Xcel disputes role heat pumps can play in emissions reductions

Apr 23, 2024

Even before Xcel Energy files its plan with state regulators on how its gas operations will cut its greenhouse gas emissions, the battlelines between the company and environmentalists are already forming.

One of the first skirmishes looks to be over heat pumps and the role they will play in trimming the utility’s carbon dioxide emissions by 22% from 2015 levels by 2030. Xcel Energy must submit its so-called Clean Heat Plan by Tuesday.

A coalition of environmental groups issued an analysis concluding that 80% of the cuts could come from broadly replacing gas furnaces with heat pumps, which run on electricity.

Almost simultaneously Xcel Energy released a report from the National Renewable Energy Laboratory, for which the utility paid, outlining the limitations of heat pumps at altitude.

The deeper debate isn’t about heat pumps, but the fate of Xcel Energy’s extensive Colorado natural gas infrastructure and the billions of dollars it generates annually, as the utility seeks ways to keep the system relevant even as it reduces its carbon dioxide emissions.

“Conflict will likely arise over the methods of that decarbonization, primarily between advocates for all-electric solutions and the gas industry backed push for dubious hydrogen and ‘renewable’ natural gas fuels,” the Sierra Club said in a statement.

Two years ago, the legislature passed Senate Bill 264, requiring gas-distribution utilities in the state to file plans with the Colorado Public Utilities Commission outlining how they will reach the targets of a 4% reduction in carbon emission in 2025 and a 22% reduction in 2030.

The legislation outlined options to cut emissions, such as energy efficiency programs, heating electrification, but also included the use of hydrogen, and gas captured from landfills, farms and mines.

A report by a coalition of environmental groups — Western Resource Advocates, the Southwest Energy Efficiency Project and the Natural Resources Defense Council — concluded that more than 80% of the cuts could come from the installation of 382,000 air-source heat pumps across the Front Range. That would replace 10% of the region’s furnaces.

An air-source heat pump draws heat out of the air, even on cold days, and uses an electric-powered compressor to concentrate the heat and move it into a house. It can work in reverse and act as an air conditioner.

The report envisions a mix of standard heat pumps, which could be used as air conditioners and twined with existing furnaces, and cold weather heat pumps designed to run in subzero temperatures.

The environmental groups are calling for subsidies from Xcel Energy that would make heat pumps even in cost with natural gas furnaces.

The goal is basically a complete overhaul of the home heating market. “If we are able to transform the market we will see additional benefits extending beyond 2035,” said Meera Fickling, a senior climate policy analyst with Western Resource Advocates.

Another chunk of emissions reductions could come from Xcel Energy boosting its single-family home weatherization program to 28,000 households annually by 2030, from the current 2,000 a year.

“The utility’s clean heat plan will need to provide roughly $125 million in additional incentives annually, beyond current programs, for efficient electric appliances and weatherization,” the report said. “However, the long-term benefits of these investments outweigh the significant costs.”

The approach, for example, will avoid the need for $51 million in gas line extensions and between $312 million and $477 million a year in avoided fuel costs, Fickling said.

Xcel Energy had NREL do an evaluation of a Bosch heat pump that found that operating at Front Range altitude reduced the device’s efficiency by 5% to 12% over the manufacturer’s specifications.

“We learned two important things: There is a decline in performance and capacity,” said Jeff Lyng, an Xcel Energy area vice president for energy and sustainability.

Lyng said that the company is continuing to evaluate heat pumps, working with a dozen customers who have heat pumps to gather performance data on their units. There is also a plan to do testing this coming winter in Leadville, at 10,000 feet of elevation.

For now, Lyng said, “putting all the eggs in one basket is a pretty risky bet.” He said the company’s residential solar program has been in operation since 2006 and there are a little less than 100,000 residential and commercial rooftop solar customers in Colorado.

“How do we get that level of adoption of heat pumps in a short time, is that realistic?” Lyng said.

Xcel Energy is pursuing natural gas system-related options with ”clean fuels,” such as so-called renewable gas captured from landfills and dairy farms and mixing in hydrogen with the gas sent to homes. The utility is planning a pilot project using a hydrogen-natural gas blend in Hudson.

“Taking technologies off the table is not the right approach, clean fuels have a role,” Lyng said. “What we are trying to do is look out for customer costs and reliability.”

Of course, there is a lot at stake for Xcel Energy, which operates in eight states, but sells gas in only three, Colorado, Minnesota and Wisconsin, with 1.5 million of the company’s 2.1 million gas customers in Colorado.

The Colorado subsidiary has 32 billion cubic feet of natural gas storage (60% of the company total), 2,000 miles of transmission lines (90% of the company total) and 24,000 miles of distribution lines (65% of the company total), according to the company’s annual report filed with the federal Securities and Exchange Commission.

Xcel Energy’s natural gas business generated $3 billion in revenue in 2022, with nearly $2 billion coming from Colorado, figures provided in the company’s federal filings show.

The reaction to the NREL findings by a heating system consultant and a building electrification specialist at the Southwest Energy Efficiency Program was that the study held nothing new.

“Capacity reduction for altitude and temperature is well established and published by the manufacturers,” David Petroy, whose company NTS Energy designs heat pump systems for homes and businesses, said in an email. “HVAC system contractors routinely correct for altitude.”

“I don’t see any interesting conclusions,” Neil Kolway, SWEEP’s industrial program director and building electrification specialist said in an email. Kolway said that the altitude reduction in performance is minor.

Petroy noted that due to the thinner air at elevation, gas furnaces also perform more poorly than they do at sea level.

For that matter, natural gas blended with hydrogen has a lower energy value, as the “volumetric energy density” of methane gas is three times larger than hydrogen.

“There is a lot of uncertainty in these plans,” WRA’s Fickling said. “There’s a lot that has to happen.”

Special to The Colorado SunTwitter: @bymarkjaffe More by Mark Jaffe