Regional Assessment of Strategic Electrification

Transcription

1 Regional Assessment of Strategic Electrification NEEP Strategic Electrification Advisory Committee May 31, 2017 Asa S. Hopkins, PhD Synapse Energy Economics Philip Kreycik and Neil Veilleux Meister Consultants Group Synapse Energy Economics Inc. All rights reserved.

2 Defining Strategic Electrification Proposed definition: Switching energy end uses from fossil fuels to electricity as part of an integrated strategy for least cost deep decarbonization

3 Technology and Market Assessment

4 Fossil fuel use in NY and New England Asa S. Hopkins

5 Buildings: Market assessment MCG and Synapse built models to project the diffusion of heat pumps across each of the Northeast states Assessed stock turnover and sales models for commercial and residential buildings Considered key input assumptions (e.g. COP improvements, building heating demand, fossil fuels displaced) Resulted in key outputs, including (i) GWh of heat pump electricity consumption and (ii) quads of fossil fuel displaced Key Findings Growth of natural gas infrastructure is a key question determining the future trajectory of heat pumps Slow rates of building turnover and new construction leads to slow diffusion of HP tech Significant policy support will be necessary to accelerate deployment

6 Buildings: Space heat Electrification opportunity primarily driven by ASHP, although GSHP plays a role in new construction Competitive in markets dominated by delivered fuels, not natural gas Residential ASHPs are not always suitable as a full-building solution Loss of capacity in extreme cold Envelope must be very tight to make whole-home ASHP heating feasible Residents must learn new habits to maximize ASHP benefits Commercial Variable refrigerant flow is a growing option Higher natural gas penetration in large commercial buildings poses a challenge

7 Buildings: Water heat Opportunity in this sector is driven by HPWH replacements of electric resistance water heaters Competitive in markets dominated by delivered fuels, not natural gas Challenges Lower market share than renewable space heating Suitability limited by space and air circulation needs for the equipment, as well as the potential for them to impact space heating loads if placed in conditioned spaces Limited by slow turnover of existing water heating systems and emergency replacement cycles (replace on failure) Opportunities Recent technology improvements show promise Upstream rebates could accelerate deployment

8 Industry Process heat and steam dominate fuel use Electrification unlikely in CHP or where byproducts are burned (e.g. paper) Process heat: glass, iron, and steel Steel: Arc furnaces More targeted heat than combustion-based tech Steam: food and chemicals Replace heat from combustion with electric heat Resistance, electrode, induction, microwave Existing infrastructure dominates; transformation not governed by stock turnover Biofuels may be more attractive for facilities to reduce emissions Synapse Energy Economics Inc. All rights reserved. Asa S. Hopkins 8

9 Transportation: Light duty All about electric vehicles; smaller impact likely from mode shift to transit EV charging infrastructure build out as market grows How much public EVSE required? Uncertain Long-distance travel: fast charge Workplace and public EVSE necessary for those who don t have home parking (e.g. multi-family, street parkers) Customer economic proposition improving rapidly Battery costs falling and performance/range improving 1% of vehicle sales across Northeast today; doubled since 2014 Lots of new models coming in the next few years Possible synergies with autonomous driving and transportation as a service Synapse Energy Economics Inc. All rights reserved. Asa S. Hopkins 9

10 Transportation: Medium and heavy duty Electrifying rail Very costly, and freight sector has evolved to mix of rail and trucks Electric trucks Less mature tech than cars; pilot stage adoption 20-year vehicle life expected slow turnover Most freight is local (100 miles or less) Fleet-based markets Requires clear payback and proven technology Long distance? biofuels, efficiency Synapse Energy Economics Inc. All rights reserved. Asa S. Hopkins 10

11 Market Barriers and Policy Assessment

12 Market barriers Policy & Regulatory Barriers Tech. & Building Barriers Economic Barriers Awareness Barriers Decision- Making Barriers Supply Chain Barriers Fuel switching regulations in EE programs Fossil fuel subsidies Lack of economywide carbon pricing Low refurb rates Inadequate performance data Inadequate EV charging stations High installed costs Inadequate financing and ROI Capital constraints Lack of consumer awareness Lack of contractor education Split incentives Other priorities Consumers lack confidence Lack of certainty on incentives and pricing Insufficient contractor base Staff training for O&M Inefficient supply chain compared to competitors Many of these barriers also contribute to real or perceived investment risk, which drives up the cost of capital Synapse Energy Economics Inc. All rights reserved. 12

13 Regulatory context Utility energy efficiency (EE) programs are a critical and well-funded tool to pursue GHG reduction goals Four major EE program barriers hinder strategic electrification: Fuel switching rules EE programs generally cannot provide incentives to encourage switching fuels Policymakers are uncertain whether these restrictions can be changed to enable electrification Cost effectiveness requirements Utility incentives Consumer incentives for fossil fuel appliances Heat pumps may or may not be deemed cost effective in each state Electric decoupling removes incentive for utilities to push EV or HP tech Gas utilities will lose customers and may worry about stranded assets long term e.g. rebates for high efficiency condensing boilers While these may achieve short term EE savings, they lock customers into another years of fossil fuel usage Synapse Energy Economics Inc. All rights reserved. 13

14 Policy and program options Mandates & Targets Pricingbased options Marketing, Outreach, & Education Definition Mandates: obligations on private sector, public agencies, and utilities Targets: goals for deployment Policies that change costs of conventional and/or replacement technologies e.g. incentives, rate structures, or pricing externalities Efforts to raise local awareness among vendors, installers, and consumers Benefits Provides signals to investors If binding, can provide certainty on outcomes Overcomes upfront cost premiums Leverages private sector investment Can achieve economically optimal outcome Overcomes lack of awareness Strengthens commitment and interest from consumers Emerging Financing & Business Models QA/QC and EM&V Policies to encourage/enable new models such as 3 rd party ownership, ESCOs, mobility as a service, and standardization of financial contracts QA: ensure that technologies meet minimum workmanship and performance standards EM&V: assess energy performance Increases access to private sector innovation Overcomes upfront costs Simplifies consumer decision-making Increases consumer confidence by ensuring quality Unlocks PBI

15 Regional policy landscape - buildings VERMONT Integrated strategic electrification into 2016 comprehensive energy plan Rebates for residential ASHP and HPWH through Efficiency Vermont NEW YORK Released Renewable Heating & Cooling Policy Framework in 2017 NYSERDA developing rebate and higher-ed TA program for GSHP; targeting heat pump cost reductions Under Reforming the Energy Vision (REV), state must set social cost of carbon MAINE Significant uptake in residential ASHP/HPWH through Efficiency Maine rebate and financing programs (over 20,000 rebates FY14-FY16) MASSACHUSETTS Released Commonwealth Accelerated Renewable Thermal Strategy in 2014 Finalizing rulemaking to integrate renewable thermal energy into Alternative Portfolio Standard Rebates for ASHP, GSHP, and HPWH through MassCEC and Mass Save programs Solarize Mass will include heat pumps, EVs, and storage (Solarize Mass Plus)

16 Regional policy landscape - buildings NEW HAMPSHIRE Developed first-in-nation RPS carveout for renewable thermal (does not include ASHP) Some residential ASHP and HPWH rebates from individual utilities CONNECTICUT Released renewable thermal feasibility study in 2017 Heat pump rebates available through Energize CT RHODE ISLAND Released Renewable Thermal Market Development Strategy in 2017 Exploring workforce development programs to drive heat pump uptake (e.g. engaging delivered fuel dealers)

17 Regional policy landscape - transportation VERMONT Variable rebates for PHEVs and BEVs (Drive Electric Vermont) VT EV Charging Station Loan Program NEW HAMPSHIRE TOU rate through Liberty Utilities for EVs MAINE NEW YORK Variable rebates for PHEVs and BEVs (Drive Clean Rebate) Incentives such as free use of certain HOV lanes and discounted EZ-Pass Residential and nonresidential TOU rates for EV charging (ConEd) Rebates for EVSE installation (EV Charger Rebate Program ) CONNECTICUT Variable rebates for PHEVs and BEVs (CHEAPR). MASSACHUSETTS Variable rebates for PHEVs and BEVs (MOR-EV) Grants to businesses and government agencies for installation of EVSE (Level 1 or Level 2) through EVIP RHODE ISLAND Variable rebates for PHEVs and BEVs (DRIVE) 43,000 ZEV target by 2025 Goal: zero-emission rail by 2050.

18 Modeling

19 Reference case Electric consumption: Non-electric fuel use: GHG emissions: Asa S. Hopkins

20 All-in case Electric consumption: Non-electric fuel use: GHG emissions: Asa S. Hopkins

21 Policy case Electric consumption: Non-electric fuel use: Heat pump market: GHG emissions: EV market:

22 Sensitivities Enhanced vs. BAU efficiency: Heat pumps and natural gas Electric consumption: 89% vs. 98% carbon-free electricity: Emissions: Asa S. Hopkins

23 Grid and Consumer Impacts

24 Changing seasonal loads Asa S. Hopkins

25 Grid impacts Increase in energy supply required Transmission impacts: Get to the supply Integrate variable renewables Higher peaks, shifting to winter Distribution impacts Clustering -> new local peaks before new system peaks Controlling new loads Electric or thermal storage associated with new loads New loads as DERs to assist with grid management Addressing issues created by electrification or by other causes Asa S. Hopkins

26 Consumer impacts Shared infrastructure means shared impacts Electric load factor up Rate ($/kwh) relief possible in near term, if peaks are managed well Gas load factor down Increased rate pressure, risk of self-perpetuating cycle Equity issues Stranded cost risk Enabling infrastructure costs Who pays; who benefits? Asa S. Hopkins

27 Action Timeline

28 Actions Develop and grow electrification programs Examples: Expanding the use of explicit targets, goals, and mandates for electrification to create market certainty Launching or supporting marketing campaigns to increase customer awareness of electric options Supporting and expanding state, city, and/or utility incentives for EVs, heat pumps, and heat pump water heaters Expanding electric vehicle charging infrastructure, particularly in multi-family housing, workplaces, and fast charging for longer-distance travel Developing and scaling new financing models for cost-effective electric technologies Continuing data collection, analysis, and testing to characterize the performance of heat pumps, heat pump water heaters, and electric vehicles. Asa S. Hopkins

29 Thorny questions What are the appropriate roles for electric distribution utilities (including regulated EE programs) in fostering electrification? Do these roles require changes in the utility business model or regulatory paradigm? What rate structures would help to advance strategic electrification, and will advanced meters be deployed if they are necessary to implement these rates? If incentives are going to play a significant role in advancing electrification, where will the money come from? What is the future of the natural gas utilities and their pipeline networks? Asa S. Hopkins

30 Data and research needs Data on the market uptake and performance of heat pumps and electric vehicles Pilots on the control and capabilities of electrification technologies as grid resources Analysis of the capacity of distribution circuits to meet electrification needs before significant upgrades are required Analysis of power supply and transmission options for a very different seasonal load shape across the northeastern U.S. and eastern Canada Asa S. Hopkins

31 Thank you We welcome additional feedback, ideas, information, references, etc.! Synapse Energy Economics Inc. All rights reserved. 31