Report Predicts Jump in Natural Gas Prices as California Communities Pursue Electrification

Share Button

Two more cities are choosing electrification in California, efforts that are expected to lead to defection from natural gas and a consequent rise in its prices, according to a draft report submtted to the California Energy Commission.

natural gas

By 63ru78/Shutterstock.com

The cities — Mountain View and Morgan Hill — became the 11th and 12th communities in the state to pass policies calling for electrification in new buildings. Dozens of additional cities and towns in California are considering similar action.

As this movement continues, natural gas prices in California are expected to rise as customers defect to electricity, said a draft report by Energy and Environmental Economics and the University of California, Irvine.

“In any low-carbon future, gas demand in buildings is likely to fall because of building electrification and the cost of RNG (renewable natural gas),” said a summary of the report. In a scenario that examines high building electrification, the draft report found that gas demand in buildings will drop by 90 percent by 2050 compared to today’s demand.

“The potential for large reductions in gas demand creates a new planning imperative for the state,” said the draft report.

Transition plan needed

The costs of operating and maintaining the natural gas system will increase but fewer customers will share those costs, which may lead to “unsustainable increases in gas rates” in customer bills after 2030, said the draft report. This will hurt those least likely to switch from gas, including low-income residents. The draft report suggests putting in place a transition plan while the state moves more and more toward electrification.

The town and city electrification measures in California generally take two forms, said Rachel Golden, senior campaign representative, Sierra Club.

The two cities to go electric most recently reflect these two strategies, which are either gas bans or “reach” building codes.

Morgan Hill’s measure is similar to the city of Berkeley’s, said Golden. It prohibits gas in new construction beginning with building permit applications submitted after March 1, 2020.

Avoiding the installation of gas pipelines in a development can cut costs by about $7,000 per unit, said the city. Property owners can own solar systems that offset some of their electricity use, when it’s not possible for the systems to lower natural gas use, the city said.

Because the gas prohibition begins at the building permit stage in Morgan Hill —  as opposed to through zoning regulations — it will affect more buildings more quickly, said Golden.

Free Resource from Microgrid Knowledge White Paper Library

How Microgrids Enable Optimal Cooperation Among Distributed Energy Resources
Many facility operators need increased resiliency, efficiently, and sustainability. Distributed Energy Resources (DERs) like wind, PV and energy storage can address these needs. Yet also introduce many other challenges. To learn how microgrids can help you optimize the integration of these assets, download this white paper.

Mountain View’s measure, on the other hand, takes place at the zoning level through a “reach code.” Most of the cities going all-electric in new buildings take this path.

This amends the state building code for the city of Mountain View to increase efficieny and reduce carbon in new residential and commercial buildings.

“They are tweaking state code as it applies to their cities,” explained Golden.

Mountain View’s reach codes apply to electric vehicle (EV) spaces in new construction, PV installation in new construction and other single family/duplex construction that covers 50% of the roof area. It calls for only limited installation of natural gas in new construction.

The code would not allow gas appliances in new construction, other than cooking appliances, fireplaces and fire pits in single-family/duplex construction.

Also exempt are cooking appliances in for-profit kitchens in multi-family, mixed use, hotel/motel, and commercial construction.

electrification in California

By Alberto Masnovo/Shutterstock.com

Electrification expected to reduce operating costs

Such measures are not only expected to cut the installation costs in new construction; they’re also expected to reduce operating costs. “Studies show that you can save between $4,000 and $20,000 over 20 years with all electric,” said Golden.

Building owners will realize more savings if they employ time-of-use rates, solar and storage, she added.

“But if they’re on time-of-use and not using equipment properly, they won’t see savings,” she said. “Implementation is very important; equipment has to be properly programmed.” California’s decarbonization efforts also focus on heat pump water heaters and HVAC units that can be grid interactive, providing demand response.

Electrification in California and power shutoffs

Some may argue that all-electric buildings are more susceptible to power safety shutoffs like the ones California has experienced over the past few weeks, said Morgan Hill’s city council staff report.

“The day-to-day advantages of the all-electric home vastly outweigh this slight disadvantage,” of being vulnerable to the shutoffs, argued the city council.

Golden points out that to avoid public safety power shutoffs — and the use of fossil fueled generators — residents need to use solar and storage, a technology that is frequently included in new microgrids.

“We need stronger incentive programs for solar and storage, which are cleaner than generators. We need policies to make solar and storage available to all residents,” she said.

Track news about electrification in California. Subscribe to the free Microgrid Knowledge newsletter.

Share Button

Sign up for our newsletter and get the latest microgrid news and analysis.

Leave a Comment

*