Minnesota aims for lower carbon emissions, yet its natural gas network keeps growing

Minnesota's ever-expanding natural gas infrastructure keeps most homes here warm in the winter, but it's also a persistent obstacle to the state's goal to cut carbon emissions.

Natural gas heats two out of three homes in the state. Minnesota's largest gas utility, CenterPoint Energy, added 11,000 new customers in 2021, a spokesman said. Xcel Energy, which mostly provides electric but has some gas customers, added 5,600.

While the state relies on the heating fuel in harsh winters, it carries a big climate cost. Natural gas is almost entirely composed of methane, which is more than 25 times more potent in its heat-trapping ability than carbon dioxide, according to the Environmental Protection Agency.

But it's historically been cheaper than other forms of home heating in the state, making it the preferred fuel in many situations.

In an emailed statement from utility spokesman Ross Corson, CenterPoint also argued that the state's electric power system isn't equipped to meet winter demand.

"'All-electric' space heating in Minnesota would require a massive, costly and technically challenging build-out of the electric system," the statement read.

The state is already aiming for an ambitious transformation of its energy generation, though, with a goal of carbon-free electricity by 2040, according to Minnesota's Climate Action Framework. This clean electricity is meant to power more efficient homes that use less energy overall.

But the lower operating cost of gas can make it hard to sell alternative heating options even to clients who are seeking a greener home, said Paul Trieu, director of architectural design and engineering at custom homebuilder Sustainable 9.

"Up until recently, there haven't been a ton of people who want to go all-electric once they associate the costs that go with that," Trieu said.

But Trieu said volatility in natural gas prices, caused in part by Russia's war in Ukraine, has pushed gas and electricity closer to parity. He's now helping to design three new homes that will run only with electricity.

In some situations, such as replacing propane in rural settings or electric baseboard heat, more-efficient heat pumps can be an easy choice, said Rabi Vandergon, with the Minnesota Air Source Heat Pump Collaborative. But Vandergon said he often recommends a "dual fuel" system that may still incorporate gas.

Air-source pumps suck heat from outdoor air in the winter and use it to warm the inside of a home; in the summer, it does the opposite. The technology's performance has improved in cold climates in recent years, but needs a backup on the coldest days, Vandergon said.

Some new federal rebates in the Inflation Reduction Act will help bring down the initial cost of heat pumps for air and for water heaters. The act also includes tax credits that will be effective in 2023.

But the expansion of Minnesota's natural gas network is supported in part by incentives, too.

CenterPoint offers rebates to builders for installing more-efficient gas fixtures in new homes, as well as incentives through the loyalty program Builders Club North. The rewards system offers points for using a wide array of construction products and services, from blacktop and cabinets to drywall installation, and construction companies can cash them in for trips or tickets to sporting events. CenterPoint is the only utility in Minnesota that offers points through the loyalty system.

The utility said its Builders Club incentives were "modest" compared with other participating companies, totaling $57,000 to 147 builders in 2021.

But these marketing programs were one focus of CenterPoint's most recent rate case before the Public Utilities Commission. It agreed not to pass on the costs of incentives to ratepayers in a settlement of that case.

Karlee Weinmann, a researcher with the watchdog group Energy and Policy Institute, worried the incentives could skew the market away from alternatives to gas, at a moment when federal programs in the Inflation Reduction Act are starting to support them.

State DFL Rep. Patty Acomb, who represents Minnetonka and Plymouth, agrees. She proposed an amendment in the most recent legislative session to bar public utilities from offering anything of value to a builder in exchange for installing appliances with a specific fuel type.

Acomb later retracted the amendment because she said she knew it would not pass Minnesota's divided legislature, but said she wanted to make a point.

"Once installed, [natural gas is] going to be there for a long time," Acomb said, adding that rebates and other programs are "incentivizing builders to establish long-term commitments with the gas industry."

The industry says it is trying to innovate. CenterPoint's statement noted that it helped push for the Natural Gas Innovation Act of 2021, a bipartisan state law that opens up more utility funds to developing lower-carbon fuels.

The utility has gained regulators' permission to integrate "renewable natural gas" into its network, or methane that is captured from places where it might otherwise escape into the atmosphere, such as landfills and dairy farms.

Other gas utilities around the country are also experimenting with even more novel technologies, said Joe Dammel of St. Paul-based advocacy group Fresh Energy. In Massachusetts, he said, some gas utilities are implementing ground-source heat pumps — which draw heat from the ground, instead of the air — that are large enough to serve entire neighborhoods.

Those might prove useful test cases for a lower-carbon future in Minnesota.

"We see a lot of overlap with [gas suppliers'] current business model there," Dammel said. "It's putting infrastructure in the ground and operating a network system."