3.3 Customer conversion challenges

Additionally, more users relying on clean fuels for decarbonization will result in overall increased demand for those fuels. Therefore, the investment needed to catalyze and grow the market to produce clean fuels – e.g., investment in carbon sequestration and electrolysis – could scale more rapidly in a High Carbon Sequestration or High Clean Fuels where there are assumed to be more fuels consumers in 2050, as compared to a Resilient Electrifi cation case, where it is presumed that energy consumers can electrify.

Because costs of a clean fuels network are more widely shared with high modeled demand, there is potential for increased investment to rapidly scale clean fuels. Consequently, the High Clean Fuels and High Carbon Sequestration scenarios are rated as green in the evaluation matrix above (Ex. 3.1), with the Resilient Electrifi cation scenario rated as yellow specifi cally for the hard-to-abate sectors.

As decarbonization progresses, large scale energy transitions will likely require changes to many customers’ homes and businesses – such as enhanced insulation, more energy effi cient appliances, and fuel-switching from natural gas appliances to electric and/or hydrogen equipment. Some of these changes could be driven by customer choice, to technologies that are more cost effective, or that better support their lifestyle or business. Some of these changes will be driven by policy – local, state, or federal, accompanied by conversion costs.

Customer conversion challenges present prospective disruptions that could be experienced in homes or businesses to align their on-premise appliances and equipment to operate on the available energy sources for their particular premise. For example, this could include industrial customers switching to hydrogen-fueled processes (such as in the High Clean Fuels scenario), or installing carbon capture technologies (such as in the High Carbon Sequestration scenario), or necessary upgrades in homes and businesses to accommodate higher electric load (such as in the Resilient Electrifi cation scenario). Managing this conversion is one of the most substantial implementation challenges associated with decarbonizing California’s economy.

The Resilient Electrifi cation scenario assumes levels of electrifi cation that may result in higher customer conversion challenges, as 100% of residential and commercial appliance and equipment sales are assumed to be electric by 2035, compared to 50% in the High Clean Fuels and High Carbon Sequestration scenarios. While some customers may be able to convert to full electric, achieving 100% electric sales by 2035 will entail transitioning all buildings with the requisite electric supply and distribution capabilities.

Achieving full customer conversions at such scale would require potentially complicated interventions, customer interruptions, and investment on the customer premise at unprecedented levels. For example, 100% electric sales by 2035 would require signifi cant upgrades; in many instances, beyond simply upgrading to a heat pump. This is likely to include upgrading the distribution panel and the main switchboard (including some secondary components), as well as possibly working with the electric utility to upgrade the service connection.

Some installed existing HVAC systems are considerably more complicated and may even require a full internal retrofi t of the circulation system requiring tenants to vacate the premise during portions of the upgrade. Residential systems can require upgrading the electric service panel (which may already be upgraded in some instances to handle EV charging). Some customers also may prefer one specifi c energy delivery source (e.g., gas for home cooking) over other energy sources.

The process by which full electrifi cation would occur such that a gas system is no longer used or needed in a specifi c area is unclear. Without targeted electrifi cation of all end-uses of all customers in one area (which might require retiring appliances that are not yet ready to be replaced before end of life), the gaseous fuel distribution system would still likely be needed to support that specifi c area until its full electrifi cation is complete. Where possible, customer costs for electrifi cation were estimated and included in the analysis discussed in Section 4.5 on Affordability.

Similarly, and even more challenging, in the No Fuels Network scenario, given that the entire fuels network would be decommissioned, all customers – including residential, commercial and industrial -- would need to convert all appliances and equipment to electricity or truck in fuel, and would have no fl exibility to use a piped mixed clean fuel as an alternative or back-up (as could still happen in the Resilient Electrifi cation scenario). For these and other reasons, 100% electrifi cation is therefore expressed in this analysis to be the most challenging. In comparison, the other scenarios which assume partial electrifi cation (of 50% by 2035) provide greater fl exibility and are therefore more manageable presuming electrifi cation efforts could potentially focus on customers that are most feasible to electrify.

The High Clean Fuels scenario assumes that currently available customer appliances can tolerate a 20% blend of hydrogen. This assumption is informed by global literature review, although continued studies are ongoing in this area and need to be completed to maintain the safety and reliability of appliances. A balance of clean fuels replacing existing natural gas combined with electrifi cation solutions could prove easier to implement on the customer premise as compared to full electrifi cation.