In a new report released today, economists at The Brattle Group identify strategies that gas utilities can utilize to become proactive and innovative participants in a clean energy future while remaining competitive.
The study, “Evaluating Strategies,” is the second in a three-part Brattle series, “The Future of Gas Utilities Series: Transitioning Gas Utilities to a Decarbonized Future,” which outlines the key challenges and opportunities the gas industry faces in decarbonizing and provides guidance on how utilities can navigate the transition in a fiscally and socially responsible way.
Almost half of non-electricity demand for natural gas – which makes up most gas utility sales – has a high likelihood of being electrified, while the rest lacks cost-effective electrification options. This presents both risks and opportunities for gas utilities. The Brattle study provides several strategies gas utilities can employ to decarbonize while also growing revenues. These include:
- Increase the performance of existing infrastructure and supplement its needs with non-pipe alternatives
- Secure financial life of infrastructure and reduce stranded cost risk
- Own and rate base some niches of gas replacement infrastructure
- Decarbonize gas supply and large uses with renewable natural gas (RNG), hydrogen, and Carbon Capture and Sequestration (CCS) technology
While gas utilities are well-suited to plan and implement large infrastructure transitions with help from these strategies, regulatory innovations are also needed for utilities to successfully invest in a clean energy transition. With this in mind, the Brattle study also outlines guiding principles that can help regulators and utilities establish a new regulatory framework.
“Well-designed regulation is a critical part of strategy. A new regulatory framework that enables utilities to decarbonize while growing their businesses is essential to enable a successful transition to a greener future,” noted Brattle Associate and coauthor Dr. Kasparas Spokas. “Utilities must work with regulators and employ well-designed strategies in order to enable solutions and mitigate risk, and that work must begin today.”
Part three of the series, focused on implementation of solutions and regulatory changes, will be released in mid-October and will be available on Brattle’s website. The series will culminate in a virtual symposium – bringing together Brattle and industry experts to debate key challenges and opportunities facing the gas industry – in November 2021.
“The Future of Gas Utilities Series” is authored by Principal Frank Graves; Associates Josh Figueroa, Dr. Long Lam, and Dr. Kasparas Spokas; Senior Research Analysts Tess Counts, Maria Castaner, and Katie Mansur; and Research Analyst Shreeansh Agrawal.