Other states including Illinois, Maine, Vermont and Washington are exploring similar laws. And 13 gas utilities have created a Utility Networked Geothermal Collaborative to explore options.
To be clear, thermal energy networks, also called geothermal networks or geo-districts, aren’t a new idea. A number of cities, colleges and corporate campuses in Europe, Asia and North America use district energy systems — shared steam or hot water exchange networks — for heating and cooling needs, and many of them aim to switch from fossil fuels to zero-carbon electricity. In the U.S., geothermal networks that tap into underground heat, cool water from nearby lakes or waste heat from sewers and other buildings are proving the efficiency and cost benefits of the concept.
But gas utilities are an ideal party to carry out thermal energy networks at scale, said Audrey Schulman, co-executive director of the Home Energy Efficiency Team (HEET), a Cambridge, Massachusetts–based group that helped spur the state’s first such pilot projects by utilities Eversource and National Grid, including the project in Framingham.
First, gas utilities have the workforce, expertise and access to capital needed to build the sprawling and interconnected underground networks required, she said. Second, they’re already spending billions of dollars per year on fossil-gas pipeline expansions and repairs that will inevitably become “stranded assets” long before their costs are paid back by customers.
In Massachusetts, the state’s six investor-owned gas utilities plan to spend more than $40 billion on a Gas System Enhancement Program to replace the roughly 22 percent of gas lines in the state that are prone to leaks, she said. Customers pay the cost of those investments via increases on their bills that can persist for decades — far past the state’s deadline to reduce greenhouse gas emissions by 85 percent from 1990 levels by 2050.
The state’s push toward thermal energy networks will likely be accelerated by a December decision from the Massachusetts Department of Public Utilities to reject gas-utility decarbonization plans that relied too heavily on alternative fuels like hydrogen and renewable natural gas. Beyond that, the department’s “beyond gas” order calls for “minimizing additional investment in pipeline and distribution mains” and specifically calls out thermal energy networks as an alternative.
“The whole thing is about setting up the regulatory structure by which we get off gas and onto something else,” Schulman said.
New York faces similar choices as it works to implement its 2019 climate law that calls for cutting fossil gas use by at least one-third by 2030 and converting the “vast majority” of customers to electric heating by 2050, Dix said. Despite these imperatives, gas utilities in the state have spent $5 billion on infrastructure investments and identified $28 billion in pipeline replacement plans since the law’s passage.
This disconnect between climate imperatives isn’t limited to Massachusetts and New York. Consultancy Brattle Group found in a 2021 report that U.S. gas utilities may face $150 billion to $180 billion of “unrecovered” investment in pipelines over the coming decade. States including California and Colorado have set policies to limit expanding gas lines and to push gas utilities to transition customers to less-polluting alternatives.
Gas utilities across the country have largely fought such mandates or pushed proposals that rely on continuing to use their pipelines to carry carbon-neutral fuels such as biomethane or hydrogen. But a growing body of research indicates that these plans will likely falter due to the high cost and low availability of those alternative fuels.
At the same time, when looking for large-scale conversion of entire neighborhoods to low-carbon alternatives, “utilities make the most sense to do this,” Dix said. “They’ve got rights of way, they have the permitting authority, they have access to capital, and they have the workforce, which is already unionized.”
Like many other states with decarbonization mandates, New York has offered hundreds of millions of dollars in incentives for heat pumps and building electrification, and has imposed regulations limiting the expansion of fossil gas to new buildings.
But according to a 2023 report from the Building Decarbonization Coalition, this “house-by-house” approach could end up leaving gas utilities and regulators in a bind — being forced to maintain expensive gas distribution networks to supply fuel to a dwindling number of customers.
The customers that remain, meanwhile, will bear a greater and greater proportion of the cost of paying off those gas investments, leading to a vicious cycle of cost increases being imposed on people who can’t afford to make the switch to heat pumps on their own. These left-behind customers are more likely to be lower-income earners already struggling to afford increasingly expensive utility bills.
Thermal energy networks, by contrast, can be planned on a neighborhood-by-neighborhood basis, she said. That gives utilities and regulators an opportunity to target disadvantaged communities, areas with the most aged or leak-prone infrastructure, or other strategic approaches to shifting people from gas to electric heating and appliances en masse.
(Building Decarbonization Coalition) The efficiency benefits of these networks can also provide significant relief to power grids that will experience massive growth in demand from building heating and electric vehicles. Department of Energy research has found that installing geothermal heat pumps in nearly 80 percent of U.S. homes could reduce the costs of decarbonizing the grid by 30 percent and avoid the need for 24,500 miles of new transmission lines by 2050.
From pilot projects to statewide transformation
Many steps remain for New York to bring these on-paper pilots into the real world, however.
First, each utility will have to negotiate with the customers involved in the pilots on how to share the costs of installing heat pumps and other new equipment. Then they’ll need to build the projects and get them up and running, track the performance of the equipment and underlying networks, and assess the cost-effectiveness of the projects.
Bringing down the cost of these projects will be an important first test. Heat pumps are more expensive than gas furnaces, and designing and constructing the pipes, boreholes and networked heat-exchange technologies involved will be more costly than standard gas infrastructure projects.
“There will be a marginal cost increase compared to business as usual,” said Matt Rusteika, Building Decarbonization Coalition’s director of market transformation. “But because you’re not buying the gas, and the gas is like half the bill, the cost for consumers would come down.”
Altering laws now on the books in New York, Massachusetts and other states to allow utilities to switch customers from gas to thermal energy network service without triggering “obligation to serve” objections will also be important, he said. Under those laws, “if the customer says ‘I want gas,’ the utility has to give gas to them,” he said. That obligation is a core part of a utility’s mission, but its strict application could allow a single customer in a neighborhood slated for a thermal energy network to stymie the entire project.
In New York, the Utility Thermal Energy Network and Jobs Act suspends that law for the pilot projects now being considered, Dix said. But another law would need to be passed to extend that shift to the state at large. In Massachusetts, the Home Energy Efficiency Team and other environmental and community groups are endorsing a “Future of Clean Heat” bill that would make similar changes.
More complexities will emerge as utilities and regulators start to consider the methods for some members of a thermal energy network to exchange their waste heat with others, Rusteika said. “How you compensate people who provide it and those who use it is a more complicated question.”
For now, backers of thermal energy networks are waiting for the first pilot projects in Massachusetts and New York to provide the real-world testing grounds for answering these kinds of questions. Eversource’s first project in Framingham, Massachusetts is set to come online later this spring, he said. “We’re going to learn a lot about efficiency and functionality and comfort and cost from that pilot.”
* Correction: A previous version of this story incorrectly implied that existing fossil gas pipelines can be used for thermal heat networks. We regret the error.