Neighborhood Electrification

Galen Nelson
Well, good afternoon, everyone. Welcome to my guest, Mike Walsh with Groundwork Data, and everyone joining today at MassCEC and beyond. This is our fourth edition of this MassCEC Speaker Series, in which we are highlighting experts, pioneers, and practitioners from a variety of existing and emerging climate tech sectors and disciplines, as well as subject matter experts who can provide insights into broader economic, social, and technological dynamics shaping our industry. Today, we are going to talk about neighborhood electrification. I am really happy to welcome you, Mike, and your firm Groundwork Data. You have done a lot of work in this space, including for us here at MassCEC and for our colleagues at DOER. But before we jump to Mike, as I do each and every time we hold this series, I am going to set the table for our discussion today briefly.

Galen Nelson
There are a number of factors that have driven interest in neighborhood scale electrification. Mike is going to dive into a few more, but I wanted to just highlight a couple that I think are particularly noteworthy. First, as many listeners to the series are aware, Massachusetts and other leading climate states have adopted an electrify everything approach to meeting our greenhouse gas emission reduction requirements. In the built environment, particularly existing buildings present enormous challenges in this regard, but also opportunities for electrification. As air source heat pumps, and to a lesser extent, ground source heat pumps gain market traction, driven by consumer interest in cooling, generous Mass Save incentives, and a gradual recognition of the performance and efficiency benefits of heat pumps. But left to market forces and equipment turnover rates, we will continue to need to maintain two large, expensive energy delivery systems in the state, our gas distribution network of pipes and our electric grid.

Galen Nelson
Complicating matters here in the northeast are substantial portions of the 21,000 miles or so of gas pipelines that serve our homes and businesses. Many of them are old and leaky. The state created the GSEP, or Gas System Enhancement Plan, structure to enable the gas utilities to accelerate replacement of leaky pipes. This work is necessary, but it is also quite expensive. Years ago, the state of Massachusetts and other states began to explore this question. Rather than passively observing a slow and steady but geographically random transition to building electrification, what if the utilities working in close partnership with customers, with communities, were to target electrification at the neighborhood scale? Could some of those GSEP investment dollars and related costs be avoided? Where might shared systems like the networked geothermal project that is now up and running in Eversource territory in Framingham make sense? Where might individual building solutions be a better fit? How would such neighborhood electrification efforts impact the local distribution grid? We started to ask ourselves many of these questions. Then we were delighted when we crossed paths with Mike, because not only had he begun to think about these questions, but Mike, in fact, you had begun to develop a tool that could help utilities, communities, and regulators think strategically about neighborhood electrification. That is the high-level overview, and I know Mike is going to provide some more. Let us start with some basics. Mike, how did we get here? Even stepping back before we get into neighborhood electrification, how and why did natural gas consumption expand so dramatically over the last 20 years? Looking ahead, what technology and macroeconomic forces do you anticipate will impact gas customers over the next 10 to 20 years? Thanks again for joining.

Michael Walsh
Galen, thank you for having me. I really appreciate being here today. It is a great way to kind of finish up a busy month. I have three young kids, and I am about to head off on vacation next week. I am excited to take today to talk with this group. I am really glad that you assembled this group of really bright and talented people in this space. I am looking down some of the names of the attendee list, and I am really excited to share some of our thoughts and lessons from these exercises with this group today. Thank you to the folks at the state for being helpful collaborators, both in DOER and at MassCEC, on some of this work over the past number of years. These are very challenging problems to have, particularly here in a place like Massachusetts with a cold climate, old building stock, and old gas system. It is really great to see a state like Massachusetts really try to take the lead on a lot of this stuff.

Michael Walsh
Going now to this question of how did we get here? To this point, I am going to bring up a slide for a minute and talk about history. Galen, you asked what the past twenty or so years has looked like in gas. I think it is helpful to go back a little bit before then. Prior to about 2005, gas and oil in the northeast were relatively the same price. We actually had a very expensive gas system. A lot of customers were relatively happy on oil and did not necessarily see a need to change. But starting around 2005, the market dynamics tended to shift pretty dramatically in favor of gas. Not only the market dynamics, but the social objectives and the policy objectives around energy and heating, and what fuels to heat with. During that time, we saw the emergence of hydraulic fracturing technology and directional drilling which unlocked cheap gas in areas such as in Pennsylvania and elsewhere across the United States that really turned the US into a powerhouse in producing low cost, cheap gas supply. Around the same time, we have a very old gas system here in the northeast, built out over a century ago in many locations. Since then, there actually had not been a lot of investment made into it. Before GSEP, which is a program that you mentioned earlier, this gas safety enhancement plan effort to modernize the gas system, utilities were not spending a huge chunk of change on the gas system, keeping costs relatively low so they could compete and bring in new customers from oil.

Michael Walsh
Then around the same time, you started to see a couple of things happening. Gas companies started to market more and encourage more steady growth in customers, which led to the averaging or the distribution of costs across a large customer base leading to lower average cost per customer. Same time, climate concerns started popping up, and gas was considered a bridge fuel for moving customers off of more carbon intensive oil. Gas was the only option at that time for delivering greenhouse gas emissions reductions, and so policymakers adopted it as a strategy to drive forward on their climate goals back then. Again, during that time, gas was seen as the premium product. It was easy to hook up to. You had it directly going into your home. You did not have to worry about your tank getting refilled, and people liked cooking with gas. During that period, it was considered the premium cooking fuel or the premium cooking source at that time.

Michael Walsh
Fast forward to today, or really after 2020, is really when this pivot evolved. Supply remains historically cheap again, due to fracking. But we now have a more global gas market because of LNG exports in the United States. We built up more LNG export terminals. We are also looking forward to the future and seeing a lot of demand on that gas supply pushing up costs. That demand is largely coming from data centers right now. Gas rates are steadily increasing due to cumulative investment needs. There is about \$15 billion in pending capital investment in the GSEP program right now that will be spent over the course of the next 15 or so years. That is another big dig here in Massachusetts. It is very concerning that we are spending that level of money when we are talking about phasing out gas and moving beyond gas in the Commonwealth. We are seeing lower growth and declining consumption as new customers hook up. They are more efficient, and that is leading to a concentration of system costs on a shrinking customer base. On the climate front, we are shifting into high gear now and trying to move as fast as we can on climate, and that means taking advantage of electrification as a heating strategy and moving beyond the combustion of fuels on site.

Michael Walsh
Finally, this new technology out there, whether it be the modularity of the heat pumps, like they have in the unit right behind me, or the fast, powerful cooking of induction stoves, leads to distinct value propositions that are encouraging more customers to shift over to those electric technologies. What this spells out going forward is right now we have these three converging disruptors of the gas system. First off is the system cost, aging pipeline, \$15 billion needed over the course of the next couple of decades, driving up the cost of the gas system overall. At the same time, climate policy shifting customers away, shifting demand down, and competition from new fuel sources is driving forward. Driving forward gas demand, sorry, driving customers to move off of gas. I apologize, it is a school day. My daughter is showing up to say hi, back to the pre-Covid days. To really sum this up, what is happening is we have a growing cost of the gas system being concentrated on a declining customer base and declining consumption, driving up gas rates over the course of time. This is a big concern for us going forward. We can just stall for a second.

Galen Nelson
Yeah, sure. I think that was a really helpful overview that Mike provided. We are going to pivot now to talk a little bit about some of the steps that the state of Massachusetts has taken to set us up for progress in this area. In no particular order, beginning with the DPU\'s Future of Gas docket 20-80, that, of course, set forth a new agenda and perspective on a slow but steady move away from gas. I suspect that Mike will jump in on that a little bit more. That included permitting the investor-owned utilities to move forward with some networked geothermal pilots. I mentioned the Eversource networked geothermal pilot in Framingham earlier. Then hot off the presses, the gas utilities have released their CCPs or Climate Compliance Plans. Those are some of the relevant regulatory frameworks, the ways in which the Commonwealth has begun to try to advance neighborhood electrification and move us toward a more strategic approach with regard to moving away from gas. Perhaps, Mike, you can weigh in a little bit more on the relevant regulatory frameworks.

Michael Walsh
Thank you, Galen. Apologies for that everybody. We have the grandparents over today watching the kids, and they are not used to watching all of them all at once. I think, just to highlight, again, going back to the slide that I previously showed, this concern about rising cost, and particularly those rising costs being concentrated on a customer base that is less able and less capable of moving beyond gas, it really has prompted states such as Massachusetts and regulators, such as our Department of Public Utilities, to take a look at more steps to managing this transition and avoiding an unmanaged exodus of customers from the gas system. What this involves, and Galen alluded to some of this a moment ago, is enacting new rules for utility investments and cost recovery. This is the whole point of the concept of non-pipeline or non-gas alternatives. When a company needs to invest in the gas system, whether it is to replace a pipe or deal with a reliability concern in part of it, they need to now look at strategies that are not those large traditional investments. Those strategies could include moving customers beyond gas and moving a certain set of customers beyond gas, such as those in a whole neighborhood, if you are trying to avoid replacing a leak prone pipe.

Michael Walsh
What that also needs to drive actions like that forward is more coordinated decision making by policymakers and utilities, a more engaged and proactive approach to utility planning across both the gas and electric sectors that we have not seen in the past. Historically, there has been some regulation, but utilities are left to their own devices in terms of infrastructure planning investments. That is oftentimes checked by the regulator. But now, as we are talking about trying to strategically make decisions across both the gas and electric sectors, as well as really trying to integrate resources that we may have to decarbonize, such as thermal resources to support thermal networks, or really large scale efforts to improve the building stock, that requires more coordination. What some of that coordination may evolve is more support from the ground up, particularly at the municipal level. I think here in Massachusetts we have this great tradition of municipal leadership. One example of that is the ten fossil fuel free community pilot program being run by DOER right now, in which those pilot communities are advancing a net zero building energy code. How can we take that framework and apply it now to the gas transition? That is really the crux of trying to take a more active and proactive approach to asking where the opportunities to move beyond gas are in a cost effective and strategic way.

Galen Nelson
I am glad you called that out, Mike, because it is worth underscoring that once you start talking about electrifying more than one building, by definition you are beginning to talk about a community and engagement with town or municipal leadership. You are starting to impact multiple households, potentially businesses. There are planning implications and impacts on communities. I am glad you mentioned that. In addition to 20-80 acknowledging that existing buildings are our greatest challenge, I suppose it is also worth briefly hovering on new construction where, thinking about DOER on the regulatory side and the stretch code, my understanding is that now it is going to make a lot more sense for new construction to move forward without gas, in the absence of gas. I guess, at least on a new construction side, would you also agree that is a driver?

Michael Walsh
Certainly. Right now, it is actually very much under consideration. In this sort of managed gas context within that Future of Gas investigation, DPU docket 20-80, the DPU actually looked into, or is looking into, revising its policy around line extension allowances. In the past, to encourage customer growth, utilities were allowed to grant new customers access to the system and cover part of the cost of connecting some of those customers to the system, with the assumption that those customers would pay off that cost over time. That strategy worked under a growing system. But as we are shifting to a system that is in decline, which now different types of customers are coming onto the system that are more efficient, use less gas, they may just use gas in a backup arrangement. That creates a lot more uncertainty about those future costs being recovered, being paid back by those customers. The department is looking into strategies to help manage that by revising that line extension allowance policy.

Galen Nelson
That makes sense. I think part of what is really interesting about this challenge is that it is so multifaceted and involves simultaneous consideration of both gas and, you mentioned this briefly, gas and electric distribution infrastructure. If you begin to electrify a neighborhood that was relying in part on gas for space and or water heating and cooking, of course you are going to impact the grid. This involves and requires greater coordination between the electric and gas utilities. I think that is an interesting component of this aspect of the transition. Assuming a gas utility is incentivized now to explore NPAs, and they are under 20-80, what are some of the variables that must be considered that inform, and I think this is beginning to get into the core of your work, but that inform how and where a gas utility might begin to prune, as it were, its existing gas network to facilitate a transition to building electrification? How would a utility optimize for cost, while, and it is important to underscore, the gas utility needs to maintain a safe and reliable system. You cannot just shut off willy-nilly certain parts of the gas distribution system without potentially incurring negative impact. I know that you and your team have thought a lot about this. You conducted a study along these lines with DOER that, I think, is excellent. It would be wonderful if you could just begin to get into that study a little bit. What are some of the scenarios that you looked at? You looked at a couple of different street segments, I believe. I think it would be great to get into the mind of your utility. How do you think? What are all the different things you need to consider as you begin to think about neighborhood electrification?

Michael Walsh
Thank you, Galen, for highlighting that work. It really helped us to set the stage for thinking about this problem. I will start off by bringing up an example here not too far from where I live. This is a dead-end street. You asked about where can you do this in a way that is not willy-nilly, that will not impact other gas customers that are out there. Dead end streets are a pretty clear, logical place to start if you are talking about this question of pruning the gas system because it really will not affect demand or affect any other customers beyond those on the street. This is a street not too far from where I live in Arlington. It has been identified in this year\'s Gas Safety Enhancement Plan, or GSEP, for National Grid, and they identified it as a potential non-pipeline alternative. The reason why it is in the GSEP is it is a century old part of the gas system, cast iron pipe. There was a leak that popped up here a couple of years ago, which bumped it up as a riskier pipe that they wanted to watch out for, so they put it into this year\'s Gas Safety Enhancement Plan. It is a street that only has seven homes, but the whole project cost for replacing the gas pipeline on the street is almost half a million dollars or approaching about \$70,000 per home. There are going to be a lot of elements that really go into making a decision around that. This is a really big, standout example of what you could consider something that is easy to, quote unquote, prune from the gas system. Again, it is a branch, it is a dead-end branch, and it has a high cost per customer to replace that gas pipeline. There is some concern about not being able to implement that NPA in the near term, given the risky nature of this pipe. It is trying to balance an understanding of when and where the opportunities are to move customers beyond gas. When you are factoring in the operation of the gas system, it does not only just, whether it is a major part of the gas pipe, you cannot take that out. You have to target areas such as this, which are the tendrils, the branches of the gas system. Where there are leaks, if there is a lot of leaky pipe on a street like this, there might be an urgent need to replace it, and you might not be able to implement a targeted electrification project on this street. We do know that just going down there and talking to a couple of the neighbors, at least two people are interested in renovating their homes and potentially moving beyond gas in the next couple of years. That is going to bump that average cost per customer up.

Michael Walsh
To summarize, some of the key issues that we are looking at here are this question of, can you prune this off of the gas system? That is a big chunk of the study that we are doing right now for MassCEC in partnership with folks over at DOER as well. Also, what is the cost effectiveness of it? This does appear to be a larger opportunity from a cost-effective standpoint. Finally, what are the impacts to the grid? As you mentioned, in our space right now in the northeast, we are a summer peaking grid. Most of these homes are using more electricity in the summer for cooling, and so there is plenty of headroom on the grid in a lot of these locations right now. If you electrify streets, at least in the near term, there is plenty of headroom on the grid. You can add, in this case about seven homes, without too much problem. You might have to add a distribution scale transformer or two to one or two of these poles just to upgrade what is available on the street. The local electricity supply, the feeder from the substation into here, should have plenty of headroom given all that. It is integrating those three elements of the operations of the gas system, the operations of the electric system, and the cost effectiveness, which depends upon both the gas and electric system, as well as what is needed to get the building stock to move beyond gas.

Galen Nelson
This might be another advantage of, in addition to little traffic, living on a dead-end street is that maybe you are a good candidate for neighborhood electrification.

Michael Walsh
It might be, but I want to emphasize that it is not just limited to dead end streets. We are building out some of the models of the gas system right now and seeing that the opportunities for pruning the gas system are much larger than you would think out there.

Galen Nelson
Another observation on this, and I am just speculating here, but looking at the housing stock, I am sensing 1950s or more recent. These building envelopes probably are moderately higher performers than last century-built structures and therefore might also be better candidates for heat pump installation or would require less weatherization. Noting that there are a number of different factors when thinking about this transition.

Galen Nelson
What are some of the data sets? Let\'s talk a little bit about that. You mentioned the cast iron pipe. We just talked about the age, vintage, and condition of the building stock. You need to understand the condition and the capacity of the electric grid. What are the various data sets that neighborhood electrification practitioners, including, of course, utilities, that they need at hand, and that you do as an analyst, that you need to identify these hotspots, these opportunity locations? What are the challenges related to each of those data sets?

Michael Walsh
The ideal situation is you are a utility, and you might have access to some of these data. As part of our work right now, we are exploring avenues and the assumptions that you can make without access to the data that a utility has, and seeing how much demonstration of this type of integrated energy planning that you can do without access to some of that data. We are talking with utilities right now about certain data needs in some of these cases. In terms of the electric system, it is really helpful to know the state, age, and the capacity of those transformers and those wires leading to those homes. I will note that our electric utilities in the state do publish hosting capacity maps for the solar industry. Solar project developers can identify where the key opportunities for deploying solar are in parts of the system, because there are some parts of the system that are getting overloaded with solar right now. That is a helpful resource for those project developers there.

Michael Walsh
On the gas side, this tends to be a little bit more challenging. Having that map of the gas system, which includes the age of the pipe, the risk of the pipe, the type of the pipe, the connections that pipe has, utilities hold that data pretty close to home. They call it critical energy infrastructure data, and they are not typically used to sharing that data out there. There are some assumptions that we can make in the absence of that. You can go down the street and oftentimes look for those gas markings and find out, okay, is there a cast iron pipe under the street here? How big is it? Within some of the work that we are doing right now, we are actually on Google Maps doing some spot checking on some of the assumptions that we make to get those bits and pieces of information.

Michael Walsh
On the building side, every building is its own special thing, its own unique thing, and has its own unique challenges. You can get a sense of the energy use in the building but not have a sense of how the person living in that building is interacting with that building, driving a certain energy load that you may have. Having some information around the type of the building stock that exists out there is helpful. There is some data available from the state from municipalities on the age, on the type of buildings, that help us to understand the characteristics of the building stock. Some of the great researchers at the national labs have published extensive data sets on the energy use of different types of buildings. Are they always accurate? Never. Are they useful? Sometimes. We are trying to integrate that as well as we go along this process here. Ultimately, it is helpful to know what has been done to the building as well. If there is any sort of Mass Save incentive data that has been delivered, we have used some of that that MassCEC has tracked in some of our earlier work for information. The utilities have access to some of that data, but one of the barriers that they have had to face over the course of last year is there have been some obscure parts of Massachusetts consumer protection law that have prevented the electric utility and the gas utility, even though they are owned by the same corporate parent, from sharing data amongst them. The DPU had to grant a waiver on that front. We are doing a lot of experimentation as we go along trying to figure out what data sets work well, and what data sets we need to really dive in on and see if we can refine some of our assumptions or grab some more data. Having a strong understanding of the gas system, the building system, and the electric system, are really essential to this work.

Galen Nelson
Thanks, Mike. That is helpful for folks to know what data are required in order for us to move forward. Let us dig into a little bit about what you found in the name of the study, the Thermal Transition Study. My understanding is that you looked at a few different street segments. Maybe you could just briefly describe those typical street segments. Then you also looked at a number of scenarios. If I am not mistaken, I do not think we have time, and frankly, our listeners probably do not have the appetite to get into all of them. I know you looked at a business-as-usual scenario, a full electrification scenario, and a hybrid approach with a gas backup. I am wondering if you could just pick maybe one to three of the more, at least two, of the more interesting scenario analyses and walk us through what you found as far as impacts on both individual homeowner and overall rate payer costs and emissions outcomes.

Michael Walsh
I am going to actually flip us up a slide here to hopefully help us through this conversation. I recommend the audience just ignore a lot of the text and numbers on here and just focus on the fact that we have pretty colors. We looked at five different scenarios, three of which were under this assumption of the gas pipeline being replaced. We looked at a single family street that was undergoing a GSEP replacement project and a multifamily street that was undergoing a GSEP replacement project just to get a sense of two really typical places across the Commonwealth, or situations in which you might want to try to understand what the options available are, what the trade-offs at play are. On the single-family street, we looked at three scenarios if the gas pipeline was being replaced. Continued gas as usual, a hybrid approach, dual fuel, keeping that pipeline but also installing some air source heat pumps, and then replacing that pipeline but steadily doing an unmanaged electrification on that street, letting the homes electrify one by one by one over the course of the next 25 years. In that situation, you are basically shoveling money both into the ground and spending a lot of money in the home on electrification. That actually resulted in that scenario being the highest cost, the red here amongst all the scenarios that we looked at. I would say the highest capital investment up front.

Michael Walsh
Then we looked at scenarios around, what if you end that gas service in 2025 and do the infrastructure investments on the building and then the grid side? Taking a look at electrifying all those buildings all at once or giving you a little bit more flexibility by allowing some customers to have a propane tank if they really wanted to have some backup heating source, or still use gas for cooking. What we found is those scenarios, again because you are avoiding that large chunk of cost on the pipeline replacement, ended up being some of your more economically favorable scenarios here, and they also ended up being more aligned with some of our climate goals overall. Just to emphasize a key takeaway from this, when you are replacing the gas pipeline, you are shoveling money into the ground with the risk of that asset being stranded there in the long term as customers steadily electrify. If you assume that is going to happen, if you avoid that and try to move some of that cost upfront, you tend to achieve your goals earlier and potentially save costs as well.

Michael Walsh
I will note that these numbers here are, we are refining them as we go along in this more updated study. We are going to be tweaking them over the course of the next couple of months to really update them for a broader perspective on things. Overall, we also wanted to emphasize in this; this shows upfront capital cost. It does not say anything about customer utility bills. With this study, we also wanted to emphasize that depends on a lot about the future. We are seeing the state right now advance in partnership with utilities, policies that will make heating electrification cheaper, such as heat pump friendly rates as well. Just want to emphasize that there are a lot of dials to be turned here and a lot of different scenarios that we could model out. But at the end of the day, what it really comes down to is, are you shoving money in the ground? Are you investing that money into the building stock and trying to deliver value through improved buildings that are there? Mapping all that out is challenging, but this is what this exercise is about, really trying to map out where money is being spent, where value is being created with both a near term and a long-term perspective.

Galen Nelson
Thanks, Mike. This is really important. I want to underscore that this, and you have said this too, is a really tough challenge. I think it is wonderful to see so many different market actors and critical stakeholders coming together to really work this problem, from the utilities to the regulators, the DPU, the community. I do want to underscore, this is a tough challenge. At the same time, I think what your data show, at least again on the upfront capital side, is that the business-as-usual approach, which will extend the life of two expensive systems, is absolutely the most costly. That is why I think it is so encouraging that the state at the DPU is moving forward with 20-80, that the pilots were approved, and that there is ongoing dialogue about how to move this agenda forward, because we know that not only do we need to electrify from a climate perspective, but now we also know from a cost perspective that an unmanaged electrification is not the most prudent path forward.

Galen Nelson
Maybe we could talk a little bit about next steps. I know that other states are exploring this approach. I think I first heard about it, and it was called tactical decommissioning of the gas system in California. There was a proceeding there, and other states are looking at this. What do you think we can learn from those states? Are there regulatory or programmatic or market transition efforts in other states that you think are worth digging into a bit more?

Michael Walsh
First off, I want to emphasize that I think some of these states are actually learning from us by some of the leading, cutting edge thinking that we are doing out here. MassCEC pioneered building electrification, and our Mass Save programs have really driven forward. What we have seen, however, is two states, California and Colorado specifically, jump ahead in terms of offering some clarifying language or clarifying legislation around how to drive forward targeted neighborhood scale electrification. In both of those states, and it gets pretty wonky in terms of legal topics, I am going to invoke this term, the obligation to serve here. This is the concept that customers, particularly once they are granted access to the system, are guaranteed access to the system in a nondiscriminatory way. You cannot just nearly cut customers off.

Galen Nelson
Part of the franchise.

Michael Walsh
Exactly. You cannot just nearly cut customers off. There are rules that you can do that if they are not paying their bills, etc. But customers are given the expectation that they have service in the long term. We are concerned about what that framework means as we talk about this system under transition. That is another discussion.

Galen Nelson
To hover on that, of course, one of the proposed concepts there is, might that pivot to an obligation to serve thermal energy as opposed to gas?

Michael Walsh
Looking at some of the Massachusetts history around the obligation to serve, there is a Supreme Judicial Court case from the early 1900s on utility shifting around customers at that time, particularly as customers went from one electric system to another, and they were organizing their territories at that time and consolidating. Massachusetts has made an advance in terms of allowing some utilities to now shift customers from gas to a thermal service as an option. That is a step in that direction of really trying to imagine what customers are guaranteed, and what tools can we use to make sure that they are guaranteed service and given due regard and ideally left better off by a transition. I think that is the principle that we want to establish and make sure is at the heart of everything that we are trying to do, ensuring that whatever transition that customers are being moved forward on leaves them better off and provides them with a better value in their homes, reliable service, reliable buildings, etc. That expansion of the obligation to serve in Massachusetts heads to thermal services and heads in that direction.

Galen Nelson
Can you think of parallels from other sectors? I tend to think of, and again, just for listeners, because we did gloss over this a little bit, I want to make sure that everyone understands that the investor owned utilities were granted essentially a monopoly to serve certain components of the state, and in exchange for that, they have an obligation to serve. They, I think, very reasonably, are concerned about efforts that might force customers to pick one type of energy delivery service over another, and they have raised very legitimate concerns about that. Are there other transitions? I tend to think, for example, about the move from septic to sewer systems as one example. Can we look to other technologies or sectors where we have seen successful transitions that might involve some of these same tensions with one utility franchise, but also the real issues of customer choice? Change is tough sometimes.

Michael Walsh
I hate to say it because I love trains, but back in the day, 150 years ago, railroads were regulated as utilities. Customers were guaranteed railroad service back in the day until it just became too cost ineffective for those railroad services to provide service, and they were allowed to halt service in some locations. We certainly are seeing this in California right now with the rapid rise of solar and storage and distributed energy resources, and customers moving beyond being fully dependent to partially dependent, in some cases independent, on the electric grid. That raises a lot of concerns about that in California. I use these two examples to emphasize a key point that requires us to take a more proactive approach to management here. The gas system is facing unprecedented competition. Again, just going back to my earlier slide, there was this expectation that gas was the future fuel, and that future was here forever. We are now in the space where customers have a number of options, and those options align with decarbonization goals. We can anticipate that customers will move beyond gas to some degree on their own accord. That is going to create challenges for the utility and for the remaining customers on the system that need to be factored into the equation of a prudent regulation and prudent management of the system going forward. We oftentimes, because we have done all these pathway studies, and I know I am partly responsible for that, frame things or see things as a choice between pathway A or pathway B. In fact, we are undergoing a technological transformation, some of which is being driven by policy choices, but some of which is being driven on its own. That just requires more regulatory involvement and regulatory management, and just rethinking and adapting some of these paradigms, such as the obligation to serve, to the modern era.

Galen Nelson
Maybe that is a good, and I want to make sure that we have time. There are a few audience questions. Maybe just to hover on this last point before we pivot to that, we just talked about obligation to serve. That might be one area where the state, thinking about what steps should we be taking next here in the Commonwealth. Thank you for reminding folks that, and it is wonderful to hear that folks are also looking to us for our leadership. That does not surprise me in this regard. What are some additional steps that we might want to take next? We need more pilots. This obligation to serve issue, it sounds like, perhaps there is a regulatory solution there. Do you see other regulatory or other challenges that we need to overcome, or other steps that you think we should take in the short term to continue to move the ball forward on neighborhood electrification here in Mass?

Michael Walsh
I want to mention the pilots that our utilities are underway with, both the thermal energy network pilots and the building scale targeted electrification pilots. National Grid has proposed two pilots in Leominster, or a set of pilots, and have identified a number of potential opportunities in Leominster and Winthrop for their pilots. They are looking at really trying to find streets to basically sign up and volunteer to be the early adopters in this concept and in this project. The design of their pilots, and there is a lot of debate going on around it, but they are going to pay for everything the customer may need. That includes some barrier mitigation involved in that. The question that they are trying to ask is, what are the barriers that may exist even if they remove the economic barrier? Is it a social barrier? Is it that one person at the end of the street saying, no, I want to still keep my gas around? That is the key challenge that everyone is trying to really grapple with. What if you get to that street where you have ten customers, none of whom want to move beyond gas, but you have one customer who says I want to keep gas around? National Grid believes, or I would say the state\'s LDCs believe right now, gas companies believe right now, that they have an obligation to replace that gas pipeline if that one gas customer wants to do that. I think that would be a scandal if that unfolds, and that would raise a lot of concerns and alarm bells for rate payers.

Michael Walsh
We talked about what some of the other states have done to leapfrog Massachusetts on this front. I will cite, for example, Colorado, which I think has taken a really helpful and innovative approach here by proposing municipal scale community driven pilots, programs in which a municipality and a gas utility work together to identify a street. If they can get enough customers, about a what they call a reasonable majority, to be determined by the town, that they can move forward with that pilot, and try to find opportunities and options to move some resistant customers beyond gas. Maybe that is a propane tank so they can keep their gas stove. The idea is you get the communities and the utilities working together on this. I think there is a lot of value in that, particularly in places like Winthrop, which is facing a number of questions around the impacts of climate. One of the reasons why National Grid is targeting Winthrop and looking at that is because they are concerned about gas equipment in basements that might be flooded. If you move the heating equipment to air source heat pumps on pads outside, above ground, you might be able to add some resiliency benefits there as well. It is really trying to find the opportunities that may play out at the community level. I think Massachusetts could emulate that again. We have a great framework with the ten communities pilot laid out there, and I think we have some willing utilities here as well that are really interested in taking that community driven approach and trying to see where they can go with it.

Galen Nelson
Thanks, Mike, that is helpful. This is probably a good segue to at least the first question I am seeing here, and I think you have addressed a good deal of this. We have talked about the challenges, primarily the financial challenges of maintaining two expensive energy delivery systems, the gas and the electric grid, and this notion that perhaps for some homes, whether it is for resilience purposes, or maybe it is homeowner preference, that having perhaps some propane backup makes more sense. It also does occur to me that the gas system itself is not without risk. We hear a lot more about electric grid outages and performance challenges in the northeast, often caused by extreme weather, but the gas system itself is dependent on the electric grid to maintain pressure. The gas system is not without its own challenges. Thinking about resilience, it does seem as though, perhaps for some customers, having a delivered fuel stored, again, perhaps it is propane, might be a good option. It sounds like that was one of the scenarios that you looked at.

Michael Walsh
It did. It helped to solve a couple of key problems here. The first of which being customer choice. There might be some customers who still want to have their gas stove, or still want to have some backup. We think about this, and we do a lot of our work focused on the residential sector because it is easy to grapple with. That could be a restaurant, that could be a larger commercial entity that might have found a way to reduce its demand for a good chunk of a year, but the expense of building a fully sized electrification, fully electric heating system, is just too much. Having some onsite backup fuel for that heating purpose may be an effective way to move that building off of gas. I do want to emphasize, too, that there are parts of the gas system that are okay, and they will still be in place, probably in 25 years, and that might still play a role in providing some backup heat, but probably at a limited size. What we are talking about here are opportunities to avoid reinvestment in the gas system, avoiding leak prone pipe replacement. We wanted to demonstrate and illustrate that using some delivered fuels helps to get over some customer choice issues, but it also helps to get over some barrier issues that are there.

Michael Walsh
One other thing to note on this front, too, is as the cost of gas goes up, the economics of delivered fuels become more advantageous. You could imagine a customer in the future saying, this gas connection is just too expensive. I am going to go off and do delivered fuels because it is cheaper, and ideally, they partially electrify. There are these market and competition dynamics at play there. Really trying to think about that and identify opportunities for that is an important part of our research and these plans going forward. Ideally, we are burning a lot less in the future, though.

Galen Nelson
One can imagine that these would in many cases be largely peaking resources. Maybe it is backup heat, or maybe there is a little bit of cooking, but we are not talking about enormous fossil fuel use. Perhaps there also might be places on the system where, rural areas where the cost of beefing up the electric grid is much higher per customer. I know that those costs are socialized across the entire rate base but just thinking about where this would make more sense. Perhaps there are more optimal locations on the system where those hybrid approaches are more prudent than others. There is a question here that I think is fairly straightforward, but I think it is good for people to understand. To be clear, the networked geothermal pilots were approved by the DPU, and those costs were spread across the entire rate base. Just confirming that the answer to that question is yes, those were not limited to the customers that participated in that. The costs related to those projects were not limited to the customers that participated.

Galen Nelson
Another listener has an interesting question or flagging a research effort which I am not familiar with. Assuming this is accurate, a research effort looking into what motivates customers to electrify or not. The question, should Massachusetts do the same to identify the barriers for electrification? I think it is an interesting notion. I do not know if we have looked at that here at MassCEC, and I have not dug into this space too much, but I suppose it would be helpful to better understand the kind of barriers or concerns that folks might have.

Michael Walsh
I would point to Mass Save. They have done substantial research on trying to understand what customers participate or do not participate in Mass Save overall. What you see is a couple of things. It is well understood that higher income customers are more likely to be proactive. They have more access to information. They are able to kind of buy into that Mass Save program a little bit more. But you also see at the low income level programs, such as our community action agencies across the state, LEAN, Low Energy Action Network, something like that, too many acronyms these days, do a great job in coordinating projects, particularly for midsize and larger multifamily low income housing. I think it is that coordination that we want to point to as great examples for learning from as we try to deploy targeted neighborhood scale electrification. How do you engage with multiple customers at the same time? It is something that they have learned how to do, particularly in some of those larger buildings as well. Circling back, I do think we need to be more tuned to this and continue the research. I would love if the listener here could send a link to that to us so I can be a little bit more familiar with the design of that information. The other thing that I want to be clear about is, we know a lot of folks are just concerned about the cost, and we need to be very aggressive about keeping the cost of electric heating relatively low. I talked about it earlier. The heat pump friendly electric rates that are being rolled out right now are a great step forward in that direction. But we also need to be prudent about where we are investing in electric infrastructure and how we are doing that going forward to keep the cost. We are going to be making a lot of investment in that. It is needed to keep up with demand because people do want electric vehicles. People do want heating electrification. That is going to be driven forward. We are going to have to make some investments to modernize for resiliency. Being smart about that spending is pretty essential so we can ensure that we keep electric costs low.

Galen Nelson
Thanks, Mike. Someone else asked if we would let the audience know about relevant DPU dockets or opportunities for engagement. The answer is 20-80. I will not try and pull up this site now, but I believe there is a dockets search page or room where you can literally enter 20-80, and you will be able to find relevant documentation there at the Department of Public Utilities website. I suspect there will be information about any upcoming events, hearings, documents, and so on. I do not know if you have anything else to add to that, Mike.

Michael Walsh
I think that covers it. Around the New Year, I created a master spreadsheet tracking all these things for myself internally. You and I can follow up on that soon as well. I think that would be a great resource for somebody somewhere to help folks interested in this stuff track. But again, go to 20-80 to see what is going on there. There is also the targeted electrification pilot, that is 24-194. Climate compliance plans are 25-40 through 25-45 or something like that. It just requires some digging at the DPU website on that.

Galen Nelson
We have maybe just time for one quick question here. I know we have a couple of minutes left. Do we have a sense with regard to these hybrid cases, customers, ratepayers, homeowners that decide to retain their natural gas hookup for backup for resilience purposes? What does that look like? Do we have a sense of how many customers, how many building owners are embracing heat pumps but maintaining their natural gas hookups? My understanding is that at least some of the Mass Save incentives for whole home heat pump solutions require that the homeowner permanently disconnect or disable the gas. I could be wrong about that, but I think that is accurate. Would love to know if you have heard about any data in that regard.

Michael Walsh
I do know, just anecdotally from some of our utilities, that they are tracking usage with some of these customers, and they are not reducing their gas demand as ideally as much as everyone would like on this front. As these systems get rolled out, we are not yet, I think, at the point where we are having these systems well integrated enough. I actually have heat pumps in my home. They were put there in 2014. We bought the house with them installed, and we also have a gas boiler for the time being. We are looking at renovating in the next year or two. I am sure we will be talking about our experience pretty widely. I cannot get these systems to interact with each other just given the way that they are designed. Believe me, I thought about designing some integration here, but it was just too much work to get that done. We use these things on the shoulder season and are pretty much reliant on the boiler during the colder months. We need more information on this front. I think, as utilities get more involved in this concept of integrated energy planning, which is a process that they are going to kick off relatively soon, there will be more discussion on this front, and hopefully more insight as to where we are headed on that hybrid track.

Galen Nelson
That is a great way to end the conversation. Maybe a topic for a future conversation, how to integrate existing systems. Thank you, Mike. I really appreciate your time. I really want to thank everyone who tuned in today, all the wonderful questions. It has been a great discussion. I think we all know a lot more about neighborhood electrification. It has been a real pleasure to work with you formally regarding MassCEC\'s project work with you, and I know our colleagues at DOER are also very happy with the work that you have done with them. Look forward to ongoing collaboration. It has been a great conversation. Thanks so much.

Michael Walsh
Thank you, Galen, for having me. I hope everyone gets a chance to enjoy the 250th celebration this weekend, the right weather, and the long weekend, and all that.

Galen Nelson
Happy Patriots Day weekend, Marathon Day, and so on and so forth. I hope it is a good one for everybody. Alright. Take care, everyone. Thanks.

Michael Walsh
Bye.