Driving end-use decarbonization is fundamentally about changing customer behavior which, by its nature, involves a lot of testing, learning, correcting, and scaling. We welcome great ideas on how to drive customer adoption, but we treat them as hypotheses that must be vetted and tested before we scale them. We also know we must align customer economics with desired policy outcomes in an equitable way by addressing the needs of the more vulnerable members of our society.
New England has very old housing stock. By some indications, over three-fourths of our stock was built before energy codes were in place. Interlacing weatherization and phasing out fossil-based heating fuels in our climate zone, where winter heating bills and electricity prices are high, is a particular challenge.
It’s tempting to suggest that we bundle weatherization and fuel switching. We hear this a lot. Yes – there is a segment of customers who will respond to that comprehensive approach. However, it is very difficult to achieve the scale we need by bundling the two. For most customers, these are discrete and large buying decisions.
Our current approach, understandably, emphasizes electrification. It provides significant near-term greenhouse gas benefits and prevents the sunk cost of keeping fossil fuel heating systems in place for the next 20 years. However, without weatherizing first – which has its own set of complexities – heat pumps, for example, become oversized for the coldest winter days, eroding their efficiency during milder ambient temperatures and putting more strain on the electric grid.
So, as a matter of policy, when it comes to meeting large decarbonization goals at scale in New England, what should we do? Should we distort the market to drive aggressive fuel-switching in the near term at a very high cost? Should we piggyback on more natural heating system replacement cycles, which may conflict with our desired 2030 goals, but could position us to achieve the 2050 ones more cost-effectively? A slower rollout of heat pumps, for instance, potentially allows space for a new generation of refrigerants to come into play. But how do we pay for all these changes and send the correct price signals that encourage customers to naturally make these transitions?
Large Commercial & Industrial
Over the last year, I’ve had the privilege of meeting with many of our largest institutional customers to discuss their thoughts and plans on decarbonization. What has impressed me is that, without exception, every one of them takes the issue of climate change very seriously and has committed to doing something about it. They are all at various stages of developing formal decarbonization goals and plans under the oversight of their boards. They all have an interlaced approach to decarbonization with three elements:
1. Execute on the no-brainers: These are usually focused on energy efficiency. They offer, by far, the biggest bang for the buck. Over ten years ago, we pioneered an approach to partner with these large institutional customers, leading to memorandums of understanding setting specific and aggressive goals, resource commitments, and execution plans to get there. This has been one of the most effective ways of driving institutional behavior change. The results show it. Customers reduced energy use by 20 to 50 percent in a few years.
2. Thoughtful and surgical electrification: Many of these customers own large portfolios of buildings of varying vintage and uses. They often find that partially electrifying multiple buildings is more cost-effective and has a higher carbon impact than the full electrification of fewer structures. This challenge has implications for the maintenance of existing fossil fuel-based systems for backup/peak shaving.
3. Exploration of solutions for full electrification: Most customers have some idea about how they could decarbonize by 70 to 80 percent, though they haven’t figured out how to pay for it. When it comes to the last 20 to 30 percent, the complexity skyrockets. They don’t have a line of sight into emerging technologies that could be used, while the implicit cost of carbon goes to multiple thousands of dollars per ton, making 100-percent decarbonization unrealistic.
Fully realizing end-use decarbonization in New England will be challenging. However, while we may not have a playbook for this challenge, we do have roadmaps from similar endeavors. That’s especially true if we look at how gains in energy efficiency have been made on the ground. We know how to drive solutions into the market at scale.
I like the three-tiered approach of our institutional customers. It allows us to move the ball forward, even as we allow for safe spaces to undertake necessary experiments and objectively assess results. We need to be honest with ourselves about what we know, be mindful of unintended consequences, and have faith in, and allow for, the price performance of technologies and solutions to evolve, even as we acknowledge that the current state may not be ready to scale.
Tilak Subrahmanian is vice president at Eversource.