Synapse Energy Economics and Meister Consultants Group NEEP Strategic Electrification Assessment WORK SCOPE AND SCHEDULE

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1 Synapse Energy Economics and Meister Consultants Group NEEP Strategic Electrification Assessment WORK SCOPE AND SCHEDULE Synapse will approach this work as a seven-phase project: Project Planning; Data Gathering; Market Barrier and Policy Landscape Assessment; Technology and Market Assessment; Grid and Consumer Impacts; Synthesis and Timelines; and Report and Presentation. They are structured to enable efficient execution of the project, while still recognizing dependencies among tasks. Note that the scheduled times for each phase overlap; this reflects the opportunity for parallel effort and the tight timeline for the project as a whole. Project Gantt chart Phase 1: Project Planning Schedule: March 13 to April 3 In this phase, Synapse and MCG will revise this work plan, participate in the Advisory Committee meeting on March 29, and revise the work plan based on feedback received. Key Meetings & Deliverables March 27 March 29 April 3 Preliminary work plan Advisory Committee meeting Revised work plan Phase 2: Data Gathering Schedule: March 13 to April 21 NEEP RFP Scope #1 and #3 This phase, which will begin while the work plan is being finalized, consists of the gathering of critical information required by the scope and necessary for the later stages of technology and policy analysis, as well as modeling. It reflects about 10 percent of the effort in the project. Phase 2A: Status of fossil fuel use in the Northeast Under this task, Synapse will conduct research of the current status of the direct use of fossil fuels by fuel type in the Northeast. The team will primarily rely on the data already assembled by Synapse in its

2 Multi-Sector Emissions Model (M-SEM), which aggregates information from EIA s State Energy Data System (SEDS), Residential Energy Consumption Survey (RECS), and Commercial Building Energy Consumption Survey (CBECS). We will use the most recent data from each of these datasets. The team will also rely on sector- and fuel-specific emissions data aggregated within M-SEM from EIA s state emissions database. Using the 2017 Annual Energy Outlook, the team will construct a business-as-usual estimate of future energy use and associated emissions for the Northeast. This scenario will incorporate expected levels of energy efficiency, renewable deployment, and electrification. We will use M-SEM to create transparent, readable figures and tables that convey the extent of electrification expected in the BAU case. Using these figures and tables, the team will craft a description of current energy use and emissions, as well as the future under a business-as-usual case, for incorporation as a chapter in the final report. Phase 2B: Literature review This task of literature review will start with the list of strategic electrification literature NEEP has already collected (the NEEP 2017 Strategic Project Resource Catalogue ), and expand it with additional studies Synapse and MCG know about or identify during the research phase. Examples of studies include economy-wide or sector-specific analyses of clean energy futures or specific technologies with expanded electrification for specific states, for regions, or for the entire country. This task will be conducted concurrently with Phases 3 and 4 where specific policies, technologies, and markets are examined for the building, industrial and transportation sectors. As we learn details of key information for each technology and market in new reports and databases, we will develop bibliographic entries for such resources. For each report that we identify as a key document, the Synapse team will summarize the scope and approaches taken for the report and most relevant information and findings as they relate to strategic electrification. We will develop a summary table and include various categories (e.g. analysis year, analysis type, sector, technology) to make it easy to search for resources. The annotated bibliography will be presented as an appendix to the Final Report. Phase 3: Market Barrier and Policy Landscape Assessment Schedule: April 3 to April 28 NEEP RFP Scope #2 and #7 For Phase 3, the project team will summarize existing legislative actions and policies related to strategic electrification of the heating and transportation sectors in the Northeast. The summary will map major market development barriers (including institutional and policy barriers) and then describe the impact of current and possible future local, state, and regional policies and programs on overcoming those barriers. As budget permits, the project team will also include an analysis of international policy best practices from three or four selected European countries (e.g. Denmark, Germany, and the United

3 Kingdom), which could be adapted to the northeastern U.S. market. This phase reflects about 25 percent of the effort in the project. Phase 3 will be led by MCG with targeted support from Synapse. MCG maintains an internal database of international best practices of over 100 heat pump and other renewable heating and cooling policies and programs, which it will use to inform its analysis. In building the policy landscape, the team will segment the markets; and they will also map applicable state targets or mandates to each of the relevant sectors. This will provide NEEP and the project team with a snapshot of current policy priorities. Policies will be organized across the following broad categories: (i) planning and targets, (ii) mandates, permitting, and other regulations, (iii) modifications to rate structures, (iv) incentives, (iv) financing and business models, (v) cost reduction tactics (vi) marketing and outreach programs, (vii) QA/QC programs, and (viii) other policy options (as needed). Private sector actions (such as Electrify America and other auto manufacturer programs) will be similarly mapped. To identify possible future policy options aligned with identified market barriers, the project team will conduct a comprehensive review of the literature, including utility dockets, state energy plans, city ordinances, and selected industry and academic articles. The project team will also leverage its own substantial experience. The team will draw upon recent experience with policies related to the light duty fleet, as well as recently designed procurement programs for alternative fuel vehicle options in the medium- and heavy-duty segments. Similarly, for the building sector, the project team will draw on its experience conducting policy analysis for ASHPs, GSHPs, HPWHs, and other electrical heating and cooling appliances. Approximately 15-page summary as a chapter in the Final Report Annotated bibliography of key existing policies for strategic electrification in the region, as an appendix to the Final Report Literature bibliography for inclusion in the appendix described under Phase 2B Anticipated/estimated policy impacts to inform the M-SEM policy case developed in Phase 6B Phase 4: Technology and Market Assessment Schedule: April 3 to April 21 NEEP RFP Scope #5 Informed by the data gathered in Phase 2, this phase of the project turns to detailed analysis of each of the pathways for electrification available to the Northeast. Once analysis of these technologies and practices is complete, we will aggregate them by sector and major subsector in order to identify the scale of activity needed in both energy and economic terms. This phase reflects about 20 percent of the effort in the project. Phase 4A: Technology and Market Analysis The goal of Phase 4A is to provide NEEP and its stakeholders with a detailed understanding of the technologies and practices needed to optimize the electrification transition, including market analysis to

4 identify economic activity levels and benefits. We will divide this analysis by sector: buildings, industry, and transportation. During this phase, the project team will also analyze the impacts and benefits of the diffusion of such technologies. The results of this assessment will directly inform the scale activity input into M-SEM modeling (Phase 6A). In addition to the overall assessment of the technologies and practices available for electrification, our approach to Phase 4A includes four primary subtasks: (i) research product lifecycle and turnover rates for key technologies across priority subsectors, (ii) research areas in which improved efficiency is already, or should be, embedded in electrification strategies, (iii) description of the potential relationships between electrification and public buildings and infrastructure, and (iv) research alternatives to electrification for sectors where fossil fuel use will be most difficult to electrify and describe alternative options for lower carbon fuels for those uses. To maximize value of the project team s research activities, the project team and NEEP will identify priority end uses and sectors (informed by the fossil fuel use data developed in Phase 2A), which will enable the project team to focus time and effort on the highest value sectors and end uses. Buildings Major end uses for strategic electrification in buildings include space heating and water heating, where heat pump technologies (air-source and ground-source) are the most promising. We will describe the technologies and practices necessary to electrify these end uses, along with the scale of resulting activity and energy use impacts. We do not anticipate extensive focus on other miscellaneous uses of fossil fuels such as cooking and dryers. The project team will provide NEEP with a summary of the product lifecycle for air-source and groundsource heat pumps (ASHPs and GSHPs), and heat pump water heaters (HPWHs) among other agreed upon technologies. This summary will map out the market growth potential for each of the technologies relative to common alternatives. Efficiency improvements and electrification should go hand in hand. Heat pump technologies are fundamentally more efficient than combustion or resistance-based heating systems, so fuel switching in this case simultaneously advances efficiency. Further increases in heat pump efficiency and the adoption of low-global-warming-potential refrigerants can further improve the emissions impacts over time. Heat pumps are also part of building systems: energy efficient building shells are a prerequisite for the optimal deployment of heat pumps. Proper installation and design practices are important to ensure the efficient and proper operation of heat pumps. MCG and Synapse will apply their knowledge of the costeffectiveness curves of electrification of space and water heating to provide recommendations for where improved efficiency will improve the net benefits of electrification in the building sector. As relates to public buildings and infrastructure, there are a variety of possible avenues for inquiry. Some possible directions include: Opportunities for leadership by example: Public entities can lead in the adoption of ASHP, GSHP, and other electric technologies that reduce fuel use in their own facilities. The team will describe concepts that will have the biggest impact on electrification.

5 Codes: Municipalities and states that adopt stretch codes and other policy incentives to improve building performance can take electrification into account in the design of those policies. Infrastructure planning: At the intersection of transportation and buildings, community land-use planning can take electrification of transportation options into account. Opportunities for critical facilities: Heat pumps can be integrated with solar PV and energy storage to serve critical facilities in the event of widespread power outages or fuel supply disruptions. For example, Boston has piloted such an approach using solar alone, through its emergency evacuation corridor. In examining opportunities for local leadership, Synapse will draw on its experience reviewing town progress under Massachusetts s Green Communities Act. We have identified two challenges to electrification in buildings and look forward to working with NEEP to identify more: the low cost of natural gas and the use of combined heat and power. Recent analyses show that unsubsidized heat pumps are not cost effective compared to natural gas (at current prices). Campuses and other users of combined heat and power (CHP) systems use fossil fuel combustion very efficiently today, and would face significant capital expense to shift to electric heat options. The project team will briefly summarize the issues and options that NEEP may consider as it develops a roadmap to serve these hard-to-reach market sectors. This will include a brief analysis of the applicability (or lack thereof) of electric technologies, and the pros and cons of potential alternatives. Industry Our analysis of the industrial sector will distinguish between direct use of fuels to provide functions including space heating, process heating, and process steam. We will discuss potential strategies to electrify these uses, including a description of the different considerations inherent in each type of fuel use and the technologies available to electrify that use. These technologies are expected to encompass a variety of methods to convert electricity to heat, including heat pumps, induction heating, resistance heating, and arc furnaces. The project team will also discuss examples of electrification that do not replace fuel use with heat, such as transitioning from distillation-based processes to pump-driven membrane-based processes, or heat-catalyzed curing to ultraviolet-catalyzed curing. We will discuss the potential of each technology to contribute to significant electrification of the industrial sector. In addition, we will work with NEEP to identify three to five key industries that both represent significant economic activity in the Northeast (or are rapidly growing) and consume large amounts of fuel for direct use. These industries may include traditional heavy industries (such as cement and steel production or pulp and paper manufacturing) as well as value-added industries (including processing of food, chemical, and biomaterial products). Our analysis of key industries for electrification in the Northeast, and the technologies and practices needed to electrify these industries, will be based on state-specific Bureau of Labor Statistics data and informed by reports from Department of Energy research laboratories. We expect the majority of electrification of industry to occur through retrofits rather than stock turnover. We will discuss the need for, potential of, and costs or benefits of electrification of existing

6 facilities. In addition, we will describe the potential for policy measures to ensure that growing industries are electrified from the outset. For each form of direct use of fuel, the project team will identify potential improvements in efficiency that can be captured through electrification. We expect that in many cases, electrification will enable increased industrial penetration of energy efficiency and demand response. For example, many electric heating systems have lower thermal inertia than combustion-based heating systems, meaning that they consume less energy upon startup and can cycle more readily in response to price signals such as timeof-use rates. We will discuss the potential for each key industry to participate in the region s existing energy efficiency and demand response programs. Finally, we will identify both forms of fuel use and particular industries where electrification will be most difficult (including the overlap with CHP, discussed above). For these cases, we will discuss the potential for use of replacement fuels to provide the same service with a reduced carbon intensity and for fuel efficiency to reduce overall fuel usage. Transportation Our analysis of the transportation sector will distinguish between light-duty vehicles (LDVs) and nonlight-duty vehicles. It will include discussion of the potential interactions between electrification and switching between modes (e.g. increased use of electrified public transit). We will perform a detailed and targeted analysis of the technologies and practices needed to transition light-duty passenger vehicles from the current internal combustion engine (ICE) stock to plug-in electric vehicles (EVs). Given the accelerating pace of EV adoption in the present day, replacement of ICE vehicles with EVs is one of the most promising technologies available to enable a transition to electrified transportation. The non- LDV analysis will focus on electrification of mass transit (especially bus and rail) and freight. The team will confer with NEEP to finalize the list of subsectors to assess and how to prioritize them. Our analysis of light-duty passenger vehicles will focus on replacement of ICE vehicles with EVs, and it will be largely informed by the EV adoption model developed for our RGGI Opportunity work. We will analyze EV adoption based on an assessment of stock turnover. The project team will rely on literature reports from federal and regional authorities to estimate of the rate of stock turnover of ICEs and assess the potential of EVs to capture increasing amounts of the light-duty vehicle market through the normal course of turnover. From a broad transportation systems perspective, more efficient utilization of vehicle assets (e.g. from increased usage of ridesharing) concentrates more miles on fewer vehicles, enabling cost-effective replacement with electric cars. In addition, from its work with procurement of medium- and heavy-duty fleet vehicles, MCG understands the relative timeframes on which fleets tend to replace existing vehicles. This analysis will also discuss the activity levels necessary to achieve EV adoption through stock turnover and the benefits associated with this transition. The project team will rely on industry and scholarly reports to assess potential improvements in EV technology that may reduce energy requirements, maximize net economic benefits, or reduce barriers to adoption. These improvements may include decreases in vehicle cost and increases in vehicle efficiency; increases in battery cycle life and duration; and advances such as wide adoption of

7 autonomous or self-driving vehicle technology, which may reduce the overall number of vehicles necessary to provide transportation service. The project team will describe the requirement for charging infrastructure as a necessary accompaniment to EV adoption. Installation of charging stations is expected to be the main impact of EV adoption on buildings and infrastructure. The public sector can also lead by electrifying its own fleets. We expect electrification of public transit to be a key component of integrating electrification with continued efforts to reduce single occupancy vehicle use. We will also integrate consideration of landuse planning that is compatible with that electrified transit and possible shared autonomous vehicles. Finally, we will describe circumstances in which use of ICEs will be most difficult to convert to use of EVs. Some non-ldv applications in the transportation sector will be difficult to electrify in the absence of significant market changes. In these cases, the team will build on its knowledge of the vehicle upfitting and retrofitting industry to recommend applications of lower carbon fuels that can significantly reduce overall greenhouse gas emissions. The team will describe the magnitude of potential greenhouse gas savings from alternate fuels in these cases. for Each Sector (Buildings, Industry, and Transportation) Text suitable for inclusion in the Final Report, totaling about 15 pages across all three sectors Quantitative estimates of the potential and timing of each considered technology for integration into M-SEM modeling Sector-specific appendices including inputs and assumptions used to arrive at the quantitative estimates Annotated bibliography entries for key resources, for inclusion in the appendix Phase 5: Grid and Consumer Impacts Schedule: April 10 to May 5 NEEP RFP Scope #6 and #8 Impacts on the Grid This phase reflects about 10 percent of the effort in the project. As electrification of additional loads becomes more common in the Northeast, there is the potential for a substantial impact on peak loads and baseline power consumption for both the regional grid, as well as local distribution networks: ISO-New England and NYISO: Impacts on the regional grid can be measured in terms of increasing generation and transmission needs. To meet carbon reduction goals, new generation resources must consist of a large portion of clean energy resources. Planning practices and resource procurement processes may need to evolve to better manage higher penetrations of variable resources. Local distribution grids: Electrification of household heating and transportation may result in the need for significant upgrades to local distribution infrastructure. For example, home EV charging systems can draw nearly 50 percent more power than even the most energy-intensive residential appliances. Faster commercial charging can require significant infrastructure upgrades.

8 New flexibility and storage: Electrification also opens the opportunity for new flexibility and storage. Electric vehicle batteries can be a grid resource; and heat pumps can store heat in homes or water. For this phase, the project team will describe the potential impact of electrification on both the regional and local grid. Impacts on Consumers Upgrading the grid to accommodate additional load is a costly undertaking. Without adequate forethought, the impacts on customers could be substantial. However, these impacts can be mitigated through the adoption of innovative planning practices, advanced distribution management systems, and the strategic use of distributed energy resources (including the very devices that are driving electrification) for demand management and load shaping. Electric rates could even fall if sales increase faster than peak demand rises. We will explore mechanisms for maximizing the net benefits of electrification to customers, including how customers can be active participants in the future grid. For example, distributed energy resources can provide the opportunity for customers to both better manage their electric bills and contribute to high-quality electrical service by consuming, generating, storing, and conditioning power using distributed energy resources. Care must be taken, however, to ensure that all customers can access the benefits associated with strategic electrification. The project team will include a discussion of strategies that can help to reach low-income customers and other under-served communities, and equitably allocate costs. Approximately 8-page summary as a chapter in the Final Report Annotated bibliography of selected case studies for modernizing the grid and protecting customers to be included as an appendix to the Final Report Phase 6: Synthesis and Timelines Schedule: April 17 to May 12 NEEP RFP Scope #4 and #9 The estimates from Phase 4 of the scale of activity in each sector will feed Synapse s M-SEM model, which will put them in the context of energy efficiency and the shift to low-carbon electricity supply. The result will be an estimate of the scaling of electrification necessary to meet state and regional carbon reduction goals. This phase concludes the analysis work in the project by identifying key actions and milestones over the next 15 years. This phase reflects almost 20 percent of the effort in the project. Phase 6A: Scale, Scaling, and Modeling The consulting team will synthesize the policy, market, and technology information developed in Phases 3 and 4 and integrate it into M-SEM scenarios. This will include the business-as-usual estimate

9 developed in Phase 2A, as well as a policy case, which will estimate energy and emissions impacts of deploying electrification in the sectors and at the scales estimated from this analysis. Importantly, the policy case will clearly identify the technology pieces by end-use sector required to meet state and regional GHG reduction goals through These electrification technologies will include the technologies and practices identified and analyzed in Phase 4. This analysis will include a development of the scaling and timing likely for each technology. In addition, our modeling will estimate the economic and environmental costs and benefits of an electrification transition, using the costs and benefits of each technology developed or estimated in Phase 4. Alongside a quantification of electrification impacts, our policy case will incorporate the expected levels of efficiency and renewable energy deployment that will allow the states and region to achieve their 2050 GHG reduction goals. M-SEM will allow the consulting team to assess the interplay of deploying these three emission reduction strategies (electrification, efficiency, and clean energy) simultaneously. The consulting team will use charts and figures resulting from this analysis and develop a narrative discussing the possible scale of electrification and the scaling of electrification strategies over time on energy use and emissions. This will include a discussion of the relative impact of electrification in a policy future in which substantial efficiency and renewable strategies are also deployed. Phase 6B: Transition Timeline This task will pull together the policy analysis from Phase 3 with both the technology assessment in Phase 4 and the M-SEM modeling in Phase 6A. Based on this, we will identify areas of policy, program development, and research that should be started over the next five, 10, and 15 years in order to stay on the path to a complete transition to meet carbon reduction goals by M-SEM modeling will enable the team to identify key dependencies and interaction effects, while taking into account the stock turnover times, barriers, and policy interventions identified in the earlier phases of analysis. Where uncertainty limits our ability to identify appropriate policy or programmatic actions, we will identify the information gaps for future work. The concluding section of the Final Report will be crafted from this analysis. It will also include Identification of key open research questions that could be used to guide future work. Phase 7: Report and Presentation Schedule: May 8 to July 14 In this phase, the Synapse team will bring the outputs from each of the previous phases together to deliver a draft report, discuss that draft report with the Advisory Committee, present the results at the Strategic Electrification Summit, and revise the report based on feedback received.

10 Phase 7A: Assemble the draft report In this phase, the Synapse and MCG team will assemble the written outputs of each of the previous tasks and build a coherent and cogent whole. The team will deliver a document of about 50 pages, including an executive summary, which will support a regional discussion of electrification with NEEP and other stakeholders. It will also serve as the framing document for the Summit and for continued regional dialogue on electrification as a critical component of decarbonization. The report will be aimed at an engaged and informed, but not necessarily expert, audience and use clear language, infographics, Sankey diagrams, and other visual means to maximize the accessibility of the report. Phase 7B: Presentations The Synapse team is excited by the opportunity to present the results of our work to the Advisory Committee shortly after the draft report is complete, and to the Strategic Electrification Summit on June 29. We anticipate incorporating Advisory Committee feedback into the design of the Summit presentation. At the Summit, we will present the report and take questions. In addition, the budget includes time (billing a half day each) for three additional team members to attend the Summit and assist NEEP by acting as resources in group discussions. We will work with NEEP to refine how the team can best contribute. If this assistance is not needed, the effort can be reallocated earlier in the project. Phase 7C: Final report Following the Summit, our team will revise the draft report based on feedback received at the Summit and from the Advisory Committee. Key Meetings & Deliverables May 22 Late May June 29 July 14 Deliver a complete draft report Present draft report to the Advisory Committee Present report at the Strategic Electrification Summit, with staff support for stakeholder discussion Submit final report to NEEP