Putting out the fire: How to cleanly heat a cold country that’s hooked on natural gas

Thousands of kilometres of natural gas lines spidering under big city streets could soon become stranded assets

Illustration by Jack Dylan

Electrify everything. Over the past year, this mantra has become a rallying cry for many climate watchers, who argue that a critical step to achieving reductions in carbon emissions is to first transition huge fossil-fuel-intensive systems – transportation, space heating, et cetera – to electrical power. Then, with sufficient investment in renewables or nuclear energy, an expanded greener grid can provide the energy required to keep the economy moving.

The process is called fuel switching. As technologies such as electric vehicles and electric heat pumps gain market acceptance, fuel switching seems increasingly plausible. “We have to do this really, really quickly,” says Simon Fraser University adjunct professor Chris Bataille, a climate policy analyst with IDDRI (L’Institut du développement durable et des relations internationales/Institute for Sustainable Development and International Relations), a Paris-based think tank.

In a cold country, the opportunities around the electrification of space heating in particular are critical. Heating and cooling buildings accounts for 12.4% of Canada’s carbon releases, but in some big cities, such as Toronto, natural gas used to heat buildings accounts for half of all emissions. (Nationally, 45% of all natural gas is used for residential and commercial buildings.) The reason? Thousands of kilometres of natural gas lines spider under big city streets, and the gas they carry, in some jurisdictions, is cheaper than electricity.

Decarbonizing using electric space and water heating

Though large swaths of Canada are hooked on natural gas, it’s become quite straightforward for consumers to switch to high-efficiency electric space and water heating. Heat pumps are widely available through home reno retailers or HVAC contractors. According to the International Energy Agency (IEA), 20 million heat pumps were purchased globally in 2020. “Growth is evident across all primary heating markets – North America, Europe and Northern Asia,” notes the IEA. “Although heat pumps have even become the most common technology in newly built houses in many countries, they meet only 5% of global building heating demand.” Across Canada, there are almost 800,000 heat pumps, and those totals have risen steadily for a decade, especially in Ontario and Quebec, according to Canada Energy Regulator data.

However, there are few policy incentives or regulatory mechanisms designed to accelerate the shift from natural gas to electric heat, so the decision remains, primarily, a consumer choice. In Canada, homeowners can access federal green-energy retrofit grants or subsidies to help cover the cost of these devices. Heat pumps range from a few thousand dollars to more than $10,000, depending on home size and other factors. High-efficiency gas furnaces run from $3,000 to more than $6,000; gas distributors also rent them. Stepped increases in carbon pricing will narrow the gap between gas and hydro rates by hundreds of dollars. Heat pumps, moreover, yield energy savings because of their efficiency.

Gas utilities continue to invest hundreds of millions of dollars each year in expanding and renewing gas distribution infrastructure.

-Bryan Purcell, vice-president of policy and programs, The Atmospheric Fund

One of the daunting financial impediments in the take-up of electric space and water heating has to do with the issue of stranded assets. If governments created incentives for homeowners or building managers to switch to electric heat, what happens to all the capital investment that’s gone into building gas distribution networks over the past 30 years? After all, in some regions, energy regulators sought to convert home heating to natural gas beginning in the 1980s because it was cleaner than oil and coal. Today, those assets sit on the balance sheets of giants like Enbridge, and governments are reluctant to impose regulations that abruptly turn them into liabilities. (Enbridge’s latest financial statements value its gas mains and related services at $12.5 billion, equivalent to about 10% of the book value of its total assets.)

Yet the complexity of fuel switching extends beyond the balance sheet. If large numbers of homeowners moved to electric heat, they would place a huge amount of additional pressure on existing electrical grids, especially in cities during peak times, says Richard Carlson, director of energy policy at Pollution Probe. “I just don’t see how the electrical systems in an urban area can be upgraded,” he says.

The solution to this Rubik’s Cube requires regulatory innovation, investment in renewable generation, and a sense of urgency. “The first thing to do when you find yourself in a hole,” says Bryan Purcell, The Atmospheric Fund’s vice-president of policy and programs, “is to stop digging. Gas utilities continue to invest hundreds of millions of dollars each year in expanding and renewing gas distribution infrastructure, compounding the risk of stranded assets and related financial disruptions. They will continue to do so until there are clear enough policy signals for a transition off of fossil gas.”

The potential for using biogas

Purcell and others believe one near-term fix is for governments to mandate that gas companies increase the use of renewable natural gas (RNG), created using methane emissions from water treatment plants, landfills or agricultural waste. In B.C. since 2017, for example, regulators have allowed energy distributors to add up to 5% RNG to their natural gas. “Getting a significant share of RNG in the gas supply as rapidly as possible can extend the useful life of gas infrastructure without compromising our climate commitments,” Purcell says.

Some environmentalists disagree: “There may be a niche role for truly low-carbon biogas for things that can’t easily be electrified,” says Greenpeace Canada energy analyst Keith Stewart, “but when it comes to space heating, biogas represents an effort by incumbents to maintain infrastructure lock-in by blocking the alternative[s] that can achieve zero GHGs.”

Bataille and Carlson feel the real solution is structural. Progress on fuel-switching, they say, will come from combining electricity and natural gas policy and regulation into a single, integrated system focused on managing thermal energy so as to minimize emissions. “We have to stop regulating gas and electricity separately,” says Bataille.

Case in point: Gas distribution companies aren’t mandated to provide financial incentives for customers to replace end-of-life gas furnaces with electric heat pumps. However, in Quebec earlier this summer, Hydro-Québec and Énergir, a gas utility, announced a partnership to provide incentives to customers who rely exclusively on natural gas for heating to transition to hybrid systems. These use heat pumps that switch to gas in very cold conditions. (The efficiency of cold-climate heat pumps drops off at very low temperatures, particularly below -20°C.) The program is projected to cut carbon emissions from buildings by 540,000 tonnes by 2030. “Quebec is one of the first places doing this,” says Bataille.

Industry pushing back against bans on gas hook-ups

There are other important policy levers. For example, municipalities could require developers of new buildings to install all-electric heating systems instead of hook-ups to the gas grid. Beginning with Berkeley in 2019, municipalities in California, Colorado and Washington State, as well as parts of the U.K., have been banning gas connections for new-build structures.

Given that much of the built-form that will exist in 2050 hasn’t been constructed yet, such regulations represent high-impact emission reduction policies. But they’ve also attracted opposition from the gas lobby. According to a recent account in the Washington Post, pro-gas front organizations backed by the industry, as well as unions representing pipefitters and other skilled trades, have created war chests to fight these mandates.

In Canada, the Canadian Gas Association is also ramping up its own scare-tactics campaign: “Policy-driven electrification,” a brief warned, “could increase the total energy cost by between $580 billion to $1.4 trillion over the 30-year period between 2020 and 2050.”

University of Toronto Scarborough political scientist Matthew Hoffmann, co-director of the Munk School’s Environmental Governance Lab, says such reforms point to the importance of building social and economic constituencies around fuel switching. Measures like mandated disconnects, he says, “have the possibility of blunting political opposition.”

Pollution Probe’s Carlson, however, asserts that the real shortcoming isn’t the lack of adequate regulation, but rather the dearth of a thermal energy strategy that lays out the policy framework at a high level. Neither Ottawa nor the provinces have developed long-term plans linking the expansion of renewable electricity to fuel-switching incentives and gas disconnects. Not coincidentally, carbon reduction in Canada’s buildings sector has been stalled for years. As Carlson notes, even recent changes – new energy-efficient building codes, for example – will yield only modest improvements by 2030.

Time, of course, has become the enemy, especially in complex, interconnected systems like building energy, which depend on massive networks of infrastructure and therefore do not turn on a dime. For that reason, advocates say policy-makers must immediately begin designing and implementing policies that lay out a clear path to electric heat but don’t bankrupt the natural gas sector, whose distribution networks will still be needed to supply thermal energy to difficult-to-electrify sectors, like heavy manufacturing.

Hoffmann adds that governments should deploy all of these approaches instead of dabbling in pilot projects or incremental reforms. “We’re at the level of crisis where there isn’t time to be making that kind of choice anymore,” he says. “We’re in a both/and world now.”

Toronto journalist John Lorinc writes about cities, sustainability and business.

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