State’s Largest Utility Agrees: Get Off Gas, Go All-Electric in New Construction

June 26, 2020  |  By Stephanie Greene and Leah Louis-Prescott

Pacific Gas and Electric Company (PG&E), California’s largest combined gas and electric utility, became the first dual-fuel utility in the country to formally support ending new gas hookups in buildings. In a letter to the California Energy Commission (CEC) this week, PG&E endorsed efficient, all-electric new construction as part of the state’s Title 24 energy code process.

California’s building energy efficiency standards govern new construction in California and set a precedent for other states. The California Energy Commission (CEC) updates these codes every three years and is currently updating codes through the Title 24 process for the 2022 code cycle. This is a critical opportunity for California to ensure its buildings achieve lower energy costs, reduce greenhouse gas emissions, and maintain healthy indoor and outdoor air quality.

By publicly supporting an ambitious new building code, PG&E indicates that it is willing to forgo future gas investments on behalf of its customers and the state’s climate goals. In its letter to the CEC, PG&E states it “welcomes the opportunity to avoid investments in new gas assets that might later prove underutilized as local governments and the state work together to realize long-term decarbonization objectives.”

Thus far, PG&E is the only US utility serving gas customers to formally voice its support for a statewide all-electric new construction standard. Electric utilities, like Sacramento Municipal Utility District (SMUD), have well-established electrification incentive programs and have enthusiastically backed an all-electric new building code.

California’s PG&E is the only US utility serving gas customers to formally voice its support for a statewide all-electric new construction standard.Tweet

To meet California’s—and the world’s—climate goals, use of fossil fuels like gas will need to decrease at least 80 percent by 2050. The Intergovernmental Panel on Climate Change (IPCC) says that to prevent catastrophic impacts of climate change, we need to stay below 1.5°C of global warming, which will require the world to halve emissions by 2030 and fully decarbonize by 2050.

Energy and Environmental Economics (E3) has conducted several important studies for California on this topic and their modeling shows that the most cost-effective path to achieving these necessary emissions reductions requires rapidly electrifying buildings. These results are supported in a number of other studies across states, showing that electrification of the buildings sector is the least-cost pathway to economy-wide decarbonization.

As recent RMI analysis shows, California has the second-largest volume of direct building emissions in the United States and is responsible for 8 percent of the nation’s onsite building emissions. In addition, California adds more new gas customers than any other state in the country. From 2013–2017 the state added nearly 250,000 new gas customers and in 2018 alone 75,000 new California homes (both single and multi-family) were built with gas infrastructure.

PG&E, one of the largest gas providers in the state, serves about 40 percent of the gas customers in California. Rather than continuing to expand a fossil fuel infrastructure network that is not aligned with California’s climate and air quality goals, the state should require all-electric new construction.

All-electric new construction in California is the right path forward, conferring several key benefits:

  • Reducing building sector emissions. Even with its current climate policies, California is not on track to meet its 2030 emissions reduction target. Electrifying new buildings helps close that gap and avoids making it worse. If the CEC requires new construction to be all-electric in the 2022 energy code, RMI analysis finds that the state would abate over 1 million metric tons of CO2 emissions annually by 2030.
  • Improving health and air quality. Fossil fuel appliances, especially gas stoves, emit pollutants known to harm health and increase asthma risk. One in eight Californians has asthma, and asthma rates are even higher in lower-income communities and communities of color. Furthermore, over 12 million Californians living with a gas stove are breathing levels of nitrogen dioxide (NO2) that would be illegal outdoors, while 1.7 million are breathing levels of carbon monoxide that exceed outdoor limits. These health risks can be avoided by building all-electric homes.
  • Improving affordability for consumers. Electric space and water heating can reduce costs over the lifetime of the appliances compared to fossil fuels. RMI analysis found that a new single family home in Oakland with electric space and water heating saves customers over $2,000 compared to heating with gas.
  • Reducing utility customer costs and investor risk. All-electric new construction would also help utilities like PG&E avoid investing in assets that will outlive their useful lives, since such assets are not aligned with the climate goals we need to meet in the next decade. PG&E’s estimated average cost to extend gas lines and service to one single family home is between $7,050 and $9,500. While most of the up-front installation cost for this infrastructure is paid for by the requesting customer, some of the costs are recovered in rates from all gas customers. These costs would be unnecessarily paid for over decades by customers or would risk becoming stranded for investors.
  • Developing the market for efficient, electric technology. By adopting an all-electric new construction energy code, California would solidify the state’s commitment to move away from fossil fuels in buildings. This would provide critical market certainty for appliance and equipment manufacturers, who can then help to grow the market and bring down costs for electric retrofits.
  • Supporting local governments. 30 cities and counties in California have adopted local building codes and ordinances for all-electric new construction in their jurisdictions, and 50 more across the state are considering following suit. By enacting a statewide all-electric code, the state would alleviate the administrative burden on local governments and show clear support for municipal climate goals.

To stay on track for a 1.5°C climate-aligned future, utilities and their customers cannot afford to invest in more gas assets for new buildings, and California’s largest investor-owned utility agrees. All-electric buildings are cheaper, cleaner, and healthier than buildings with gas, and efficient electric alternatives are readily available today. By supporting this measure, PG&E did the right thing for its customers and the climate (Editor: and may be responding to pressure from the left to take over the company and put it under public ownership).

** E3, April 2020

April 17, 2020

new E3 study for the California Energy Commission demonstrates why the state needs a transition strategy for its retail natural gas distribution system, as it aims to achieve its ambitious climate goals by midcentury.

Natural gas is an integral part of the energy system in California, with more than 80 percent of all homes connected to the natural gas grid. The question of how to reduce carbon emissions from natural gas use in buildings is thus a crucial one as California looks toward strategies for meeting its climate goals.

In this study, E3 evaluated two strategies for reducing carbon emissions from California buildings: building electrification and renewable natural gas. E3 found that building electrification is likely to be a lower-cost and lower-risk strategy for reducing carbon emissions from buildings in California. E3 also found that, particularly under a high building electrification future, customers remaining on the natural gas system could face disproportionately high costs in the absence of a gas transition strategy.

Customer utility bills over time in the High Building Electrification scenario with no gas transition strategy. As more and more customers exit the gas grid in this scenario, the relatively few remaining customers would have to pay higher utility bills to cover the fixed costs of the natural gas system. This issue could be mitigated with a gas transition strategy. (Bills include all electric and gas end-uses in the home, not electric vehicle charging.)

The study, which builds on E3’s 2018 deep decarbonization report for the CEC, used E3’s PATHWAYS model to evaluate economy-wide deep decarbonization scenarios and examine possible futures for the natural gas system. E3 also partnered with co-authors from the Advanced Power and Energy Program at the University of California, Irvine, to examine the costs of renewable natural gas and to evaluate the impact of these deep decarbonization scenarios on air quality.

The draft study results were first presented in June 2019 at a California Energy Commission public workshop and were subsequently finalized after incorporating feedback from stakeholders. E3 experts Dan AasAmber MahoneZack Subin, and Snuller Price contributed to this study.

September 2019 Gridworks Report on Transitioning Off Gas

In September 2019, the nonprofit Gridworks published policy recommendations in a related report, “California’s Gas System in Transition: Equitable, Affordable, Decarbonized and Smaller,” building on analysis of the PG&E system.

Gridworks’ report shows how a suite of local and state-wide policies resulting from California’s commitment to 100 percent clean electricity and carbon-neutrality are set to cause a significant reduction in gas demand in coming decades. At the same time, the cost of safely operating California’s gas infrastructure has risen in recent years, and is set to rise again as utilities seek necessary safety upgrades and investments.  

Without a strategy to transition the gas delivery system, the confluence of these two trends could cause harm to gas workers, low-income gas residents, gas-dependent industries, and the broader economy. Gridworks’ Report begins the development of that strategy, providing recommendations on how state and industry leaders can meet this challenge head on

Consistent with Gridworks mission to convene, educate and empower stakeholders to decarbonize electricity grids, this Report draws on a series of facilitated discussions between key consumer, labor, equity, utility and environmental stakeholders. These stakeholders provided invaluable input, without which this Report would not be possible.

The final report for this study can be downloaded here, and the appendices can be downloaded here.


UtilityDive, “California natural gas costs could spike as state decarbonizes: E3, UC Irvine

Los Angeles Times, “Cow poop could fuel California’s clean energy future. But not everyone’s on board

S&P Global Market Intelligence, “Calif. decarbonization may create thorny cost issues for gas systems” (paywall)

NRDC Expert Blog (Pierre Delforge & Merrian Borgeson), “Study: CA Needs a Safe, Managed Transition Away from Gas

NRDC Expert Blog (Merrian Borgeson), “Protecting Workers and Communities Requires Gas Planning

Environmental Defense Fund Energy Exchange Blog (Michael Colvin), “How to decarbonize California’s economy without breaking the bank

Environmental Defense Fund Energy Exchange Blog (Michael Colvin), “Strategies for smarter, cleaner buildings in California