A net-zero future for gas utilities? Switching to underground thermal networks

Massachusetts’ major gas utilities, facing the eventual demise of fossil fuels under the state’s decarbonization mandate, are contemplating a new business model: replacing neighborhood gas pipeline networks with pipes that capture and share thermal energy underground.

Over the next year, utilities Eversource, National Grid and Columbia Gas plan to break ground on separate pilot projects testing the viability of making such ​“geo-grids” or ​“micro geo-districts” into in-the-ground realities. If they succeed, the model could be extended to a much broader set of the utilities’ customers — and potentially offer gas utilities in other regions a path toward a carbon-free future.

Nikki Bruno, Eversource’s director of clean technologies, said the utility has hopes to expand well beyond its $10.2 million, three-year pilot project in a lower-income neighborhood in the city of Framingham, Massachusetts.

For that to happen, however, ​“we would have to show an environmental benefit, customer affordability, and technology performance,” she said. 

Right now Eversource is busy signing up a mix of residential and commercial customers willing to install heat pumps that can tap into the pipes it will be laying alongside its fossil gas pipelines, Bruno said. Those pipes will carry a water-and-antifreeze mix that circulates through loops in boreholes sunk hundreds of feet into the earth, absorbing underground temperatures that linger at a stable range around 55 degrees Fahrenheit.

As that temperate fluid is brought back to the surface, it can be used by electric-powered heat pumps to generate heat when it’s cold outside or cold when it’s hot outside, whichever is needed, as this Eversource graphic indicates.

Heat pumps are already much more efficient than fossil-fired furnaces or boilers. Heat pumps that exchange heat and cold with fluid at a stable temperature — as in these pilot projects — are even more efficient, outperforming air-source heat pumps that exchange temperatures with outside air.

Ground-source heat pump systems like these have been used for decades, largely by individual buildings or campuses. They’re far more prevalent in Europe, where some cities have built neighborhood or citywide networks.

But the costs of drilling boreholes and laying pipes have put ground-source heat pumps out of reach for most homeowners or businesses in the U.S. Gas utilities, on the other hand, are already in the business of excavating streets and laying pipelines, and they could spread the costs of that work across their customer base.

Connecting lots of customers on the same pipe network could also allow utilities to share and balance the thermal energy being exchanged among them, making the entire system more efficient than a stand-alone ground-source system — if enough customers in an area agree to join in, that is.

Eversource’s demonstration project will help the utility and Massachusetts regulators determine whether the model can deliver environmental and energy-efficiency benefits in a financially viable way, Bruno said. ​“If this works, we can say, ​‘This has been proven here.’ We could expand load; we could connect other networks.”

A tested technology at utility scale 

That’s the hope of Zeyneb Magavi and Audrey Schulman, co-executive directors of the Home Energy Efficiency Team (HEET), a Cambridge, Mass.–based nonprofit climate solutions incubator that works to reduce the state’s reliance on fossil gas.

HEET has been tracking methane leaks from the state’s aging underground pipeline networks for years. An engineering study it commissioned to assess the potential for replacing fossil gas with geothermal networks directly inspired the pilot projects now underway in Massachusetts.

“Our state is still investing billions of dollars” into replacing fossil gas networks, Magavi said in an interview. Utilities are currently projected to spend another $20 billion through 2050. But Massachusetts’ newly passed mandate to reduce carbon emissions to net zero by 2050 means ​“there will be no rate-base to pay off that infrastructure. It will be a stranded cost, and it will be a huge equity problem” for the customers who are left paying the bills as wealthier customers switch to cleaner alternatives.

Ground-source heat-pump networks could help solve that stranded-cost problem while eliminating carbon and methane emissions. Using ground-source heat pumps for heating is also four to five times more energy efficient than using gas furnaces.

Schulman pointed out that networking heat pumps with geo-grids offers even greater efficiency, because ​“you can share back and forth any excess thermal energy. An ice rink can — even during the winter — pull cool off the system, making the water hotter by comparison. And homes down the street can pull that heat and use it.”

Eversource’s initial application for the pilot project with the Massachusetts Department of Public Utilities listed other benefits as well, such as a ​“cleaner, safer, quieter system” that eliminates the emissions of combusting methane indoors and avoids the noisy outdoor compressor systems used by air conditioners or air-source heat pumps.

A business model based around a utility-owned and -operated system also helps cover the large upfront capital costs of deploying the network. That’s more attractive to building owners who may not plan to remain in their buildings for the length of time needed to earn back the costs of a geothermal heat-pump system in reduced energy bills.

Where these barriers can be overcome, the benefits are quick to arrive. Colorado Mesa University in Grand Junction, Colorado installed a single-loop ground-source geothermal system in 2007, and it has saved more than $1 million per year in energy costs while keeping its buildings comfortable in a region where temperatures can range from well below freezing to 100 degrees Fahrenheit and above.

New neighborhoods can be built around a shared geothermal network. EcoSmart Solution, a spinout of Shell New Energies and Taurus Investment Holdings, designed and owns such a system for the Whisper Valley development in Austin, Texas, allowing its 7,500 homes to use rooftop solar power and heat pumps to dramatically reduce their energy use for heating and cooling.

Beyond overall efficiency, Whisper Valley’s ​“geo-grid,” as EcoSmart Chief Technology Officer Greg Wolfson described it, also dramatically reduces the peak electricity demand needed to keep homes warm amid cold snaps. That’s an important factor in a state that experienced widespread power outages during February 2021’s Winter Storm Uri, he said.

A low-carbon future for gas utilities 

The fundamental disconnect between fossil gas business models and state decarbonization imperatives is forcing lawmakers, regulators and utilities to explore ways to transition from their fossil fuel roots. Biomethane and hydrogen are being proposed as an alternative to fossil gas — but it’s far from clear if those alternative gases can replace today’s volumes of fossil gas in ways that are cost-effective and reduce overall emissions.

Utilities will also want regulators to approve plans to share the costs of emerging geothermal networks with their remaining gas customers, said Steve Bryant, former president and chief operating officer of Columbia Gas of Massachusetts, in written testimony before state regulators. That could allow revenue from gas sales to pay for early development of geothermal and support ​“further steps to transition to alternative fuels and technologies,” he said.

Columbia Gas is paying for one of the state’s geo-district pilots as part of a settlement over its mismanagement of a gas system upgrade in 2018 that led to explosions, more than 100 house fires, one death, 22 injuries and the evacuation of more than 8,000 residents.

HEET points to disasters like these, along with the less noticeable but widespread health and climate harms caused by gas leaking from pipes and valves or burned by stoves and furnaces, as reasons to move as quickly as possible to eliminate its use.

Other states and cities are exploring ground-source geothermal as a solution to the climate and safety problems of gas networks, said Mike Henchen, a principal on the Carbon-Free Buildings team at nonprofit research organization RMI. (Canary Media is an independent affiliate of RMI.)

“From a regulatory model or utility model, it’s most analogous to a steam network,” such as those operated by New York City utility Con Edison or Xcel Energy in Denver, Colorado, he said. ​“The idea is to replicate that regulatory model, but instead of steam, do it with ground-source heating and a heated fluid.”

One example of this is in Philadelphia, where the city-owned gas utility is exploring decarbonization options that include networked geothermal systems, Henchen said. ​“It’s a promising concept that can decarbonize heating. It’s worth testing. But the jury’s still out to see how far we can scale it.”

Assessing the potential — and the limits — of utility geothermal networks 

There are a number of potential limits to scaling up these types of geothermal networks, Henchen said. The first is centered on geography and climate. Ground-source heat pumps provide the most benefits in colder climates since their ability to provide heat amid lower temperatures without dramatically increasing electricity use means ​“you’re going to avoid really taxing the electric system,” he said.

In warmer climates, however, ground-source heat pumps are not the most cost-effective solutions; ​“the air-source heat pumps will always be cheaper to install,” since they require no underground work. Given the pressing need to halt and reverse the use of gas, ​“if we’re not able to do these more highly coordinated district transitions, we still need to see folks move toward air-source heat pumps,” he said. ​“That’s the pathway that’s most broadly available to every building, or nearly every building, now.” But that’s not a business model that’s particularly well-aligned with gas utilities.

Another limiting factor is getting enough customers to sign on. The high costs of drilling boreholes and digging up streets and other rights-of-way will require long-term payback from lots of customers making use of the system. If too many customers in a neighborhood targeted for those improvements can’t or won’t participate, the costs may not be worth it.

Wolfson highlighted that EcoSmart’s geo-grid projects depend on near-universal adoption by the neighborhoods they serve. ​“If you had a patchwork of people, some of whom wanted to do it and some of whom didn’t, it would never work,” he said. ​“You have to do it at scale.”

New-build projects like Whisper Valley do that by embedding the shared pipeline network into the legal titles and easements that govern land use and how builders construct homes, he said. Gas utilities that already have those land-use structures in place have a ​“tremendous advantage” on that front, he said — if regulators approve their use of that authority.

Keeping the upfront and ongoing costs of converting to a networked geothermal system as low as possible is also important. That’s why Eversource’s pilot project is subsidizing the costs to customers to switch from fossil-fueled heating to heat pumps and setting flat, low monthly rates for participating, Bruno said.

By actually installing and operating its pilot network, Eversource will be able to gather data and work with regulators to set the proper customer rate structures for any potential expansion of the geothermal network model, she said.

“We want to understand how the thermal systems work, how the metering may work,” Bruno said. ​“The vendor ecosystem, the installations, the permitting [and] working with the community in Framingham will also determine the ultimate cost.”

Keeping those costs in check is critical to prevent customer departures from threatening district energy economics, as is happening with Xcel’s Denver steam network, Henchen noted.

“If you get folks who start to defect from the system, you start to get that death spiral,” he said. That term describes the process of customers departing from an energy network, which forces utility costs onto a shrinking number of customers, which raises their individual costs and in turn encourages more to depart.

HEET’s Schulman noted that this problem also applies to existing gas utility customers as decarbonization efforts ramp up, however. ​“We don’t want the remaining gas customers to shoulder a higher and higher burden of the fixed-cost gas system,” Schulman said, ​“because the people who end up paying that will end up being the renters or low-income residents.”

That’s why HEET and other like-minded groups support the ​“Future of Heat” bill, a broad set of gas utility reforms introduced to the Massachusetts state legislature last year, Schulman said. In addition to regulatory and incentive proposals to push utilities to switch from gas to lower-carbon alternatives such as biomethane, hydrogen and electric heating, the bill would allow utilities to serve customers with thermal energy instead of fuel, she said.

Utilities need to be incentivized to make this switch, Magavi said. ​“I do not believe, on a house-by-house basis, that we can get to our climate goals at the speed and scale we need.” 

By getting utilities involved, ​“we are reusing a skilled workforce that works with pipes in the street,” she said. ​“We’re reusing a customer service base, a regulatory framework. We’re using everything else that is a gas utility.”