PGW Business Diversification Study

By LeAnne Harvey

Posted December 10, 2021


The City of Philadelphia’s Office of Sustainability ,in partnership with PGW, have been exploring how PGW, a municipally-owned natural gas utility, can diversify its business model to transition away from fossil fuels and towards clean energy. This is a crucial action for the City to take toward achieving its goal of carbon neutrality by 2050. 

Yesterday, the City released the PGW Business Diversification Study, a first step in a multi-year, multi-phase effort. The study examines different business models in which PGW can sustain local jobs and maintain customer affordability, while also identifying pilot projects to demonstrate ways to reduce greenhouse gas (GHG) emissions. 

Philadelphia is one of the most energy-burdened cities in the United States, with residents paying nearly 7% of their income on energy, compared to a national average of 3%.  With gas prices on the rise, this study is a timely look at how PGW can address cost inequities amoung households, while providing low-carbon energy services. Currently, over 70% of Philadelphia households are reliant on natural gas for heating, cooking, and hot water. 

The study explores pathways to decarbonization for PGW including Decarbonized Gas, Hybrid Electrification, Electrification, and Networked Geothermal Systems. 

The study makes clear that decarbonized natural gas is not a viable, scalable, or cost-effective alternative. Examples of decarbonized gas include biomethane, synthetic natural gas, and hydrogen. These alternatives would not help the city improve air quality, significantly reduce GHG emissions, or meet energy demands. 

On the other hand, electrification is a promising potential path forward for PGW. In this pathway, customers would replace their gas furnaces with either air-source or ground-source heat pumps which are powered by clean electricity. Across the country, we are seeing successful commitments, incentives, and programs in place to scale air-source heat pump installations. For Philadelphia, we have an additional challenge of addressing home repair. Pairing electrification with critical home repair is essential to ensure that low-income Philadelphians are not left behind in a transition. 

Networked Geothermal Systems, or district heating, is already being utilized in Center City and West Philadelphia and offers another promising approach for the City to explore. District heating can help to smooth demand patterns across the district. Another benefit is that district heating can be similarly structured to PGW’s current business model, providing an easier transition for PGW’s existing workforce. 

While the study lays out the costs and benefits to each pathway, and makes clear that the pathways should not be mutually exclusive, it doesn’t provide a clear direction forward. So while there are 77 pages of informative analysis, it leaves us asking “What’s next?”

The study recommends considering three near-term pilots to better understand the implications of a large-scale transition:

  • New financing opportunities for weatherization

  • A feasibility study for networked geothermal systems

  • A local decarbonized gas program

While these pilot projects will help to better understand the opportunities and challenges for networked geothermal systems and decarbonized gas, they are missing an obvious opportunity to explore electrification. To support electrification as a viable option, we need to ensure that all points in the process are equipped to make a supportive decision. Consumers need assurance that electrification meets their affordability, comfort, and health needs. Contractors need familiarity and experience with equipment installation and high-impact efficiency measures that pair best with electrification. Grant, loan, and rebate program implementers need evidence of electrification improving cost, comfort, and indoor air quality. This applies to not only home heating but also to all of the other gas appliances in a home including stoves, clothes dryers, and water heaters. A robust existing-homes electrification pilot is necessary to answer the critical questions of customer affordability, reliability, and comfort. 

In addition, the study provides recommendations for next steps forward:

  • Define mid-term GHG reduction targets with PGW

  • Work with PGW’s regulatory bodies to consider legal or regulatory options to pursue decarbonization strategies

  • Create a citywide strategy for Greenhouse Gas Reduction in Philadelphia’s buildings

  • Conduct a PGW Workforce Impact Study

Green Building United would like to see a continuation of the public input process that informed this study. Our members play a critical role in the built environment, including decision making around equipment in new and existing buildings and homes, and proving out high performance building construction, renovations, and maintenance. From the Passive Rowhouse Manual to ongoing education and events, our members are curating innovative resources to help guide our built environment toward net zero. We are excited to learn how the City plans to prioritize these recommendations, and how we can lend our expertise and support. 

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