The Illinois Commerce Commission (ICC) initiated Future of Gas proceedings in early 2024, prompting Brattle to collaborate with Peoples Gas Light (PGL) and North Shore Gas (NSG) to evaluate decarbonization technologies and their costs. The analysis focuses on long-term (20+ years) planning, considering environmental cost-effectiveness, customer affordability, administrative complexity, and realistic enforcement or incentivization mechanisms. Three scenarios are analyzed: Business-as-Usual (BAU) with no decarbonization goals, full decarbonization by electrification, and a partial, hybrid Economic Decarbonization Scenario (EDS) with efforts capped when customer conversion costs exceed the social cost of carbon ($200/mt CO2).
The study finds that gas demand declines only marginally under BAU due to efficiency improvements, making significant decarbonization in the short run challenging. Technologies evaluated include weatherization, HVAC electrification, hot water and cooking electrification, ten-building energy networks (TENs), gas energy efficiency technologies, clean fuels (RNG, H2), industrial carbon capture and storage (CCS), and direct air capture (DAC). Costs per customer and cost per ton of avoided CO2 vary greatly depending on building age, condition, and retrofitting requirements. Electrification requiring large retrofits, RNG, and H2 tend to be expensive.
Residential and commercial space heating electrification are only economical (less than $200/mt CO2) in a portion of select home/building categories. Full electrification would eliminate 88% of gas usage but has very high total and marginal customer costs. The EDS achieves about 35% decarbonization of Chicago end-use for 18% of the customers’ costs of full decarb via electrification. Under EDS, PGL’s 2050 gas demand and resulting emissions decline by 35%, with average net cost of carbon abatement at $111/ton, well below the SCC. Gas rates and bills under EDS are very tractable, with customer rates increasing only slightly faster than inflation and annual bills remaining nearly flat.
The study also assesses the use of decarbonization to avoid pipe repairs and expansion (NPAs). It finds that pipe avoidance is very difficult despite decarbonization measures, as the system’s mesh and density require old iron pipe replacement even with reduced load. The EDS relies mostly on weatherization and EE plus niche electrification, requiring no incremental electric grid capacity. It imposes almost no burden on the electric power expansion and does not require a clean grid.
Achieving significant gas decarbonization will require expanding laws and regulatory practices to allow more activity, flexibility, and innovation. The study recommends steps for the Future of Gas proceedings to foster economical GasCo decarbonization, including integrated gas-electric planning, increased funding for EE and DR programs, amendments to least-cost supply planning requirements, and establishment of provisions for gas utilities to recover investments in the gas system at just and reasonable rates.
