Energy+Environmental Economics Decarbonizing Buildings ......Apr 27, 2021 · Energy+Environmental...

e Energy+Environmental Economics

Decarbonizing Buildings

Michigan Council on Climate Solutions

4/27/2021

Dan Aas

Energy+Environmental Economics

Agenda

About E3

Building Decarbonization Pathways

Decarbonized Gasses

Electrification

Concluding Thoughts

2

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of Sontcc Cooper (-S9 cil l,onvoluotion)


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Ulilili@s C,:Jrr-mission (CPUC) to achieve state

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Multiple studies on costs ar d feasibil ity of high renewables integration ,:lfld low-carbon

transition pat'lWays fro'Tl 2C20a2050

Rehab1l1ty enalysos cf closing Cl'l:t~t.2111 Q.!IIS-fired po·1tP.r plants and assessment of alternatives

[traoomiss o,,, s:oragc, etc :,

About E3

Technical &

Strategic

Consulting for the

Clean Energy

Transition

Expertise in

engineering,

economics,

mathematics &

public policy

75 full-time

consultants

with a wide

variety of

backgrounds

San Francisco New York Boston Calgary

250+ projects per year across a diverse client base

3


E3 has examined building decarbonization pathways in

distinct settings

California Northwest Northeast Minnesota

Cold Day 35F 10F -5F -20F or lower

Temp

Heating Fuels Mostly Gas Gas and Electric Gas and Fuel Oil Mostly Gas

Electric Peak Summer Winter Summer Summer

4


Building Decarbonization Pathways


ElectrificationHeat pumps,induction stoves

How will we heat our buildings?

Decarbonized gas Renewable natural gas or hydrogen

Potential Advantages: repurposes existing infrastructure, minimal consumer

disruption

Potential Drawbacks: cost, not commercial at scale, can require extensive utility

infrastructure retrofits

6



Electrification Heat pumps, induction stoves


Potential Advantages: commercially available products, complementary to

decarbonized electricity, assists with climate adaptation

Potential Drawbacks: requires building retrofits, upfront consumer costs, electric

peak load impacts, potential for stranded assets and workforce reductions

7



Electrification Heat pumps, induction stoves


Hybrid Heat pumps paired with gas

Potential Advantages: utilizes existing infrastructure, reduces demand for more

expensive varieties of decarbonized gas, mitigates grid impacts

Potential Drawbacks: this approach is not well studied in the U.S., though it is an

emerging strategy in Europe

8


Electrification Heat pumps,


Hybrid Heat pumps paired with gas


District heating induction stoves

With geothermal, waste heat, or bio CHP backup

Potential Advantages: multiple input sources enable a diversified decarbonization

approach

Potential Drawbacks: partly requires new infrastructure, expansion is not well studied

in the U.S., though it is an emerging strategy in Europe and being explored in MA

9

Cl Energy+Environmental Economics

Decarbonized Gasses

County Level Biomass Ory tons per square mile annually

0 - 5500


Biomethane is the lowest cost-form of

decarbonized gas, but is limited in quantity

Biomethane can be produced

from wastes

• Forests

• Agriculture

• Landfill

• Manure

And from purpose grown

energy grows

• Lifecycle and indirect emissions

impacts are important

considerations for purpose-

grown crops

• Potential to use lands currently

devoted to ethanol for

alternative energy crops Source: US DOE Billion Ton Report (2016)

11

t ,., I •••• • • • • • • • •

• t

♦


What about hydrogen?

H2

Electrolysis

“Green”

Hydrogen

H2 CO2+

Steam Methane Reforming

Storage

“Blue”

Hydrogen

12

$1,200

_ $1,000

~ --.... ~ $800 .--1 0

: $600 V)

0 u ro

;t: Q. ro u

$400

$200

$-

1400

s 1200 ~

1000 ~ Q. ro

800 ~ Cl)

ro 600 ~

400

200

0

C:

Cl) > +-' ro ::J E ::J u

2020 2025 2030 2035 2040 2045 2050

~ E3 Cost ~ MHPS Cost Cumulative Capacity


$6 - -----------------------

i $ s -· =-_s::::::-------==---------< ~ 00 .... = ~ $4-§ C .9 $ 3 - -----=-.._ ti ::II 'a

SMR SMR with CCS {90%) On-site solar/wind

Curtailed renewables Adv. Nuclear

e -----------~~~---~-~c$2-·- ~----~-~-~-=-=-=-~-~-'------------- ----~~ w- ---a, e 'a :r $1 - -------------------------

$0--·- --~ ---~ ----.-----,-----.----.----2020 2025 2030 2035 2040 2045 2050

E3/UCI 2020 Capital

Costs and Learning

Curves

MHPS 2020 Capital Costs and

E3/UCI Learning Curves

Hydrogen production costs are expected to decline

Alkaline Electrolyzer Cost Projection E3/UCI Hydrogen Production Cost Projection

E3 recently published a report on potential opportunity for renewable hydrogen in a deeply decarbonized future

with Mitsubishi Hitachi Power Systems (MHPS)

Electrolysis with renewable power may be more economic than SMR with CCS if electrolyzer costs fall with an

aggressive learning rate of 25% and curtailed renewables are available at close to zero cost

13

https://www.ethree.com/wp-content/uploads/2020/07/E3_MHPS_Hydrogen-in-the-West-Report_Final_June2020.pdf

t • • ,., •• I •••• •••• . . . .

• t I t

I


Synthetic Natural Gas (SNG) Production

H2

Electrolysis

Bio-CO2 CO2 from

Direct Air

Capture

Methanation

CH4

SNG production requires a combination of climate neutral hydrogen and climate neutral CO2.

E3 considers two sources of climate neutral CO2: 1) less costly bio-CO2 from biofuels

production, 2) more costly CO2 from direct air capture.

14

90

80

70 .-. :J I- 60 co E E 50 -fA-co T""" 40 0 N ---+-' CJ) 30 0 u

20

10

00 0.25 0.5


SNG with DAC

SNG with bio-C02

7% H2 in pipeline

Bi om ethane

______ .. Optimistic scenario

. EIA forecast for 2050 NG price : Pipeline gas demand

: in 2050 Pipeline gas demand in 2017 : with no electrification

0.75 1.0 1.25 1.5 1.75 2.0 RNG supply (Quads)

2.25

E3 RNG Supply Curve: Conservative vs Optimistic

California Renewable Natural Gas (RNG) Supply Curve, 2050

This plot bounds a

‘Conservative’ and ‘Optimistic’ set of costs for RNG

The quantities of RNG on the x-

axis will be different in MI, but

the relative proportions are

likely to be similar

15

@ Energy+Environmental Economics

Electrification

• CZ 5- Standard HP .. • CZ 5- Cold Weather HP

~ 12 ..

Sacramento-~ • New Standard HP -"'O 10 • co 0 (.)

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Q.)

Q.)

0.. 6 E ::::i 0.. - 4 co Q.)

I

2

0 0 20 40 60 80 100

Temperature (F)


Proposals to electrify heating focus on deployment of air-

source heat pumps

Air-source heat pumps are very efficient on

an annual basis, with coefficients of

performance (COPs) of 3 or higher possible ASHP loads for a 2200 ft2 building

in Washington today

However, ASHP COPs fall as the outdoor

air temperature drops. This increases the

amount of electric load required to keep

buildings warm.

Heat pumps are commonly installed with

supplemental heat that is used during the

coldest hours of the year.

• For all-electric homes, supplemental heat is

provided via electric resistance

• “Cold climate” heat pump models require less supplemental heat than traditional systems.

Supplemental heat may not be needed in all

cases.

17

160

140

120

100

$ 80 c.,

60

40

20

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Building Thermal Loads Electric System Loads

---------.--------.-------,-----....-----......--------,,--------.--------.----0 1000 2000 3000 4000 5000 6000 7000 8000

Hour of Year


At scale, electrification natural gas end-uses could

have large impacts on electricity systems

Thermal vs electric loads: NY + NE, 2050

18


Potential strategies to mitigate those peaks and open

questions

Building shell improvements

• What are the trade-offs between investments in buildings vs building a bigger grid?

Continued improvements in the cold-weather performance of heat pumps

• How can consumers be incentivized to invest in systems with lower impact on the grid, but that come at a higher

private cost?

Ground source heat pumps

• Are the electric sector savings sufficiently large to overcome the higher installation costs of these systems?

Hybrid (also called dual fuel) heat pumps

• How do the grid benefits of this approach measure against the costs of decarbonized fuels and fuel delivery?

• Is there a viable business model for fuels (e.g. natural gas, propane, kerosene) to serve purely as backup?

Load flexibility

• To what extent (how much, how long) can loads be shiftable?

• What consumer-side costs will be required to enable those shifts?

19


Concluding Thoughts


Final Thoughts

Decarbonized gasses can have an important role in decarbonizing buildings end-uses.

• However, they are much costlier than natural gas, are likely to be limited in scale and are commercially unproven

Heat pumps can efficiently heat buildings during most hours of the year

• But all-electric buildings can cause large electric system impacts during the coldest hours

In cold-climates, lower-cost, lower-risk decarbonization strategies will likely require some

combination of decarbonized fuels and electrification

• Electrification will likely be a lower cost means to provide heating energy during most hours of the year

• Decarbonized fuels may have an important role to deliver heat during the coldest hours of the year

Energy efficiency is needed in all cases

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