Zero-carbon new residential construction: Heat Pumps versus RNG

By Bill Andrews and Tom Hackney

February 20, 2023

Electric heat pumps for new homes in BC would be a less expensive zero-carbon solution than gas equipment using renewable natural gas. That’s the conclusion of a new report by Energy Futures Group (EFG) commissioned by BCSEA. BCSEA filed the report in the BCUC’s proceeding on FortisBC Energy Inc.’s (FEI) application for approval of a revised “Renewable Gas” program.

The December 2022 report speaks to FEI’s contentious proposal to supply 100% renewable natural gas (biomethane) to all new residential gas customers, for the life of the building, with the extra cost of RNG (compared to fossil natural gas) being covered by all FEI customers while the new residential customers would pay only the price of fossil natural gas. (For our earlier coverage of FEI’s RNG application, see “Changes to FortisBC’s Renewable Gas Program.”)

EFG, a US-based energy economics consultancy, compared the combined capital and operating costs of an RNG scenario and an Electricity scenario. Each scenario was designed to provide space heating, hot water, cooking, and clothes drying for an average new residential dwelling in BC over a 20-year period. The analysis deliberately excluded FEI’s proposed subsidy for RNG and government incentives for electric heat pumps. For RNG, the analysis used FEI’s average cost of acquiring RNG ($23.41/GJ), not the subsidized commodity price FEI proposes to charge new residential customers (about $6/GJ). To be conservative, the study assumed that electricity for heat pumps would be at BC Hydro’s Step 2 rate for residential customers (about $0.14/kWh).  The analysis concluded that the net present value (NPV) of the RNG scenario is $50,312, while the NPV of the Electricity scenario (air source heat pump) was significantly less, at $37,262. EFG concluded that FEI’s proposed cross-subsidized RNG service would be a more costly zero-carbon solution than electricity for heating new residential homes in BC.

FEI is applying for the cross-subsidized RNG service for new residential customers to try to continue to gain new gas customers in the face of many local governments’ increasingly stringent GHG emissions requirements. FEI says municipal, provincial and federal regulations and policies on GHG emissions “threaten the long-term viability of the gas delivery system and energy choice for British Columbians.” However, many of BC’s largest municipalities – Vancouver, Victoria, Surrey, Richmond, North Vancouver and Saanich, as well as Metro Vancouver – have intervened in the BCUC proceeding to try to prevent cross-subsidized RNG from undercutting other climate solutions.

The BCUC proceeding continues. In early February, BCSEA filed EFG’s responses to technical questions from BCUC staff and FEI. The next step is for FEI to file evidence in rebuttal to the evidence filed by BCSEA and other interveners. Then the parties will have an opportunity to file information requests to FEI on its rebuttal evidence. Following FEI’s responses, due at the beginning of April, FEI will file a written final argument by April 27. Interveners will file their written final arguments by June 1. And FEI will have the last word, with a written reply argument due June 22.