Click the link to read the article on the Big Pivots website (Allen Best):
To be very clear, this is the biggest energy story of the year in Colorado, in my read.
State legislators in 2021 adopted several laws that will, in various ways, begin squeezing greenhouse gas emissions from buildings.
Now comes the implementation as the three commissioners from the Public Utilities Commission do their required public engagement in meetings held in various locations in Colorado. All available evidence suggests to me that this will come close to fist-swinging before it’s all done, at least of the wordy type. From what I hear, it already has.
I attended the second of the six meetings, the one at Montbello Community Center in Denver. It was a bilingual meeting structure designed for consumption by people who had mostly never heard of the PUC much less clean heat plans.
In Montrose a week later, people had heard of the clean heat plans – or least that an effort was underway to remove natural gas from buildings. According to a report in the Montrose Press, many were not in the least bit happy. “Public Utilities Commission gets an earful over Clean Heat Plans,” was the headline.
SB 21-264, which we’ll call the clean-heat law, requires Colorado’s four privately owned natural gas utilities – Xcel Energy, Black Hills Energy, Atmos and Colorado Natural Gas – to reduce greenhouse gases 4% by 2025 and then 22% by 2030. This is compared to emissions of 2015.
How can they do this? The law provides four ways for the utilities to do so in the heat-clean plans they must submit:
1) Demand-side management programs, especially including improved energy efficiency.
2) Beneficial electrification, meaning that gas use in buildings for space and hot water heating is replaced by electricity. One way of doing that is through addition of air-source heat pumps or, in original construction, ground-source heat pumps.
3) Improved efforts to reduce methane leaks from the natural gas infrastructure.
3) Recovered methane, such as from landfills, to supplement the methane extracted from wells;
4) Green hydrogen, which means made from renewable resources and after (but not natural gas);
5) Pyrolysis of tires, the recycling of tires to extract heat and energy, as is being considered at Fort Morgan.
The latter two are likely more difficult than the first three.
The PUC commissioners have until December to draw up the rules governing the review of these clean-heat plans.
I see four very, very big issues here:
First, this is a lot of work in a short time. “A heavy lift for utilities,” John Gavan, the PUC commissioner who presided at the Montrose meeting, said.
A Black Hills representative at the Montrose meeting said that the required reduction coming on top of demand growth means that instead of a 4% reduction it’s more like a 25% reduction. Nigh on to impossible, said Mike Harrigan, the Black Hills rep.
Second, the gas utilities are being required to radically change their business models and, in the case of three of them, to essentially make themselves less relevant. Xcel Energy will sell more electricity as it sells less gas. For Black Hills, which sells both gas and electricity, the trade-off is not as easy. It sells gas in Aspen, for example, but not electricity.
One of the attendees at Montrose summarized it in this way: “Let me get this straight,” said David Combs, speaking to the Black Hills Energy representatives. “The products you sell, you make money on, you’re trying to reduce and you’re giving people money to use less of it?”
There always has been a strange tradeoff between regulated utilities. They enjoy monopolies in their service territory in return for regulation. This was once reliable money. Utilities are now being required to be far more inventive.
Third, builders and real estate developers have been enjoying a subsidy as they build new subdivisions, the gas lines that are laid being subsidized by existing natural gas customers. At the end of the day, this may be the defining issue. High-spirited filings with the PUC began in December 2021.
Fourth, there are equity issues here as we squeeze out natural gas, replacing it with electricity. Who will pay for the aging natural gas systems? Like so many things, it’s likely to be those who can least afford to pay.
I mentioned the Montbello meeting. It was designed to reach out to an area that met the definition of a disproportionately impacted community. I can’t disagree, but I must say that I felt very marginalized. I struggle to hear well normally, and the choice of room configuration left me with my back to the speakers and trying — and almost entirely failing — to hear the English translation of what was being said in Spanish. My impression was that the meeting was designed with the intent of honoring the law, and it did achieve that. But one meeting alone will not achieve the real purpose with this particular group.
A meeting in Grand Junction was somewhat boisterous, I heard, which did not surprise me. The first filings of opposition to clean-heat plans in the PUC docket in this case were submitted by real-estate agents and others from the Grand Valley and Montrose. Weeks later they started arriving from places like Aurora.
Again, as Gavan identified in the Montrose meeting, the key issue here is the subsidy for gas lines to homebuilders. Nobody likes to lose their subsidy.
Sandy Head, executive of the Montrose County Economic Development Corp. told the Press that the cost of extending a gas line to a new house was previously $250 to $300 but will now cost $800.
This led to charges that it would become too expensive to live in a place like Delta County – which, with the exception of now pricey Paonia, remains one of Colorado’s least expensive places to live west of I-25.
Also balled up into this issue is the high cost of natural gas and the failure of Xcel Energy to adequately prepare itself for what happened in February 2021. Xcel ended up paying $600 million extra for high-priced natural gas. But there’s also the issue of Texans going without power – which some people, apparently, still think can be blamed on the dependency on wind turbines. (It was a part of the problem, but only a small part).
“We’re not going to shut off fossil fuel generation in the form of gas overnight,” Gavan replied, as per the Montrose Press account. “No, our plan is to add another gigawatt of combustion technology to back up renewables. It’s a balancing mix. As we transition, the resource mix will change. It will become very different, more intelligent.”