Calls to Do Away with Subsidies for Natural Gas Hook Ups

By Published On: June 22, 2021

Eliminating subsidies for natural gas pipeline connections to new homes in California is critical to slashing greenhouse gas emissions, advocates say.

“We have to stop digging the hole deeper,” Panama Bartholomy, Building Decarbonization Coalition executive director, told the California Energy Commission during its June 22 Building Decarbonization workshop. The coalition is a nonprofit made up of 60 organizations, including private and public utilities, community energy and clean air agencies and advocates.

Continuing to subsidize gas hookups will not only exacerbate the climate crisis but also lead to costly, stranded pipelines when California fully decarbonizes its economy by 2045, Bartholomy warned.

Those costs drive up utility bills.

Utility customers contribute more than $100 million every year to subsidize gas connections for new customers, NRDC’s Senior Scientist Merrian Borgenson wrote in a June 10 Blog. Ratepayers collectively pick up this tab via what are called “line extension allowances.” The three investor-owned utilities offer gas hookup allowances ranging from roughly $1,600 to a little over $1,800 per home or apartment, which are folded into rates, Borgenson and coauthor Azara Negron pointed out. “These subsidies are an obstacle because they keep buildings and people hooked on gas for years to come.”

Gas pipes built into homes also drive up housing costs, according to think tanks and environmental groups. Consulting firm E3 in an April 2019 report estimated it adds about $6,000 to the cost of a single family home and $1,000 for each family living in a low rise multi-family building.

Between 2013-17, California added nearly 250,000 gas customers, more than any other state, according to clean air advocates.

About 180,000 new homes a year are needed to keep up with demand for housing, Michael Kenny, CEC energy specialist, said. The number of gas connections is unknown, and depends on how many new buildings will be all electric. This week’s workshop was intended to inform the Commission’s Integrated Energy Policy Report update.

Source: NRDC

Housing affordability is a major problem in California, Le-Huy Nguyen, a project manager specializing in the resident sector at the Commission, pointed out.

Homes produce 2/3rds of buildings’ carbon emissions

California’s 13.2 million households produce about two thirds of the greenhouse gas emissions emitted from all the buildings in the state. Overall, residential dwellings and commercial spaces are the source of a quarter of the state’s climate pollution.

Gas used to heat water and warm homes is the largest source of building emissions. Decarbonization requires the replacement of gas space and water heating with efficient electric heat pumps, speakers reiterated at the Tuesday Commission workshop. An essential part of the target must include protecting the health and pocketbooks of struggling households. These dwellings are a major source of emissions because they largely lack insulation and use old inefficient appliances.

California has the most progressive low-income weatherization program in the U.S. Subsidized residential upgrades slashed greenhouse gas emission by 60% per unit, Bartholomy said. Additionally, Gov. Gavin Newsom has proposed investing $50 million to increase weatherization upgrades in struggling Californians’ homes.

Decarbonization and building efficiency code update

An important part of the CEC’s decarbonization work is its upcoming update of the building energy efficiency standard. The latest proposal requires electric heat pumps in place of gas-fueled water or space heating in new construction, whichever is the biggest draw in a new home or commercial building. The draft update of the 2022 Title 24 code also requires new buildings be wired for all-electric appliances.

Full electrification of new buildings is not being considered right now, even though an all-electric single-family home is estimated to reduce annual greenhouse gas emissions by 33-56% in 2020 and 76–88% in 2050, concluded the consulting firm E3 in an April 2019 report on building electrification. The ranges reflect building vintages and climate zones differences.

The CEC’s Title 24 code update is separate from building decarbonization being addressed in the Integrated Energy Policy Report.

The retrofitting of existing homes also is necessary to drive down building climate pollution. But the costs and lack of customer awareness are major roadblocks, the CEC was told. It is even more challenging in rental dwellings because landlords have little incentive to lower their renters’ utility bills.

Therefore, retrofit subsidies are needed, including for electric heat pumps. There also were calls for rates that reward ratepayers for reducing fossil fuel use, in place of higher ones because of increased electricity consumption.  

Grid connected heat pumps

Manufacturers and others urged Tuesday that new heat pumps that are installed be connected to the grid so they can respond to signals to lower demand or send power to the grid.

Commissioner Andrew McAlister noted that staff is working to coordinate the CEC’s decarbonization efforts with energy efficiency savings and cost, noting “they are rowing in the same direction.” SB 350 directs the CEC to ensure efficiency is doubled by the end of this decade.

Elizabeth McCarthy

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