Targeted Electrification and Gas System Decommissioning: Lessons Learned To Date and Key Recommendations

Introduction

This blog post provides an overview of lessons learned to date in the Northern California portion of the California Energy Commission’s (CEC) Tactical Gas Decommissioning Project. Here, we share our insights gained over the course of developing the proposed site selection framework and community engagement work a along with recommendations for changes needed to implement these types of projects at-scale. These preliminary learnings will be further refined as the project team continues its research. You can read more details about this project in our recently published Interim Report (here).

In summary, we found that implementing building decarbonization in a manner that achieves California’s GHG reduction goals and helps keep gas rates affordable will require important changes. The interim report includes recommendations for steps that utilities, regulators, state agencies, and the legislature can take to bring about these needed changes.

These changes are summarized in the table below, which articulates the current paradigm (status quo), a potential long-term paradigm where gas decommissioning could be employed at scale to help equitably achieve our decarbonization goals, and actions needed to support the transition to the long-term paradigm. The changes are then described in more detail in the following sections.

Lessons Learned and Key Recommendations: Overview

Gas System Data

The project team had access to pipeline-level gas system data in PG&E’s GIS-based Gas Asset Analysis Tool, which proved invaluable for identifying candidate sites at the level of individual gas main segments and specific gas customers. We also had the support of PG&E gas engineers using the Synergi Gas model, which was required to determine hydraulic feasibility for decommissioning.

We are grateful to have had access to these data sources and models. However, challenges remain for third parties such as local governments to identify, design, and implement pilots. These challenges were highlighted by reviewing the CPUC Staff Proposal on gas decommissioning, which does not pre-suppose that pipeline-level data would be available to support prioritization of sites for gas decommissioning.

Challenges identified include:

• Need for planning tools. PG&E’s Gas Asset Analysis tool is GIS-based and offers a clear visualization of gas system infrastructure at the level of individual pipeline segments. Key layers in the GIS tool, such as the DIMP operational risk score, enabled the project team to conduct the initial screening and identify specific candidate sites. While we laud PG&E for having developed this useful planning tool, we note that many utilities may not have a similar tool available. The development of similar planning tools by other utilities will be a necessary step in planning gas decommissioning projects outside of PG&E’s service territory. In addition, future data improvements to PG&E’s tool and other tools could include a representation of electric distribution headroom and upgrade costs, longer-term forecasts of gas pipeline replacement projects, and more granular estimates of gas pipeline replacement costs.
• Data confidentiality. We have also identified key issues with data confidentiality, specifically regarding pipeline risk. To identify sites for gas decommissioning, it is crucial to know which pipeline segments are likely to be replaced in the near term. It is evident that the risk of leakage or failure would likely be a key metric in determining which pipeline segments are slated for pipeline replacement projects. However, there are important considerations regarding making pipeline risk data public, as customers may be upset to learn that that pipelines in their neighborhood are deemed high-risk. Concerned residents may even petition the utility to quickly replace the pipelines, eliminating the potential for a gas decommissioning project to avoid gas system costs. Utilities, regulators, and other stakeholders should consider these issues as they work to balance the need for pipeline replacement schedules to be available to support site identification for gas decommissioning against sensitivities regarding making pipeline risk data public.
• Manual review of hydraulic feasibility. The next issue we identified is that manual engineering review by gas utility engineers is needed to evaluate hydraulic feasibility for decommissioning. In the current process, gas engineers must open the Synergi Gas model corresponding to the area where candidate sites are located, manually remove pipes proposed to be decommissioned, and re-run the model. This process also requires close coordination between the project team and gas engineers to discuss mitigation plans if the initial scope of decommissioning is deemed infeasible. While some level of manual review may always be needed prior to implementing a gas decommissioning project, a potential improvement would be to have a layer in the GIS-based Gas Asset Analysis Tool that reflects whether specific projects or areas are likely to be hydraulically feasible. A simple option could be to develop a robust characterization of terminal branches to use as proxy for hydraulic feasibility. A more complex option could be to evaluate thousands of potential sites in Synergi through batch processing, and then provide the feasibility results as a layer in the GIS Tool. Other strategies may be developed in the CEC’s ongoing research project to develop a “Data-Driven Tool” to support gas decommissioning, led by DNV and their project partners.
• Level of technical complexity. Finally, even if key data are accessible, stakeholders such as local governments could face challenges interpreting all the data elements across various models. Targeted electrification and gas decommissioning is a highly complex topic and, even though our project team has a significant amount of technical experience, we have still required extensive support from PG&E throughout the process. Ultimately, user-friendly tools and well-defined procedures should be available that enable stakeholders to make informed evaluations regarding site identification and prioritization for gas decommissioning.

To address these challenges, the state could review concerns regarding data availability and make a final determination of what should be made public and what should remain confidential. The state could also work to support the development of tools for gas planning that enable the evaluation of targeted electrification and gas decommissioning. As one option, the CPUC could direct the utilities to develop such tools. Alternatively, the state could work to develop these tools, and one such process is currently underway at the CEC.¹

Planning Horizon

The three-year timeline for planning gas infrastructure investments through the GRC is insufficient for identifying and implementing targeted building electrification and strategic gas system decommissioning projects at-scale. Two major changes to the planning process could help address this issue:

• A longer-term planning process could be developed where gas pipeline replacement projects are identified and planned on a longer timeframe, such as 10-15 years in advance. This would provide time to evaluate alternatives, perform robust community engagement, and allow for implementation of alternatives like targeted electrification and gas decommissioning. Although the 2022 Gas Planning Order requires advance planning of very large projects, it does not change the timeframe for planning the smaller gas pipeline replacement projects that reflect the majority of utility capital projects.
• The consideration of non-pipeline alternatives such as gas decommissioning could be required for sites where existing gas pipelines are in need of replacement or other major repair, or for the subset of these projects that would be hydraulically feasible for decommissioning. This alternatives analysis would need to be performed several years in advance to provide the time needed to implement alternatives like targeted electrification.

Another key concern is that there is not yet a strategic long-term plan for gas customers and gas utilities that is aligned with California’s climate targets, nor are there emissions reduction targets for the buildings sector or for gas utilities. Long-term planning and target-setting could provide helpful regulatory context to support greater advance planning for specific capital projects.

Obligation to Serve

In the current regulatory paradigm, utilities contend that 100% customer opt-in is required to decommission gas infrastructure. This requirement means that large sites with many customers may prove difficult or impossible to implement gas decommissioning and even small sites may require substantial financial incentives to achieve 100% opt-in. Any gas system decommissioning projects pursued in the next few years will need to consider ways to work within the obligation to serve. In the longer term, California will need to evolve the obligation to serve to ensure it does not become a barrier to the state’s decarbonization goals. Particular care will need to be taken to ensure that customers have the time, resources, knowledge, and funding needed to transition to electricity or other energy sources.

The project team will consider the obligation to serve in more detail as we develop deployment plans for the three proposed pilot sites.

Community Engagement

Implementing gas decommissioning and targeted electrification projects at scale will require buy-in and participation from individuals within selected communities. However, identifying the appropriate parties to interface with community members may prove difficult. For example, utilities and local governments may not be viewed as trusted parties and local organizations may not have the bandwidth to engage on these issues when faced with other more urgent priorities.

Long-term investments in community engagement are needed to ensure that targeted electrification and gas system decommissioning projects reflect the interests and needs of local communities while delivering financial savings and other benefits. Below are some key observations from our work, including conversations with CBOs and TAC members, and recommendations for others looking to lead projects in this space.

• Communities should be given an opportunity to define what successful community engagement looks like. Reporting back to the community on how their input shaped outcomes demonstrates respect for their time and effort and helps maintain trust.
• Strong facilitation is essential for difficult or complex conversations with community members to ensure that all voices are heard and knowledge is transferred successfully in both directions.Community engagement efforts should leverage trusted messengers who work in communities, offer in-language support, and compensate community members for their time.
• Both TAC members and municipal partners communicated that meaningful community engagement takes time and “moves at the speed of trust.” Project timelines imposed by grant funding or customer programs should be developed to support long-term engagement. However, there may be hard deadlines for gas decommissioning projects to successfully avoid pipeline replacement. Allocating sufficient time in the beginning stages of a project to reach consensus on the scope and purpose of the proposed work can go a long way.
• Even with sufficient funding available and mutually aligned priorities, bandwidth and capacity constraints may limit local organizations’ ability to engage in a project, especially within a limited timeframe. CBOs and other community champions should be offered administratively simple funding and should have the opportunity to shape scope, timing, and budget based on their capacity.
• Time should be taken to explore the local community’s current priorities and identify how proposed work can support those efforts.
• Time should be taken to understand cultural norms and perspectives to ensure the project is communicated effectively with community members.

Project Funding

California will need to identify significant funding streams to achieve widespread building electrification in the coming decades. This funding will be needed regardless of whether electrification can be targeted to specific neighborhoods that would support gas system decommissioning. Electrification funding will need to cover some or all of the costs associated with building electrification, especially in low-income communities. These costs may include behind-the-meter electrification costs, building energy efficiency improvements, and potentially remediation to bring housing units up to code. In addition, bill guarantees may be needed to support bill savings in the near term. Importantly, increases in electric revenue from higher system usage due to building electrification could potentially offset some of these costs.

It may be appealing to use gas system avoided costs to provide funding for building electrification. However, if all gas avoided costs are repurposed in this manner, it would fail at the key objective of returning funds to gas ratepayers to reduce long-term gas cost pressures. In the near term, decisionmakers will need to consider the tradeoffs between using gas avoided costs to support building electrification in the absence of other funding sources vs. using gas  avoided costs to reduce gas cost pressures. In the long term, it may be preferable to prioritize other funding sources to support building electrification so that gas system avoided costs can be returned to gas ratepayers and help offset the gas rate impacts associated with declining gas demand, escalating gas infrastructure costs, and rising commodity costs for low-carbon fuels. A substantial amount of local, state, and federal funding sources will likely be needed to support the levels of building electrification aligned with state decarbonization goals.

Cost-Effectiveness

Development of benefit-cost analyses for gas decommissioning projects is an important area for further research, as cost-effectiveness tests and metrics have not yet been established for these projects. In future materials, the project team will propose sets of benefits and costs and will perform benefit cost analysis for our proposed pilot sites. The project team will also explore how cost-effectiveness evaluation may change over time if building electrification becomes the expectation or norm for California’s buildings, regardless of whether a site is being pursued for gas decommissioning.

For this interim report, the project team identified that site density (i.e., the number of customers per mile of gas main) is likely to be a key driver of cost-effectiveness for gas decommissioning projects. Unless very high GHG costs are assumed, the most significant benefit and cost components for gas decommissioning are likely to be gas system avoided costs (benefit) and behind-the-meter electrification costs (cost). Because these scale in different ways, sites with fewer customers per mile of gas main are likely to see better overall cost-effectiveness.

In addition to cost-effectiveness, planners and regulators may consider other factors such as equity in prioritizing sites for gas decommissioning, recognizing that electrification can bring important benefits to low-income and disadvantaged communities. However, this finding indicates that less dense project sites will likely see greater gas system cost savings per dollar spent on electrification.

In the future, cost-effectiveness of gas decommissioning may improve due to a number of factors. For example, higher costs for GHG emissions would increase cost-effectiveness. In addition, zero-emission appliance standards, such as those under consideration by CARB, would likely improve cost-effectiveness of gas decommissioning by increasing upfront equipment costs in the counterfactual scenario where gas decommissioning is not implemented. Future materials will explore this in more detail.

Next Steps

Over the next two months, the project team is working to prepare three documents for the Energy Commission. All three of these will be incorporated into the final report for this project. The documents are:

1. Outreach Strategies Report. This document will describe our community engagement activities throughout the project and summarize our findings.
2. Site Selection Report / Benefit-Cost Analysis Report. This document will present the project team’s proposed benefit-cost analysis framework for gas decommissioning projects. The benefit-cost analysis will also be analyzed for the 11 candidate sites.
3. Site Deployment Plans. This document will present a plan for implementing targeted electrification and gas decommissioning projects at the three proposed pilot sites.