Transforming PGW: A Sustainable Model for the Future

Today in Philadelphia’s City Hall, Kleinman Center Faculty Director Mark Alan Hughes presented during a public hearing held by the Committee on Public Transportation and Utilities. Here is his written testimony. You can watch his testimony here.

Re: April 26th public hearing on the sustainability of the Philadelphia Gas Works (item 181081)

Thank you committee chairs and council members for the invitation to discuss considerations relevant to the future of the Philadelphia Gas Works (PGW).

My name is Mark Alan Hughes and I am on the faculty of the University of Pennsylvania and am the faculty director of the Kleinman Center for Energy Policy (Kleinman Center) at Penn. I was also the founding director of sustainability for this City and helped conceive and create the Greenworks plan. 

The Kleinman Center is funded exclusively through a gift fund totaling over $40 million from unrestricted alumni donations to Penn. Faculty and staff of the Center also participate in proposals and projects funded by federal research dollars awarded on a national competitive basis. The Center receives no private, corporate, or other funding. We recognize the rare privilege of this independence and we express our gratitude to Penn alumni.

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In these brief remarks, I seek to lay out some of the challenges and opportunities facing PGW in the particular context of both climate change and energy policy. This context, more than any other, will constrain the choices and define the chances for a “PGW maneto”…a sustainable PGW, one that can endure in the sense of the City’s ancient motto.

An idea that captures this connection between climate change and energy policy is “electrify everything.” It may be the most important policy idea in the world, but the idea has profound consequences for Philadelphia, largely because of PGW.

Electrification combines climate and energy in the following way. First, the world needs to stop adding heattrapping greenhouse gases into the atmosphere, because the concentration of those gases is increasing the Earth’s temperature—with devastating and irreversible impacts on the ecosystems humans depend on.

The best science suggests that (and the Paris Agreement commits to) limiting the increase in Earth’s global mean temperature (GMT) to 2.7 degrees F is necessary to have a reasonable chance of avoiding cataclysmic climate change impacts. Just how cataclysmic could a couple degrees make? Consider this. The latest UN report (written by 91 of the world’s leading climate scientists) found the following differences between a GMT increase of 3.6 degrees compared to 2.7 degrees: “…the number of people affected by water scarcity will double. Twice as many corn crops will perish in the tropics. The size of global fisheries will drop by 50 percent. And 99 percent of the world’s coral reefs will perish…the number of species projected to lose half their habitat will double…” (The Atlantic)

The key to limiting global warming is to radically change our energy and land use practices that increase the concentration of greenhouse gases in the atmosphere. Four years ago in Paris, the nations of the world agreed to limit GMT to 3.6 degrees and to try for 2.7 degrees.

How are we doing? By 2018, GMT had already increased by 1.8 degrees F. The best estimate of current policies in place around the world (including the pledges made by the Obama administration) are predicted to lead to a 6-degree increase in GMT…. over twice the safe threshold.

[The open secret of recent climate science is this. Almost every model used to guide our decisions about the energy transition can no longer avoid catastrophic changes in sea level, heat waves, and food supply without assuming that we invent ways to geoengineer the planet. That’s really the single best measure of how bad the global situation is.]

The best news in this bleak picture is that there has been significant progress in decarbonizing electricity. (CO2 from the power sector has fallen steadily in the Unites States since 2005, and in 2017 CO2 from power generation was lower than transportation for the first time since 1978.) As a result, policymakers are committing to electrifying end uses that have relied on gas and liquid fuels, like space and water heating, industrial processes, and vehicles.

The main reason the power sector has so rapidly reduced its carbon emissions is innovation in policy and technology that support renewable power. Building on a low and zero carbon base of hydro and nuclear power, solar and wind have combined with various means of energy storage to out-compete coal and now natural gas generation in many parts of the country for many times of the day and year.

[One-third of the world’s installed power plant capacity is now carbon free. New U.S. solar and wind generation in 2019 is expected to be double new gas capacity this year. A growing number of U.S states and territories are establishing legislative goals for 100 percent renewable electricity, with the recent passage of PS 1121 in Puerto Rico one of the most ambitious and comprehensive.]

If we can continue our accelerating path toward zero-carbon electricity and then electrify has many things as possible, we can make progress toward bending the curve of predicted GMT from 6 degrees toward 2.7 degrees, and reduce the suffering and death of millions of people. “Electrify everything” may indeed be the most important policy idea in the world.

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But electrification creates a special challenge for Philadelphia, home to the nation’s largest municipally owned natural gas utility. PGW has generated enormous value for the City’s residents and businesses for almost 200 years, but it will be a liability in a world where carbon emissions become constrained by taxation or regulation.

Those constraints will almost certainly arise in a few years and become punitive within a couple decades. And that’s a good thing, as the fate of the Earth depends it.

However, PGW delivers over 75 billion cubic feet of natural gas every year through 6000 miles of pipe to 475,000 residential and 25,000 industrial customers who combust that gas and release CO2 into the atmosphere. That value chain simply can never get to zero emissions. It will go out of business either by regulatory fiat or by paying for the impacts of carbon pollution, stranding huge municipal assets as a result.

What can we do? Some think the problem an illusion and call to shut down PGW and/or transform it from a natural gas system to something else based on cleaner technologies. Perhaps such a transformation might be accomplished by transferring PGW assets to a private entity capable of dismantling the parts in the smartest way, perhaps with some proceeds going to cushion the financial blow on residents and workers.

At the Kleinman Center, we take an open-minded approach to these “how” questions and are considering the costs and benefits of an array of different approaches. But the complex goals are always the same: achieving a just and efficient energy transition in Philadelphia that meets the energy needs of all residents and firms, while fulfilling the policy obligations on this government to ensure both financial solvency and a habitable city.

Using Penn’s extraordinary portfolio of research expertise across many schools and disciplines, we have assembled a diverse team of graduate student and postdoc researchers working in the labs and centers of world-class scholars. Led by Kleinman Center Research Associate Oscar Serpell, the team incudes Dr. Wan Yi “Amy” Chu of the Vagelos Institute for Energy Science and Technology, PhD candidate Benjamin Paren of the Department of Material Science and Engineering, and MBA/MA candidate Giridhar Sankar of the Wharton School and Lauder Institute. The remainder of this testimony builds on the ongoing research of these Penn researchers working at the Kleinman Center.

The future of PGW is largely defined by the extent of electrification:

• Build a renewable-plus-storage electricity system to power all of the end uses currently energized by PGW
• Build a net-zero-carbon gas system that leaves the basic PGW system of distribution and end uses in place
• Once we understand these two extremes, of course, we can consider hybrid and/or transitional combinations of the two approaches providing thermal energy

Each approach offers the basic benefit of a plausible zero-carbon future for PGW by mid-century along with major costs that need to be better understood and compared. Both will be expensive, but that expense must be compared to the cost of a future in which PGW is effectively illegal and the status quo is simply not an option.

Electrify Everything PGW Now Does with Natural Gas

The three obvious costs of electrifying everything the PGW now does are:

1. swapping out all the end uses in the city, from residential furnaces to industrial thermal process;
2. building and operating enough new renewable generation and storage to power PGW (as well as enough to electrify cars, trucks, and buses); and
3. managing the dismantling of the physical and financial assets stranded by electrification.

As daunting as each of these is on its face, each is actually even more daunting than it appears:

1. Some industrial processes may not be amenable to electrification. These processes would either leave the City or continue to require gas-fired processes.
2. Converting all of Philadelphia’s residential and commercial space and water heating natural gas load to electric load would increase annual electricity demand by at least 10,000 GWh, equal to a 25 percent increase in PECO’s total supply for its five-county region; and this in turn would require an enormous seasonal storage capacity to meet winter demand.
3. Changing equipment from gas to electric in hundreds of thousands of buildings would put complex operational stress on the gas distribution system. For example, it may well require a planned shutdown of areas of gas distribution by neighborhood rather than voluntary retirement on an owner’s schedule on a building by building basis.

Put Carbon-Neutral Gas in PGW’s Pipes

The renewable gas approach offers a compelling alternative that leaves most of the status quo in place: same pipes, same workforce, same furnaces. Change the gas that flows through the PGW system from methane extracted from the Marcellus Shale and elsewhere to another combustible fuel.

What makes this approach a climate policy and not just a PGW procurement policy is the source of that alternative fuel. Natural gas is Methane, CH4. It can be extracted from the Earth but it can also be reformed from Carbon (C) and Hydrogen (H2).

Recall that the essence of the climate change crisis is that we have pumped too much CO2 into the atmosphere and we continue to add more every hour, 37 gigatonnes in 2018. New technologies now exist (for example, those developed by climate engineering start-ups like Carbon Engineering and Climeworks) that can extract CO2 from the atmosphere and provide carbon for re-use. There are other sources of CO2 as well, such as bio-gas from waste, which is typically a 50-50 mix of CO2 and CH4.

Hydrogen can be extracted from water using a high energy process called electrolysis. Hydrogen and carbon can then be reformed into methane using a number of processes. The century-old Sabatier Reaction uses very high heat. Demonstrated biological reactions use organisms that combine carbon and hydrogen into methane with much less added energy than traditional methods for producing synthetic natural gas.

If the electricity used in these processes comes from renewable sources, then burning that synthetic gas would not add any additional CO2 to the atmosphere because the carbon was already in the atmosphere…this process mines air rather than shale.

Just like the electrify everything strategy, the synthetic natural gas strategy has daunting costs to consider and better understand.

1. Electrolysis is the process of splitting water (H2O) into hydrogen and oxygen. It is both energy and water intensive. Every ton of H2 that is produced requires thousands of gallons of purified water. The water used by these processes has to be extremely pure (free from any metals or additives) and thus is likely not compatible with the existing water treatment facilities. It may be that a synthetic methane facility would also have to have a designated water treatment facility.
2. The release of CO2 from the capture medium needs a large amount of heat. Where do we get this heat? Carbon engineering, for example, uses natural gas to produce heat. But if the direct air capture plant is directly coupled to another process that releases heat, say methanation itself, a large percentage of the heat can be supplemented through this process. For every ton of CO2 used to make methane, the thermochemical process creates 5.21 GJ of heat, which can supply a large portion of the estimated 5.25 GJ needed for the overall process of obtaining carbon.

It’s obviously complicated. But not beyond our abilities to understand and manage these options. Furthermore, the processes above can serve many complementary purposes that provide co-benefits allowing decisionmakers to deal with uncertainties and transitions in the coming years.

For example, some of the same processes described above can be used to store large amounts of excess renewable electricity as synthetic natural gas (this is called Power-to-Gas) at a total cost comparable to battery storage.

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Carbon neutrality would flip PGW from a dismal future liability to a competitive asset for at least the remainder of the 21st century. Philadelphia leaders could finally have their cake and eat it too: honoring both environmental priorities for the planet and valuable energy assets for Philadelphians.

In conclusion, I respectfully suggest to the committee that the four takeaways are these:

1. The future of a sustainable PGW rests on a just and efficient energy transition that meets your obligations to provide both fiscal integrity and a habitable city.
2. Meeting those obligations means beginning now to transform PGW into an entity capable of at least surviving and ideally contributing to a decarbonizing present and a decarbonized future.
3. There are many options worth considering, lots of questions about each option to investigate, and almost certainly there are a few uncertainties that will require your judgment.
4. You have a room full of people here who are prepared to help inform this work, including many faculty and students of the University of Pennsylvania.

Mark Alan Hughes

Faculty Co-Director

Mark Alan Hughes leads the Kleinman Center as faculty co-director and writes on topics ranging from deep decarbonization to the future of Philadelphia’s energy landscape. He is also a professor of practice at the Weitzman School.