“With a clean electricity system comes opportunities to reduce fossil fuel usage in these sectors: for example, electric vehicles displace petroleum use and electric heat pumps avoid the use of natural gas and oil for space and water heating in buildings.”

–The White House, United States Mid-Century Strategy for Deep Decarbonization, 2016

The Obama Administration opened many fronts in its war against fossil fuels. The best known was the Clean Power Plan, stayed by the US Supreme Court and now being dismantled by the US Environmental Protection Agency.

Perhaps the least-known Obama-era intervention against consumer-driven energy involves deep decarbonization, whereby “clean” electricity (statutorily defined[1]) replaces natural gas in homes and businesses. A demand-side strategy intended to drive the supply side (renewables), deep decarbonization is apart from conservationism, or forced energy reduction per se.

Deep decarbonization is the first step to achieving “zero emissions by 2070 (full decarbonization),” according to Jeffrey Sachs et al. in their essay, “From Good Intentions to Deep Decarbonization.”

“Deep decarbonization requires not natural gas and fuel-efficient vehicles, but zero-carbon electricity and electric vehicles charged on the zero-carbon electricity grid,” Sachs and his coauthors state. “By pursuing coal to gas, or more efficient gas-burning vehicles, we risk putting ourselves into a high-carbon trap.”

Direct-use natural gas is in the crosshairs of the deep-to-full decarbonization movement. As such, (de)regulatory reform should be on the agenda as part of President Trump’s America First Energy Plan.

Regulatory Basis

DOE’s Office of Energy Efficiency and Renewable Energy (EERE) regulates energy-using appliances under this authority:

The Energy Policy and Conservation Act [of 1975], as amended, specifies that the Department [of Energy] must consider for amended standards those standard levels that “achieve the maximum improvement in energy efficiency which the Secretary determines is technologically feasible and economically justified” and which will “result in significant conservation of energy.” 42 U.S.C. 6295.

Final regulations, “as proposed and as recommended by stakeholders,” are issued with this rationale: “The Department of Energy (DOE or Department) has determined that revised energy conservation standards for … will result in significant conservation of energy, are technologically feasible, and are economically justified.”

The term economically justified (also defined as “non-trivial”) requires a break-even point with the added cost of the “more efficient” hardware within the estimated life of the appliance. But EERE routinely chooses variables that support more stringent regulations. And determining what is trivial or not is part of what keeps EERE’s huge bureaucracy so large.

Regulatory Bias

EERE imposes more stringent regulation on gas appliances than on their electric counterparts—the unstated goal being increased electrification. This is justified not by using full-fuel-cycle analysis but merely by finding electricity to be more energy efficient than gas in terms of on-site energy usage.

For example, replacing a gas water heater with an electric resistance water heater saves about 35 percent in direct, on-site energy use. But on a source basis (a.k.a., full-fuel-cycle basis), a natural gas water heater consumes approximately 46 percent fewer Btu.

Metric bias results in more stringent gas water-heater standards despite the fact that life-cycle energy losses for natural gas are only about 10 percent of its usable energy (from the point of wellhead extraction to the consumers’ utility meter) versus 70 percent for electricity.

Turning to space heating, an electric resistance furnace saves approximately 20 percent in Btu compared to a gas furnace on site. But on a full-fuel-cycle basis, the gas furnace uses about 40 percent less.[2]

Appreciated holistically, natural gas is distributed to over 73.5 million US homes and businesses for a wide variety of uses, such as water and home heating and cooking. Overall, 38 percent more energy is delivered for 15 percent of the cost of electricity. This is reason to leave gas alone, not discriminate against it, via public policy.

New Standard Needed

The anti-gas bias has attracted pushback from the victimized industry. “It is important that government policies and regulations that influence energy matters be based on accurate measurements of energy efficiency and environmental impacts,” concluded a study by the American Gas Association. Yet:

Most government policies and regulations that influence energy matters are “site-based”—that is, they only consider the impacts at the site where the energy is ultimately consumed. Site-based regulations, such as appliance efficiency standards and measurement, can lead to higher energy resource consumption as well as higher levels of pollution. A full-fuel-cycle analysis is more comprehensive.

Far from controversial, full-fuel-cycle analysis has been recommended to the Department of Energy (DOE) by the National Academies of Sciences, Engineering, and Medicine, in their “Review of Site (Point-of-Use) and Full-Fuel-Cycle Measurement Approaches.”

Consumer, Environmental Issues

Rational consumers, unregulated by government, can be expected to weigh the up-front price of appliances against the anticipated operating costs of electricity versus gas. Over time, interfuel competition can be expected to improve efficiency as well, and without government assistance.

Ironically, government intervention intended to substitute electricity for gas is about switching from one carbon-based energy for another—even a more emitting one. Sixty-five percent of US electricity is generated from fossil fuels—with less than one-fourth coming from renewables, led by hydro (7 percent) and wind (5.5 percent).

Complementing a let-the-market-decide argument for allowing natural gas to compete against electricity is a grid security and diversity argument . In short, the natural gas grid is less susceptible to outages than is the power grid.

Reform Opportunity

EERE’s mission statement—“to create and sustain American leadership in the transition to a global clean energy economy”—is fundamentally opposed to President Trump’s instruction to “lower costs for hardworking Americans and maximize the use of American resources.” Deep decarbonization is a very radical part of energy statism that must be drained from the swamp.

DOE Secretary Rick Perry should deep-six deep decarbonization. Most obviously, DOE should replace the site-based efficiency methodology with a full-fuel-cycle standard to end the war against direct-use natural gas. As part of this reform, DOE’s statutory responsibilities for appliance standards should no longer be entrusted to those employees and consultants that are zealots for carbon-free energy.

These measures would arrest the regulatory bias. But more would be needed. A massive regulatory structure remains in place that will follow the political winds in the future. Legislative reform of EERE’s mission—indeed the agency’s very existence—is required to achieve pro-consumer, pro-taxpayer, America-first energy policy.

[1] The Clean Energy Standard Act of 2012 defines “clean” electricity as “electricity generated at a facility placed in service after 1991 using renewable energy, qualified renewable biomass, natural gas, hydropower, nuclear power, or qualified waste-to-energy; and electricity generated at a facility placed in service after enactment that uses qualified combined heat and power (CHP), [which] generates electricity with a carbon-intensity lower than 0.82 metric tons per megawatt-hour (the equivalent of new supercritical coal), or [electricity generated] as a result of qualified efficiency improvements or capacity additions at existing nuclear or hydropower facilities[; or] electricity generated at a facility that captures and stores its carbon dioxide emissions.”

[2] This assumes ratings of 100 percent efficiency for an electric furnace and 80 percent efficiency for a gas furnace multiplied by site to source conversion factors of 32 percent for electricity and 92 percent for gas.

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