat pumps provide a key enabling technology.

A glimpse of this low-carbon future can be seen at Basalt Vista, a housing project in Pitkin County for employees of the Roaring Fork School District and other local jurisdictions. The concept employed there and elsewhere is called beneficial electrification.

In setting out to ramp down growth in natural gas consumption, Colorado ranks among the front-tier of states, lagging only slightly work already underway in California, Minnesota and New York.

Community bans

In the background of these discussions are rising tensions. In California, Berkeley a year ago banned natural gas infrastructure in new developments, and several dozen other cities and counties followed suite across the country.

Protect Colorado, an arm of the oil-and-gas industry, had been collecting signatures to put Initiative 284 on the ballot, to prevent restrictions on natural gas in new buildings. The group confirmed to Colorado Public Radio that it was withdrawing that and other proposals after negotiations convened by Gov. Jared Polis and environmental groups.

Emissions of methane—the primary constituent of natural gas and one with high but short-lived heat-trapping properties—can occur at several places along the natural gas supply chain beginning with extraction. Colorado ranked 6th in the nation in natural gas production in 2018, according to the U.S. Energy Information Agency.

Hydrocarbon processing in the Wattenberg Field east of Fort Lupton, Colo., on July 2, 2020. *Photo/Allen Best*

In 2017, according to the Environmental Protection Agency, 4% of all greenhouse gas emissions in the United States were the result of extraction, transmission, and distribution of natural gas. However, several studies have concluded that the EPA estimate skews low. One 2018 study 2018 estimated that methane emissions from the oil and gas supply chain could be as much as 60% higher than the EPA estimates.

Greenhouse gas emissions also occur when natural gas is burned in houses and other buildings, creating carbon dioxide. An inventory released in December 2019 concluded that combustion of natural gas in houses was responsible for 7.7% of Colorado’s energy-related greenhouse gas emissions.

Just how the shift from natural gas to electricity will affect utilities depends upon the company. For Atmos Energy, a company with 120,000 customers in Colorado, from Greeley to Craig, from Salida to Cortez, gas is just about everything.

Xcel’s talking points

Xcel Energy, the state’s largest utility, sells both gas and electricity. In theory, it will come out whole. But it has been leery about moving too rapidly. Technology advances and costs declines have not yet arrived in the natural gas sector, observed, Jeff Lyng, director of energy and environmental policy for Xcel, in a June 8 filing with the PUC.

Still, Xcel is willing to have the conversation. Lyng pointed to efforts by Xcel to improve efficiency of natural gas use. The company is also participating in industry programs, including One Future, which are trying to limit methane emissions from the natural gas supply chain to less than 1%. For Xcel, he explained, that includes replacing older pipes with new materials that result in fewer emissions. It also means using the company’s purchasing power to push best practices that minimize emissions.

The company intends to offer options to customer, including incentives for electric water heaters programmed to take advantage of renewable energy when it is most readily available. That tends to be at night.

Xcel sees an opportunity to work with builders and developers to design all-electric new building developments to avoid the cost of installing natural gas infrastructure.

“This may require high-performance building envelope design, specifying certain appliances and, especially load management,” Lyng wrote in the filing. “Load management is key to ensuring these new electric devices interact with the power grid and are programmed to operate as much as possible during times when there is excess renewable energy or the lowest cost electricity on the system.”

Not least, Xcel conceded a role for air-source heat pumps, the crucial piece of technology employed in most places to avoid natural gas hookups. Heat pumps can be used to extract both cool and warm air from outdoor air as needed. Xcel sees the technology being an option when customers upgrade air conditioning units with spillover benefits for heating.

“Through this option, given the cooling and heating capacity of air source heat pumps, some portion of customer heating load can be offset through electrification, while maintaining their natural gas furnace or boiler as a back-up.”

Others think air-source heat pumps can have even broader application, especially in warmer areas of the state.

Short-term costs may be higher for electrified buildings. “This will improve over time as electric technologies decline in cost and as the electric system becomes cleaner,” Lyng said. Xcel, he added, favors a voluntary approach: pilot programs that expand.

Lyng, in his testimony, warned against trying to ramp up electrification too quickly. In 2019, he pointed out, the maximum daily demand for natural gas had the energy equivalent of 26,000 megawatts of electricity—more than three times the company’s electrical peak demand.

An unintended consequence may be adverse impacts to people of low income. The thinking is that as the demand for natural gas declines, the cost will actually go up per individual consumer.

“As a smaller and smaller pool of customers is left to pay for infrastructure costs, the large the cost impact will be for each remaining customer,” explained Dr. Scott England, from the state’s Office of Consumer Counsel, in a filing.

This is extracted from the July 23, 2020, issue of Big Pivots, an e-magazine about energy shifts underway in Colorado and beyond. You can get on the mailing list by going to BigPivots.com.

Social cost of methane?

Xcel has also explored the opportunities with renewable natural gas. At its most basic level, renewable natural gas involves harvesting biogas from wastewater treatment plants, landfills and dairies. In its first such venture in Colorado, Xcel last fall began getting 500,000 cubic-feet per day of methane from the treatment plant serving Englewood, Littleton and smaller jurisdictions along the South Platte River in metropolitan Denver.

A bill introduced in Colorado’s covid-shortened legislative proposed to create a renewable gas standard, similar to that first specified by voters in 2004 for electricity. SB-150 proposed targets of 5%, 10% and 15% for regulated utilities, encouraging greater use of biogas from landfills, dairies and other sources.

The sponsor, Sen. Chris Hansen, D-Denver, said he plans to reintroduce the bill the next session,

Hansen said he may also introduce a bill that would require the PUC to apply the filter of a social cost of methane to its decisions when evaluating alternatives. This would be similar to the cost of carbon, currently at $46 a ton, now applied to resource generating alternatives.

Longer term, Xcel wants to explore opportunities to produce hydrogen from renewable energy to blend into the natural gas distribution system at low levels or converted back to synthetic gas.

The Sierra Club may push back on efforts to convert to synthetic gas. The organization recently released a report that found significant problems with renewable natural gas, a phrase that is now being used by some companies—not necessarily Xcel—to include far more than the biogas from landfills. The Sierra Club estimates that there’s enough “natural” biogas to meet 1% of the nation’s current needs for natural gas. Other estimates put it far higher.

There will be implications left and right from this transition from gas to electricity. Lyng pointed out that solar energy will have lower value, because of its inability to replace natural gas on winter nights.

For the testimony of Jeff Lyng and Keith Hayes and a few dozen more, as well as the filings as of July 29, go to the Colorado PUC website and look up case 20AL-0049G.