PGW Diversification Study By Morgan Sarao

At the beginning of 2021, the City of Philadelphia announced their goal of reaching carbon neutrality by the year 2050, a move that helps to address climate change. In order to achieve this goal Philadelphia will transition away from fossil fuels such as natural gas. This is a major change since Philadelphia Gas Works (PGW) is the largest municipal gas utility in the country. It is a necessary change however since PGW alone accounts for 22% of the city’s greenhouse gas emissions (GHG). 

In September 2020, Philadelphia’s Office of Sustainability commissioned a business diversification study for PGW with the aim of identifying equity-focused strategies for PGW to reduce GHG emissions. The challenges to equitably decarbonizing PGW are manifold. First, PGW’s robust infrastructure includes 6,000 miles of gas mains and service lines, and this infrastructure is aging and relies on revenue from ratepayers to maintain. As more affluent customers abandon gas to transition to electricity, there is concern that gas rates will rise and lower-income ratepayers (which constitute one-third of PGW’s customer base) will be left to pay the bill for maintaining PGW’s aging infrastructure. Meanwhile, updating PGW’s infrastructure is becoming increasingly critical and time-sensitive. In 2019, a 92 year old gas main caused an explosion that killed two people and leveled 5 rowhomes in South Philadelphia; this is only one example of how dilapidated gas infrastructure puts Philadelphians in harm's way. Sustaining the labor force is a concern as well. PGW employs 1,600 people and must make a plan for retaining or retraining these employees so that they are not left behind during this transition. 

 In April of 2021, findings from the diversification study were presented to the public; the findings focused on three options for PGW’s decarbonization: (1) injecting renewable natural gas (RNG) into PGW’s gas mix, (2) hybrid electrification where PGW customers would adopt heat pumps paired with their original gas furnace to meet “peak heat” demands during the coldest periods of winter, and (3) full electrification where PGW customers would adopt electric heat pumps or connect to geothermal micro-districts. Naturally, there are benefits and drawbacks with each option. 

The RNG scenario is a more expensive option, as RNG is not sold commercially at scale to power Philadelphia’s gas needs, although PGW’s workforce would still be employed under similar conditions under this scenario. 

The hybrid electrification model is also expensive and consists of a high upfront cost of buying and installing heat pumps, including upgrading wiring and circuit breakers to handle heavier loads. In this scenario gas furnaces would also still be utilized to meet peak demands in the winter, and with anticipated extreme weather in the future due to climate change, it’s likely that gas furnaces would still be heavily utilized, thwarting efforts to reduce GHG emissions. A benefit under this scenario would be a role for PGW’s workforce since PGW’s infrastructure would continuously be utilized. 

Under the full electrification scenario, there are two types of heat pumps that would be used: air-source heat pumps which transfer heat absorbed from the outside air to an indoor space, and ground source heat pumps which transfers heat absorbed from the ground to an indoor space. Pipes from neighboring homes can be connected to form a “Geothermal MicroDistrict” under the ground source heat pump electrification scenario, which would preserve jobs as many PGW employees are trained to install and maintain the sort of plastic pipes used to create geothermal micro districts. The biggest upfront costs associated with installing the system include drilling six-inch-wide boreholes into homes, but operating costs for these systems are low. 

The next steps for the diversification study involve researching the legal and regulatory feasibility of these options, incorporating stakeholder feedback from the public presentation into the final report, and identifying and evaluating potential pilot project opportunities.

Although the City of Philadelphia is moving to electrify, fossil fuel utilities (like PGW) have opposed electrification by showing support for state-wide legislation that would forbid local governments from enacting measures that would discourage fossil fuel use. PGW has membership in two trade groups that have supported PA Senate Bill 275, a bill that if passed would forbid local governments from enacting measures that would discourage fossil fuel use and encourage electrification. The union that represents 1,150 of PGW’s workers testified in favor of the bill, saying electrification efforts would jeopardize those jobs and put an undue burden on low-income ratepayers. Senate Bill 275 is one of 19 “preemption” bills that have been introduced in states across the country this year, with 15 of these bills having been enacted into law or are awaiting final signatures from the state’s governor. Four preemption laws went into effect in 2020 in Arizona, Louisiana, Tennessee, and Oklahoma. 

To find the PGW Diversification Study Draft materials, please click here