Written on: September 6, 2023 by Joe Uglietto
State regulators are quickly approaching a fork in the road when it comes to developing Clean Heat Standards (CHS) and compliance markets. They will either choose program guidelines that are designed only to incentivize the electrification of buildings, or they will choose program guidelines that are designed to reduce carbon emissions from the thermal sector from all technologies.
Let’s take a look at what’s happening right now in Massachusetts. The Department of Environmental Protection (DEP) has indicated that its CHS is designed based on the California Low Carbon Fuel Standard (LCFS). However, there are many differences between these two programs. One example is that the LCFS treats all emissions reductions equally; each ton of carbon dioxide reduced is worth one credit regardless of the energy source. The Massachusetts DEP indicated during its Aug. 15 public hearing that it is leaning towards a “yard stick” method that would assign the value of one credit as the equivalent of one electrified home. While the stated goal of the CHS is to reduce emissions from the thermal sector, the adoption of this “yard stick” method to value credits would indicate that the actual goal of the CHS is to electrify all buildings in Massachusetts, not maximize greenhouse gas reductions.
Digging a bit deeper into the suggested program guidelines, we find that in the Massachusetts CHS’s first discussion document published a few months ago, the DEP suggested a mandate that all heating fuel suppliers convert 3% of their customer base annually to Air Source Heat Pumps (ASHP) or face a large fine. In this scenario, whether the customer wants to switch to heat pumps or not is irrelevant. The DEP has also considered treating electricity as carbon-neutral. The fuel used to power our electric grid would be irrelevant and all electricity would be considered to be renewable—despite the reality that more than half of winter electric generation would continue to come from natural gas. To cap things off, heating fuel suppliers would be required to either reduce the carbon intensity of their fuel or lower their sales by 29% in 2025 and by 49% in 2030. There would be no time built in for capital investment or to effect a transition as was afforded to the power and transportation sectors.
The problems with these kinds of program guidelines are myriad. Tracking fuel from out of State, regulating out-of-State entities, accurately carbon-scoring each fuel and a large compliance obligation in year one are just a few problems that come to mind. Let’s not forget to mention the harm brought to the end-user or consumer, who will bear the financial burden of these programs and be stripped of the ability to choose how best to heat and cool their home.
It is absolutely a possibility that these guidelines will be written into the CHS in Massachusetts. However, this story is far from over. DES—along with other stakeholders—has been heavily engaged in the process. It is critical that our industry continues to shine a light on the deeply negative outcomes that may result from these guidelines. Only then can we convince regulators that the greatest promises for effective Clean Heat Standards are ones that support a realistic approach. ICM
Renewable Energy Insights is a regular column by Joe Uglietto, President of Diversified Energy Specialists, consultant to the industry with a focus on emissions reductions and renewable energy innovation.