Natural gas utilities can navigate the energy transition by following a three-step action plan, according to economists with management consulting firm The Brattle Group.
“Increased coordination among stakeholders — especially between gas and electric utilities, and between gas utilities and technology providers — is needed to ensure decarbonization is achieved in the most cost-effective way on a system basis,” said Associate Long Lam, an author of the firm’s Implementing Regulations study.
The Brattle economists said implementing a decarbonization plan is a long-term proposition that considers “system economics” through the lens of a gas utility’s political, regulatory and competitive environment.
The report authors argue that gas utilities need “to translate their long-term visions into short-term requirements that can be set in motion today with a three-step action plan.” The action plan components include:
- A “Pilot Projects and Experimentation” step in which gas utilities today seek regulatory approval for decarbonization pilot projects and demonstrations of emerging alternative gas technologies;
- A “Bridge Solutions” step over several years in which gas utilities, regulators and stakeholders would collaborate to expand traditional cost-of-service regulations, accommodating decarbonization goals with new planning criteria, participation rules and pricing;
- A longer-term “New Ways of Doing Business” step in which pilot technologies and exploratory services can become full-fledged business lines for gas utilities.
When the new business lines are in place, gas utilities could take several action items, according to Brattle. Potential actions could include updating evaluation metrics for new investments, gaining permission to selectively own non-delivery assets, coordinating decarbonization efforts with electricity businesses or electric utilities and expanding to less regulated markets where utilities can ease market development.
How Are Utilities Decarbonizing?
Citing expanded U.S. federal tax credits, Brattle last year deemed carbon capture and sequestration (CCS) an increasingly attractive decarbonization route for utilities. Utilities are also implementing the energy transition via measures such as purchasing renewable natural gas and reporting methane emissions.
Brattle said its most recent study — the final installment of its three-part The Future of Gas Utilities Series: Transitioning Gas Utilities to a Decarbonized Future — presents key challenges and opportunities for gas utilities in decarbonizing. The report outlines how utilities can navigate the energy transition in a fiscally and socially responsible manner.
“Access to capital, system planning processes and regulatory oversight will put gas utilities in a unique position to plan and implement the large infrastructure transitions needed in decarbonization, according to the study authors,” said Brattle.
Lam wrote the report with his Brattle colleagues Principal Frank Graves, associates Josh Figueroa and Kasparas Spokas, Senior Research Analyst Tess Counts and Research Analyst Shreeansh Agrawal. Former Brattle senior research analysts Maria Castaner and Katie Mansur also co-authored the report.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 | ISSN © 1532-1266 |