Can Gas and Electric Utilities Cooperate to Reduce Carbon Emissions?
by Bob Shively, Enerdynamics President and Lead Facilitator
Much discussion in today’s energy world centers around the need for electrification to foster decarbonization. Electrification is the process of replacing technologies that use fossil fuels (coal, oil, and natural gas) with technologies that use electricity. While a significant part of electrification involves replacing internal combustion vehicles that use gasoline or diesel with electric vehicles and thus threatens oil company revenues, it also includes replacing natural gas consumer appliances such as furnaces and stoves with electric appliances. This threatens natural gas utility revenue streams.
Electrification
The threat to entrenched businesses has caused an uproar in regions attempting to use regulation to foster electrification. Some cities and states have controversially added regulations that require all electric construction in new buildings. Other states have put in place laws limiting local governments' ability to restrict use of fossil fuels. In a world where conflict seems all too common, is it naïve to ask if there is an alternative?
Canada is known as a country in which cooperation is valued. A recent development in Québec suggests there may be a way for natural gas and electric utilities to cooperate to benefit both industries and to reduce their customers’ cost of decarbonization. The partnership between the electric utility Hydro-Québec and the gas utility Énergir focuses on the fact that electric heat pumps are unable to keep a building warm during extremely cold temperatures. The usual solution is to add an electric resistance heater to a heat pump installation. But this is problematic in two ways – it costs a lot of money to heat buildings on the coldest days since resistance heaters use a lot of electricity; and it creates an additional winter electric peak that Hydro-Québec must build facilities to serve.
The lower-cost technical solution? Leave gas heaters in place for use during peak cold days. But this would place the gas utility Énergir in the position of maintaining gas facilities to cover peak cold days without getting revenues from those facilities the rest of the winter, which is financially unviable. The unique cooperative solution for Québec, called the “dual-energy agreement,” results in the electric utility paying the gas utility to keep its facilities in place. This avoids the need to install electric resistance heaters and saves Hydro-Québec from having to build peaking capacity to cover the new loads. It also addresses Énergir’s need for revenues to cover the cost of gas facilities that are only occasionally used.
According to the two companies, dual-energy will result in savings of $1.5 billion by 2030 compared with fully electrifying participating customers. Yet carbon emissions by the customers will be reduced by more than 70%. While not a path to 100% carbon reductions, the cooperation suggests that significant reductions can be achieved at lower cost through gas and electric companies working together. This must be more practicable than continuing a fight between gas and electric utilities.
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