How to Fix What Xcel Got Wrong on Clean Heat

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The Colorado Public Utilities Commission should approve a Clean Heat Plan that delivers more emissions reductions at a lower cost

Landmark Clean Heat legislation from 2021 requires Colorado’s gas utilities to reduce greenhouse gas (GHG) emissions from gas burned inside their customers’ homes and buildings by 4 percent by 2025 and 22 percent by 2030. Environmental and public health advocates agree that energy efficiency and beneficial electrification at the individual household level is the best way to meet those requirements at the lowest cost. Unfortunately, Xcel Energy—the state’s largest utility and the first utility required to file a Clean Heat Plan under the 2021 law—missed the mark in its inaugural Clean Heat application.

It is now up to Colorado’s Public Utilities Commission to listen to what every day Coloradans are asking for, sort through the evidence that will be presented to them by consumer and climate advocates, and direct Xcel to make the right investments in the decarbonization resources that are most likely to deliver low-cost emissions reductions and healthier indoor air.

Xcel Chose the Wrong Resources

To show how it could meet its Clean Heat requirements, Xcel chose modeling parameters that artificially inflated the cost of a key resource for keeping greenhouse gas emissions reductions in buildings affordable: beneficial electrification. Beneficial electrification involves investing in buildings to make them healthier, safer, and more efficient and replacing home appliances that burn fossil gas with highly efficient, all-electric appliances capable of being powered by 100% clean electricity. Like many other developing technologies, we expect that highly efficient electric appliances will come down in cost as demand grows and contractors get more comfortable selling and installing them.

Yet, Xcel’s modeling shows significant cost increases for electrification in the next five years. We disagree with this assumption. Costs for electric homes and buildings are rapidly coming down and we anticipate the trend to continue, enabling more people to reap the benefits at a lower cost.

Xcel’s faulty modeling, combined with a lack of ambition for going after low hanging fruit in building decarbonization, resulted in a Clean Heat application heavily tilted toward riskier, more costly, less environmentally sound energy sources such as biofuels and hydrogen. Some types of biofuels (also known as renewable natural gas) can reduce climate emissions. But their supply is limited and demand is high from other harder to decarbonize sectors. This is also true for the type of hydrogen that can reduce emissions at the level we need (so called “green hydrogen” ). Green hydrogen is such a novel energy source that Xcel can’t commit to it being available when it might be needed. So, the application leaves the door too wide open for Xcel to shift their customer dollars to “blue Hydrogen,” which is made by fossil fuels and only reduces emission by 55 to 72 percent.

Neither energy resource is a cost-effective long-term decarbonization solution for the gas system. Especially not when lower cost efficiency and electrification are plentiful.

There is a Much Better Alternative

Environmental advocates have already laid out our plan for how Xcel Energy can meet its emission reduction goals, and it will be much less costly. Our recommendation involves Xcel offering generous incentives and technical support for electrification where it saves Coloradans money today. This includes efficient all-electric new homes and smart ACs that can cool in the summer and provide clean heat in the winter. As technologies improve, become more available, and the cost of equipment lowers, so can incentives. Xcel also should pay special attention to disproportionately impacted and low-income communities, so that those who have been historically underserved in Colorado can benefit first from the transition cleaner, healthier homes and buildings.

Over the coming weeks, the Public Utilities Commission will hear from everyday Coloradans and climate experts. We urge the Commission to remain skeptical of Xcel’s claims, look for building decarbonization best practices elsewhere, and adopt an inaugural Clean Heat plan that lives up to the state’s recent climate leadership. The plan should achieve one goal: delivering affordable, safe, clean heat to every Coloradan’s home and business.

Originally published on the NRDC Expert Blog. By Alejandra Mejia Cunningham