Fearing for Its Future, a Big Utility Pushes ‘Renewable Gas,’ Urges Cities to Reject Electrification

In the small town of Duarte, California, early this year, the state’s largest natural gas utility made what has become its standard pitch to city councils: If you care about climate change, stick with gas—because it, too, can be a renewable source of power.

Robert Cruz of the Southern California Gas Company urged the City Council to pass a resolution opposing any state regulation mandating “electrification” in buildings.

No such state rule has been proposed, but several cities have passed partial bans on gas-burning appliances in buildings, the company’s core market. And state legislators have introduced zero-emission building policies that SoCalGas is worried might lead to this same prohibition all over California as the state works toward its zero-emissions goal.

Fearing an existential threat may be on the horizon as California races toward a future without fossil fuels, SoCalGas has been exerting its financial and political muscle on multiple fronts, including in at least 40 local governments and inside one of the nation’s leading universities, to promote biogas—which the industry markets as “renewable gas”—as a better solution than renewable electricity.

“Natural gas doesn’t have to come from the ground,” Cruz told Duarte’s city’s leaders when he addressed them in February. “Just like electricity, it can be generated from renewable sources.” 

Biogas is methane that can be captured from landfills, wastewater treatment plants, wasted food and cow manure and then transported and used as fuel, just like conventional natural gas.

It is theoretically “zero emissions”—better for the climate than regular fossil fuel gas—because it prevents methane from going into the atmosphere, offsetting the carbon dioxide it emits when burned. But it is expensive, the gas pipelines that transport it are prone to leaking methane, and even the most optimistic projections say its potential availability is limited. 

According to SoCalGas, if the company were to mix a small amount of biogas into the company’s vast network of natural gas pipelines, it could significantly reduce greenhouse gas emissions from buildings at a lot less cost and inconvenience than switching to electric heaters, hot water heaters, clothes dryers and ovens. It is a claim that has been disputed by environmental scientists.

“I think we have to be honest about what we are really talking about when we are talking about biomethane,” James O’Dea, an analyst with the Union of Concerned Scientists, said. “It means a little bit of biomethane but a lot of natural gas.”

California has an executive order to get to net-zero emissions across its economy by 2045. To help reach that target, it passed legislation requiring the California Energy Commission to find ways to cut building emissions over the next decade.

“There is a growing consensus that building electrification is the most viable and predictable path to zero-emission buildings,” the energy commission concluded in a report in February.

Berkeley’s City Council outright banned natural gas in new low-rise buildings in July, and since then other cities including San Jose, Menlo Park, Palo Alto, Mountain View, Morgan Hill and Windsor have enacted, or are in the process of enacting, similar measures.

If appliances in more of California’s buildings were to go all-electric, by government mandate or market forces, such a move would cut deep into the company’s bottom line. Gas deliveries to houses, apartments and smaller businesses are the heart of SoCalGas’s business—the vast majority of its revenue is tied to building and maintaining the expansive network of small distribution pipelines that feeds these customers.

Electrification would mean that the nation’s largest gas utility could face billions of dollars in annual revenue shortfalls, while being saddled with stranded assets of more than 100,000 miles of underutilized pipes, according to a draft report released in October by the energy commission.   

“We are not in opposition to electrification,” Cruz of SoCalGas told the Duarte City Council. “What we are saying is we need the balance of all our energy choices in front of us, and natural gas is an important part of that prospect.”

Over the past year, Cruz and his SoCalGas colleagues have circulated a model resolution to city officials across southern California about the benefits of biogas. More than 100 towns and counties, including Duarte, have passed non-binding resolutions opposing any future state rule that might require electrification. The resolutions wouldn’t block state legislation, but they send a signal to legislators.

California Sides with Electrification

While biogas currently makes up less than 1 percent of all the natural gas it ships, SoCalGas sees it as key to its future. 

In March, the company announced plans to replace one-fifth of its natural gas with biogas by 2030, in part through a voluntary tariff program for its customers that would allow them to pay a premium to get biogas instead of conventional gas. (It was already required to invest in biogas infrastructure under a settlement with the state over one of the largest natural gas leaks in U.S. history, at its Aliso Canyon storage facility in 2015.)

“If you want to address climate change, you need to make gas more renewable, you need to replace fossil gas with renewable sources of gas,” George Minter, a SoCalGas executive, told InsideClimate News.

The climate benefit of capturing methane is well established. A recent report by the United Nations Intergovernmental Panel on Climate Change concluded that global warming cannot be limited to 1.5 degrees Celsius (2.7°F) without substantially reducing emissions of this potent short-lived greenhouse gas.

California officials support the use of biogas, but say the fuel would be better used in hard-to-electrify sectors of the economy—like aviation, heavy industry and long-haul trucking. Electrification is preferred for buildings, the energy commission concluded in its February report, because the grid is increasingly supplied by wind and solar electricity, and because super-efficient electric appliances are now readily available.

Biogas “is likely to be constrained by limitations” on its “availability, cost and ongoing methane leakage concerns,” the commission wrote.

Once the lowest-cost sources of biogas are tapped—from landfills, wastewater treatment facilities, food waste digesters and dairies close to natural gas infrastructure—the cost of additional biogas increases exponentially.   

Gaslighting on Biogas?

At the heart of SoCalGas’s argument for promoting gas over electrification is its claim that mixing even a small amount of biogas with conventional fossil gas would significantly reduce gas’s overall emissions.

In his presentation to the Duarte City Council, Cruz stated that just 16 percent biogas in the company’s mix would “achieve the same GHG [greenhouse gas] reductions as overhauling 100 percent of California’s buildings to all electricity.”

The 16 percent figure is one of several that comes from a 2018 Navigant Consulting report commissioned by SoCalGas, and is the one the company has highlighted in press releases and op-eds.

According to critics, the figure was derived by making assumptions and simplifications that overstate the climate benefit of biogas. One way it did that, they say, is by comparing the emissions gains of switching to biogas economy-wide to the benefit of electrification in buildings only. When it compared buildings to buildings, a much higher percentage of biogas—46 to 63 percent—was required to match the benefits of electrification, the Navigant report found. 

“That is not the same thing as what they are claiming, that 16 percent is equivalent to electrifying everything,” Pierre Delforge, a building decarbonization senior scientist with the Natural Resources Defense Council, said. “It’s a much more nuanced comparison that is being simplified in the way it’s reported.”

Even the 63 percent figure could be low, Delforge said. The Navigant report assumes that in 2030, clean energy sources will provide only half of California’s electricity. Since the report was written, the state set more stringent standards requiring that 60 percent of electricity come from clean sources by 2030, and 100 percent by 2045. (To account for this change, SoCalGas’s Minter told InsideClimate News the 16 percent figure should be adjusted to “a little less than 20 percent.”)

The Natural Resources Defense Council and the Sierra Club both criticized the report in detailed analyses filed with the California Energy Commission.

“The SoCalGas report systematically uses worst case efficiency and cost assumptions for electrification, and best case assumptions for gas, leading to a grossly misleading comparison,” the Sierra Club wrote in a critique submitted in 2018.

After the Sierra Club filed its comments, SoCalGas reached out to an institute at Stanford University that the company helps fund and asked if a researcher from the university would defend the SoCalGas commissioned report.

In an April 29 email obtained by the Sierra Club and provided to state regulators, Naomi Boness, managing director of the Stanford Natural Gas Initiative, asked her colleagues at Stanford if they would weigh in on behalf of the company. The email sought “a highly regarded energy resource scientist or economist” to respond to Sierra Club’s claims “in the form of a letter or op-ed piece, possibly followed by further research, if needed, and a peer-reviewed paper on this topic in the not too distant future.”  

Boness said her institute, which she confirmed receives $75,000 per year from SoCalGas, did not take up the request as it did not fit with their research agenda. “I was just forwarding this from SoCalGas as a courtesy to see if there was anybody at Stanford that would be interested,” Boness told InsideClimate News.

Christine Detz, a spokesperson for the company, said “it appears the request came from our R&D team.”

“I don’t understand why anyone would have an issue with asking researchers to examine the data and to provide a factual, scientific analysis,” Detz said.

Rob Jackson, a Stanford professor who is part of the university’s Natural Gas Initiative, said he was not happy with what he saw after viewing a copy of the email.

“No company or group should be able to buy research outcomes,” Jackson said in an email.  

A Scalable Climate Solution?

Apart from the controversial claims SoCalGas has put forward about biogas’s climate impact, there is also the issue of availability, raising questions about whether it could be a scalable climate solution.

The National Renewable Energy Laboratory calculates that biogas sources in California have the potential to provide just 2.7 percent of all natural gas currently used in the state.

SoCalGas’s Minter cites other studies that suggest biogas collected in California could provide as much as 16 percent of the natural gas used today. However, those studies include other forms of biogas, including hydrogen gas, that could be blended with natural gas in existing pipelines but are significantly more expensive to generate.

Minter said that going forward SoCalGas could also buy biogas carbon credits from farms or landfills producing biogas in other states or even other countries—for instance, from a dairy farm in Quebec that captures biogas, gas that is then used by the local utility in Quebec. The arrangement means that some of the biogas the company counts toward its gas percentage in the future in California may never actually enter the company’s own pipeline network.

Electrification Threatens ‘Financial Viability’

If there are sizeable cuts to natural gas sales, it’s unclear if SoCalGas could survive.

The same day Cruz spoke to the Duarte City Council, Sempra Energy, SoCalGas’s parent company, outlined the financial blow that swapping natural gas for renewable energy and electrification would deal to its business.

“A substantial reduction or the elimination of natural gas as an energy source in California could have a material adverse effect on [San Diego Gas & Electric’s], SoCalGas’ and Sempra Energy’s cash flows, financial condition and results of operations,” Sempra Energy wrote in a document filed with the U.S. Securities and Exchange Commission.

Gas sales to residential and commercial buildings are particularly important for SoCalGas. In 2018, deliveries to these two sectors— including gas owned by the company and gas transported for others—made up 42 percent of gas volume but 90 percent of gas shipment revenue, according to data submitted by the company to the U.S. Department of Energy.

“We don’t make money selling gas,” Minter said. “Revenues are generated from the rates we collect based on the cost of operating the pipeline system to deliver that natural gas.”

If buildings in California were to switch to all-electric appliances, natural gas utilities in the state would face a gap between the money they need to maintain existing gas infrastructure and money they receive from a dwindling number of ratepayers.

The gas utilities would face a budget shortfall of approximately $8 billion per year by 2050 if buildings were to electrify rapidly, according to the October draft report released by the energy commission. To make up the shortfall, utilities would need to increase rates for remaining customers by 480 percent by mid-century, according to the report.

The report notes that the rate hikes could drive more gas customers to pursue electrification, worsening gas company finances. “Such a feedback effect would threaten the financial viability of the gas system,” it concluded.

To help slow the growth of future financial obligations, the report recommends halting gas system expansions, as Berkeley and other cities are now doing.

Safety, and Now Climate Change

Just as electric utilities’ infrastructure is coming under greater scrutiny amid recent wildfires across the state, aging natural gas infrastructure has been a concern in recent years following catastrophic failures. Five years before the Alison Canyon gas leak released up to 109,000 metric tons of methane, forcing thousands of people living nearby to be relocated, a natural gas pipeline explosion killed eight people in San Bruno.

“Because of the San Bruno explosion, and then the Aliso Canyon leak, and other issues and [the] liability of energy in southern California in particular, it’s becoming evident that we need to really heavily invest in the natural gas pipeline system in order just to maintain safety and reliability,” said Bryan Early, the California Energy Commission’s chief of staff.

“At the same time, there is a relatively convincing argument being made that that gas pipeline system is probably incongruous with the state achieving its climate goals, and so we are going to have to reconcile those two.”  

For some cities, the decision has already been made.

“We have to move to cleaner sources of energy if we are going to have the emissions reductions that we want to reach,” said Ken Davies, deputy director of Climate Smart San José, a climate initiative of the city’s environmental services department. “There is really no other choice.”

San Jose currently gets more than 80 percent of its electricity from clean energy sources, Davies said. A pending ban on natural gas in new low-rise buildings could take effect as soon as January. “It makes sense right now to move away from a fossil fuel,” he said.

Top photo credit: Ralph Orlowski/Getty Images