Reviewed by Lexie CornerOct 1 2024
A study by the Stanford Woods Institute for the Environment’s Climate and Energy Policy Program argues for the integration of gas and electric utilities, as well as coordinated planning, to enhance the efficiency and cost-effectiveness of the transition to zero-carbon buildings.
Researchers from Stanford and Notre Dame Universities suggest that state regulators reconsider their regulatory approaches, as policies promoting clean energy lead to growing competition between gas and electric utilities, particularly with the shift from gas to electricity.
Utility regulators are facing a uniquely difficult combination of climate, safety, and equity concerns as they contemplate how to decarbonize gas networks. By recognizing the competition taking place between gas and electricity, regulators can find new opportunities to proactively manage the building-energy transition.
Joshua Lappen, Study Co-Author and Postdoctoral Research Associate, University of Notre Dame
A white paper titled The Unseen Competition in the Energy Transition: Acknowledging and Addressing Inter-Utility Competition to Achieve Managed Decarbonization recommends that state public utility commissions (PUCs) adopt a unified energy sector approach.
The report warns that ongoing competition between gas and electric utilities could hinder decarbonization efforts, lead to higher rates for consumers, result in unnecessary fossil fuel infrastructure investments, and disproportionately impact low-income energy users.
Competition or Unification
Gas and electric utilities, which have historically served distinct markets, are increasingly converging due to climate policies, particularly in sectors like building, heating, and cooking, long dominated by gas utilities. With the growing popularity of electric heat pumps and induction stoves, gas utilities have launched campaigns to protect their market share.
The federal Inflation Reduction Act, which provides subsidies for electric appliances, has further intensified competition, creating what the authors call a "patchwork of duplicative energy monopolies."
The authors stated, “In many parts of the U.S., gas and electric utilities are now providing nearly identical services, but customers are paying for the maintenance of two separate distribution systems.”
They argue that better coordination and planning could prevent these economic inefficiencies.
The white paper recommends that PUCs treat gas and electric utilities as a unified energy sector, integrating their planning processes to minimize stranded assets and maximize investments across both systems. The authors suggest that combining gas and electric utilities serving the same regions could protect ratepayers from rising costs, maintain service reliability, and accelerate decarbonization efforts.
Managing the Transition
The study warns that failing to act could lead gas utilities to continue investing in fossil fuel infrastructure that will outlast the decarbonization timeline, exposing consumers to financial risks. The researchers argue that by proactively regulating and planning, the U.S. can accelerate its shift to a decarbonized energy system while protecting ratepayers and the broader economy from the negative impacts of unchecked competition between gas and electric utilities.
Times have changed. To reach our climate goals, we have to start treating gas and electric utilities as a single energy system.
Amanda Zerbe, Early Career Climate Law Fellow, Department: Environmental & Natural Resources Law and Policy Program, Florida State University
Michael Mastrandrea, the research director, and Michael Wara, the director of the Climate and Energy Policy Program at the Stanford Woods Institute for the Environment, are coauthors of the study. Wara, the senior director for policy, and Mastrandrea, the director for policy, also lead the Sustainability Accelerator at the Stanford Doerr School of Sustainability.
Journal Reference:
Lappen, J., et. al. (2024) Unseen Competition in the Energy Transition. Stanford Digital Repository. doi.org/10.25740/xx485hd7415