CenterPoint proposes investments to decarbonize natural gas

CenterPoint recently proposed a large package of pilot projects aimed at decarbonizing the natural gas utility. On January 15, CUB filed an initial comment with the Minnesota Public Utilities Commission (“PUC”), recommending that the plan be approved, but with significant modifications.

Background

The Minnesota Legislature recently declared that "it is the goal of the state to reduce statewide greenhouse gas emissions across all sectors producing greenhouse gas emissions . . . to net zero by 2050." Achieving this goal will require innovative thinking around how we utilize greenhouse gas (“GHG”) emitting resources, including natural gas. To help, the Legislature has also passed the Natural Gas Innovation Act (“NGIA”). The NGIA allows Minnesota’s natural gas utilities to initiate pilots and conduct research on technologies and strategies that could help Minnesota reach its GHG emissions reduction goals.

In June 2023, CenterPoint filed its first proposed NGIA Plan with the PUC. The PUC now has authority to approve, reject, or modify that Plan following a public comment process. As the first such plan introduced under the NGIA, CenterPoint’s filing represents an important step in working towards Minnesota’s state energy goals. We appreciate CenterPoint’s willingness to discuss its proposed NGIA plan with interested stakeholders (including CUB), and we look forward to continuing to discuss it with them and others as part of an ongoing comment period before the PUC. This blog post provides an overview of what is included in CenterPoint’s NGIA plan, CUB’s initial thoughts on it, and what happens next in the regulatory process.

What is in CenterPoint’s first NGIA Plan?

CenterPoint’s first NGIA plan includes proposals for eighteen pilot projects to be rolled out over the next five years. The pilots involve investments in new, low-carbon fuels that could supplement geologic gas; proposals for increasing or improving conservation and efficiency programs; and other proposals for offsetting GHG emissions associated with the combustion of natural gas.  (See below for a summary of these pilots.) According to CenterPoint, “The eighteen pilots are projected to reduce or avoid approximately 1.2 million metric tons of carbon dioxide equivalent (“CO2e”) emissions, equivalent to the energy use of approximately 150,000 homes for one year.” CenterPoint estimates the total lifetime utility costs of these pilots to be around $186 million. If approved, most of these costs would be recoverable from ratepayers; however, CenterPoint will retain the burden to show that it acts reasonably when incurring the costs described in the Plan. 

In addition to the proposed pilots, CenterPoint proposes several R&D projects aimed at better understanding various pathways to achieving net-zero GHG emissions by 2050. These projects include “weatherization blitzes” aimed at increasing participation in CenterPoint’s existing conservation and efficiency programs, and research exploring expanded use of renewable natural gas, green ammonia, and carbon-capture technologies.

Does CUB support CenterPoint’s Plan?

See below for a full description of each of CenterPoint's proposed pilots.

CUB believes it is critically important for Minnesota’s natural gas utilities to plan for the future, particularly in light of Minnesota’s GHG emissions reduction goals. The NGIA provides a helpful process to test innovative projects and evaluate how they contribute to that broader, long-term planning process. However, to help ensure costs introduced through NGIA plans are reasonable, it is important for the PUC to avoid approving pilots that are underdeveloped or unlikely to be cost-effective. 

On January 15, 2024, CUB filed comments offering our initial reactions and questions on CenterPoint’s Plan. In those comments, we generally recommended that the PUC prioritize approval of pilots focused on conservation, efficiency, and electrification (which each reduce the end use of natural gas) and be more careful about approving large investments in new technologies that are still being studied.

With this in mind, we expressed general support for Pilots I, L, M, N and O (described below) but noted some concerns about Pilots A-D, which involve potentially non-cost-effective investments in renewable natural gas and green hydrogen. We also raised some questions over whether certain proposals would be better addressed as part of the company’s Energy Conservation and Optimization (“ECO”) offerings.

We are particularly concerned with Pilot C, which has the largest budget of all proposed pilots. If approved, Pilot C would permit CenterPoint to issue a request for proposals to spend an estimated $66 million (over the full life of the pilot) procuring renewable natural gas (“RNG”) from third-party developers and producers. As this RFP has not yet been issued, CenterPoint has not identified the price at which it will procure RNG or the costs of investments that may be required to blend RNG into its distribution system. This leaves a lot of unknowns about whether and how this investment will cost-effectively move CenterPoint towards significantly reducing GHG emissions. We raised some questions about this pilot (along with Pilots A and B, which also propose investments in RNG) in our comments and look forward to seeing CenterPoint’s response before making a final recommendation on whether Pilot C (or a modified version thereof) should be approved.

We are also concerned about Pilot D, which proposes building a green hydrogen facility in Mankato at a lifetime utility cost of nearly $23 million. In our view, the facility envisioned in Pilot D would be similar to an existing Center Point-owned green hydrogen facility in Minneapolis. The Minneapolis facility has been operational for over a year but, so far, has produced far less green hydrogen than CenterPoint has said it is capable of producing. We think CenterPoint should focus on improving and learning from the operation of its Minneapolis facility before investing in a new facility that may similarly underperform. 
 

What happens next?

There will be three rounds of comments on CenterPoint’s NGIA Plan. Interested parties (including CUB) just filed initial comments on January 15 and 16.  CenterPoint and others wishing to reply to those initial comments must do so by March 15. Finally, supplemental comments will be accepted until May 15. After this supplemental comment period, the PUC will hold a hearing to determine whether to approve, modify, or reject CenterPoint’s plan.

CUB is currently reviewing other parties’ initial comments and intends to file further refined recommendations in the supplemental comment period.
 

Get involved

Anyone can file public comments on CenterPoint’s NGIA Plan. If you have questions or concerns about the Plan that you would like to raise with the PUC, there are a few ways you can do this. You can write a comment online or send an email to consumer.puc@state.mn.us, and reference Docket No. 23-215. Please note that everything in your comment will become part of the public record. Comments should be submitted before May 15.

Keep an eye on our blog and social media pages for additional updates on this topic.

Summaries of CenterPoint’s proposed pilots

Below are summaries, taken verbatim from CenterPoint’s filing, of each proposed pilot.

Pilot A. RNG Produced from Hennepin County Organic Waste: CenterPoint Energy proposes to purchase renewable natural gas (“RNG”) from Hennepin County’s anaerobic digestion facility, which is currently under development. This new anaerobic digester facility will process source separated food waste from Hennepin County’s organics recycling program and a smaller quantity of yard waste. [Since its initial filing, CenterPoint has removed this pilot from its proposal].

Pilot B. RNG Produced from Ramsey & Washington Counties Organic Waste: CenterPoint Energy proposes to purchase RNG from Ramsey and Washington Counties’ anaerobic digestion facility, which is currently under development. This new anaerobic digester facility will process source-separated food waste from Washington and Ramsey Counties’ organics recycling program and a smaller quantity of yard waste.

Pilot C. Renewable Natural Gas Request for Proposal (“RFP”) Purchase: CenterPoint Energy proposes to issue an RFP to purchase an additional amount of RNG to complete its RNG portfolio.

Pilot D. Green Hydrogen Blending into Natural Gas Distribution System: CenterPoint Energy proposes to own and operate a 1 MW green hydrogen plant at an existing Company facility in Mankato, Minnesota. CenterPoint Energy would install dedicated solar panels, an electrolyzer, a hydrogen storage system, and other necessary systems and equipment to generate, store, and blend hydrogen into the gas distribution system.

Pilot E. Industrial or Large Commercial Hydrogen and Carbon Capture Incentives: CenterPoint Energy will identify a small number of large commercial or industrial customers interested in installing either power-to-hydrogen or carbon capture demonstration projects and support their projects by providing financial assistance towards feasibility studies and project costs.

Pilot F. Industrial Methane and Refrigerant Leak Reduction: CenterPoint Energy will hire a vendor to conduct surveys of participating industrial and large commercial facilities for methane and refrigerant leaks behind the customer gas meter. CenterPoint Energy will also offer incentives to partially offset the cost of leak repair.

Pilot G. Urban Tree Carbon Offsets: CenterPoint Energy proposes to purchase carbon offsets from local non-profit, Green Minneapolis. Green Minneapolis works with local tree planting partners across the 7-county Twin Cities Metro area to plant trees in urban areas and funds their work by selling carbon offsets.

Pilot H. Carbon Capture Rebates for Commercial Buildings: CenterPoint Energy proposes to provide rebates to commercial customers that install CarbinX carbon capture systems manufactured by Canadian company CleanO2. These units connect to existing natural gas heating equipment, capture CO2, and convert it into chemicals that are resold for commercial uses.

Pilot I. New Networked Geothermal Systems: CenterPoint Energy proposes to develop a new networked geothermal system to provide building heating and cooling for a neighborhood currently served by the Company. This pilot starts with a study phase to identify the location, technologies, and business model for the system.

Pilot J. Decarbonizing Existing District Energy Systems: CenterPoint Energy proposes to help existing district energy systems that currently use geologic gas to identify opportunities to reduce the lifecycle GHG impact of their systems via funding for feasibility studies and financial support for following through with study recommendations.

Pilot K. New District Energy System: CenterPoint Energy proposes a pilot to help current natural gas customers considering developing district energy systems by providing funding for feasibility studies and financial support to follow through with feasibility study recommendations.

Pilot L. Industrial Electrification Incentives: CenterPoint Energy would support industrial customers to electrify low-to-medium heat processes using heat pump technologies. This pilot begins with a study phase to identify promising heat pump technologies and potential industrial applications.

Pilot M. Commercial Hybrid Heating: CenterPoint Energy proposes to provide support for small-to-medium commercial buildings interested in replacing Heating, Ventilation, and Air Conditioning (“HVAC”) systems with hybrid systems using electric heat pumps and gas backup.

Pilot N. Residential Deep Energy Retrofits and Electric Air Source Heat Pumps: CenterPoint Energy would provide support for residential customers interested in retrofitting their homes to significantly improve energy efficiency and installing air source heat pumps with gas back-up. This pilot starts with a study phase to identify appropriate measures and home characteristics for deep energy retrofits.

Pilot O. Small/Medium Business GHG Audit: CenterPoint Energy proposes to expand its existing Conservation Improvement Program (“CIP”) Natural Gas Energy Analysis (“NGEA”) project to include identification of non-CIP GHG reducing opportunities for small and medium-sized businesses.

Pilot P. Residential Gas Heat Pumps: CenterPoint Energy proposes to fund the development and testing of a small number of ‘combi’ space and water heating gas heat pump systems in Minnesota homes.

Pilot Q. Gas Heat Pumps for Commercial Buildings: CenterPoint Energy proposes to fund the development and testing of a small number of gas heat pump systems in in commercial buildings.

Pilot R. Industrial and Large Commercial GHG Audit: CenterPoint Energy proposes to expand its existing CIP Process Efficiency and Commercial Efficiency projects to include identification of non-CIP GHG reduction measures and payment of incentives for the installation of identified non-CIP measures.