This article is adapted from GreenBiz’s newsletter Energy Weekly, running Thursdays. Subscribe here.
Two states on opposite sides of the nation have come to the same conclusion: They cannot meet their ambitious climate goals without electrifying buildings.
New York and California are often jockeying to be seen as leaders in the clean economy. Last week, duel announcements from the two public utilities commissions, the bodies that regulate the states’ electricity and natural gas infrastructure (among other things), revealed the “competition” is not very close. New York is winning.
A look at the states’ policies show the states have also, to this point, prioritized different approaches to spur on electrification. New York is focused on incentivizing fuel switching, while California is focused on restricting new natural gas. While both theoretically would get to the same targets — customers foot the bill for all-electric appliances, which ultimately will save them money on utility bills and help the state reach climate goals — the two policy approaches read differently to consumers.
New York is ‘pulling’ customers to electrify buildings
Last week, New York announced the New York State Public Service Commission approved an additional $2 billion for building electrification and energy efficiency programs. It also reauthorized $1.3 billion for existing programs.
The state estimates that the additional $2 billion investment will save consumers more than $13 billion on utility bills through 2025. Of course, consumers will get the savings only if they take advantage of the program; after all, their rates will increase either way.
This opt-in system means customers are incentivized to go electric, but the choice is theirs.
In total, the state’s earmarked funds for electrification and efficiency is a whopping $6.8 billion through 2025. Here’s a rough breakdown of the total allocation of funds, according to a release from the state’s website:
$1.2 billion will be devoted to energy efficiency measures and heat pump deployment, and $200 million will create “market development programs” through the New York State Energy Research and Development Authority (NYSERDA).
$1.5 billion will go to energy efficiency measures — which include upgrading to efficient, electric heat pumps and boilers — administered by the New York Power Authority (NYPA).
$500 million will help 1.1 million customers on Long Island electrify and become more energy efficient.
$3.3 billion will go to new and existing utility energy efficiency and electrification activities.
The funds aim to spur deployment of all-electric appliances in businesses and residents, which is key to New York’s strategy to reduce greenhouse gas emissions in the state by 85 percent by 2050.
“This historic investment shows we are aggressively pursuing clean energy alternatives to reduce our reliance on fossil fuels, growing jobs in clean energy industries and protecting our environment for current and future generations,” said New York Gov. Andrew Cuomo in a statement.
California is ‘pushing’ customers away from natural gas
Meanwhile, in California, most of the policy designed to spur on the electrification of buildings has come from cities and counties.
In 2019, more than 50 local governments across the state considered policies to restrict or heavily discourage natural gas infrastructure. The initiatives, by and large, focus on new builds, the most accessible lever for local governments concerned about the health and safety implications of building out new natural gas infrastructure.
The legislation has inspired other cities to explore restrictions, from Massachusetts to Washington state.
It’s worth noting that the two states’ current strategies aren’t in competition with one another. Both restrictions on existing natural gas and incentives for efficient, electric appliances are needed if the states are to meet their climate goals.
California’s electrification incentives are lagging
The same day that New York announced its new investment, the California Public Utilities Commission launched a new rulemaking to consider “the safety and reliability of natural gas infrastructure” in California while looking at how the state can wind down natural gas technologies.
To be clear, the two activities are not analogous; New York’s commission announced the allocation of funds, while California’s commission is just entering a bureaucratic process to listen to stakeholders. That in itself shows how much further ahead New York is in implementing policy.
The CPUC also voted to allocate $45 million to boost all-electric heat pumps last week — an important step, but a fraction of New York’s dedicated funds for a state that is 50 percent larger.
“New York really showed us up, frankly, in getting serious,” said Matt Vespa, an attorney with the nonprofit law firm Earthjustice, in a phone conversation. “California needs to look to New York and get it together to get the resources needed to make [the transition to all-electric buildings] happen.”
California has a goal of carbon neutrality by 2045 and an 80 percent reduction in greenhouse gas emissions by 2050.
“There’s no legitimate pathway to getting to climate goals without electrification,” said Vespa.
The ‘gas infrastructure’ death spiral
Another challenge in transitioning away from natural gas: figuring out how to unwind existing infrastructure.
As more customers transition to electric appliances, fewer gas customers will be stuck with the growing infrastructure maintenance costs, which already account for 80 percent (automatic PDF download) of residential gas rates in California and will increase in the coming years. The result could be more customers going electric, leaving even fewer people to shoulder the burden of costs.
“There was all that utility death spiral talk a few years back that never came to pass,” Vespa said. “That could really happen on the gas side.”
The CPUC’s rulemaking process is asking how to design for this very problem to hopefully handle it strategically. If left to happen organically, it could be more costly, and adversely hurt those least able to transition.
As New York transitions, it, too, will have to answer these questions.