NW Partners Unite to Increase Gas Efficiency Options


The development of new, energy-efficient products and technologies historically has focused on electric appliances and services. Gas utilities have long offered customers incentives for purchasing energy-efficient products and for making energy-saving improvements, but the range of high-efficiency options for natural gas products has been limited.

Northwest gas utilities are stepping up their investment in natural gas efficiency using market transformation strategies that have proved successful for electric products and technologies.

Northwest residential, commercial and industrial customers rely on multiple energy sources, including natural gas and electricity generated by hydro, gas, coal, solar, wind and other renewables. To help those customers maximize energy efficiency and holistically optimize energy resources, the region must invest in electric and gas efficiency. Tackling both can generate significant benefits for the region’s economy, environment and energy capacity in the years to come.

In Oregon and Southwest Washington, local natural gas distribution company NW Natural has worked with electric providers through the nonprofit Energy Trust of Oregon, to implement publicly supported efficiency and renewable programs. Typical projects have included weatherization measures and cash incentives for products, appliances and equipment, as well as custom efficiency improvements, for residential, commercial, industrial and agricultural customers.

A call for market transformation

Historically, national and regional efforts for commercializing gas efficiency technologies have lagged behind efforts for electric technologies. “There have been fewer cost-effective and commercially viable new products for gas,” said Fred Gordon, Energy Trust of Oregon’s director of planning and evaluation, and a key proponent in advancing natural gas efficiency in the Northwest.

“NW Natural understood that it couldn’t provide incentives for emergent equipment that didn’t exist.” said Holly Meyer, NW Natural energy policy and sustainability manager. After talks with other regional gas utilities and Energy Trust of Oregon revealed similar concerns, the group found an able and willing partner in the Northwest Energy Efficiency Alliance (NEEA).”

Through two decades of work with electricity providers, NEEA has developed a methodology for vetting and accelerating new technologies and service approaches.

“NEEA’s approach minimizes the amount of money spent on less-promising technologies, while allowing viable ideas to develop quickly,” said Gordon. “NEEA also knows how to evaluate market transformation efforts.”

Building and testing the collaborative

The founding members of this natural gas efficiency effort include Avista Utilities, Cascade Natural Gas, Energy Trust of Oregon, NW Natural and Puget Sound Energy. Two of the utilities are gas only, while two are electric and gas providers; two serve more rural customers and two serve urban cores; two had worked with NEEA and two had not. Together, the participating utilities and nonprofit Energy Trust serve nearly two-thirds of the total residential and commercial market covered by NEEA’s four-state footprint.

All of the members agreed to participate in a pilot project. The group worked with the Gas Technology Institute (GTI) to launch a gas-fired, heat-pump water heater.

“The gas-fired heat pump potentially is a game-changing technology for the industry,” said Jeff Harris, chief market transformation officer at NEEA. “It allows gas-fired equipment to operate at efficiencies that exceed the traditional 100-percent limits on straight combustion equipment by leveraging ambient sources of heat.” The technology can be applied to commercial water heating, as well as residential and commercial space-heating applications.

“The challenge will be in scaling the components cost-effectively,” said Harris, “but the residential water heating example looks promising and bodes well for these other applications.”

NEEA has brought value by leveraging relationships with water heater manufacturers to accelerate product development. At the same time, it is working with national retailers and the region’s contractors to make sure that the Northwest will be ready to adopt these products when they come online.

Finding market opportunities

In February 2015, the new collaborative launched a five-year, $18.3-million initiative to accelerate the development and market adoption of new efficient natural gas technologies, practices and services, to create more choices for consumers.

These are the innovations that will help fuel our imagination of what could be in transforming how our employees and the public see the gas utility of the future.

The 2015–2019 Natural Gas Market Transformation Business Plan identifies five market opportunities: gas-fired, heat-pump water heaters; combined water and space heating systems; efficient gas clothes drying systems; efficient hearth products; and high-efficiency, gas-fired rooftop heating equipment. The first three technologies alone could deliver about 280 million therms in savings per year.¹

“The equipment selection criteria included some obvious benefits, such as the size of the energy savings opportunity, cost-effectiveness and risk,” said Harris. “But the criteria also included how well the opportunity would leverage existing NEEA market transformation efforts, and how likely we were to get an ‘early win’ in the market. Finally, the portfolio was assessed for regional equity, or how well the potential benefits of this work are distributed across the region.”

Looking for big wins

If the gas-fired, heat-pump water heater, now in field testing, continues to perform as it has initially, it will be the first gas product to produce Energy Factor (EF) rating well above the 1.0 threshold. Current gas storage water heaters must meet code requirements of 0.67 EF. “This new technology could further cut water heating costs by up to half, address gaps in product offerings for gas customers, and also put more muscle behind testing and validation efforts,” added Meyer.

“Right now, our only gas water heater incentive for single family homes is for a unit that’s slightly more efficient than the minimum Federal manufacturing standards,” said Gordon. “We find it’s easier to promote efficiency through market sales channels when there is a larger jump in efficiency. So we see great benefit from a significantly more efficient water heater.”

Meanwhile, the needed gas-absorption technology for the water heater already was under development by Tennessee-based Stone Mountain Technologies, Inc. With the mix of players assembled, Energy Trust can put additional weight behind testing and validation to move the technology forward.

At the same time, employees and trade partners gain local experience with gas absorption technologies in order to successfully promote and implement it — “if and when the product is commercially produced,” Gordon said.

Lining up early wins

“If” and “when” are small words that describe a big caveat for this new gas collaborative. That’s at least part of the rationale behind identifying early wins that will produce new products and savings for gas utilities in the short term.

Clothes dryers – The new ENERGY STAR specifications in development for clothes dryers will address one of the last major appliances to get an energy efficiency overhaul treatment. The new specs will include gas and electric versions. Should this new dryer technology reflect real savings over what’s currently on the market, it will provide an additional efficiency opportunity that complements promoting efficient washing machines, according to Gordon.

If new standards come online for electric dryers but not for gas, this poses a missed opportunity for consumers looking to upgrade their gas appliances.

Hearth products – Not all of the products that the collaborative considers will require a major technology upgrade. One of the most promising to NW Natural is the hearth products category.

Many customers appreciate the aesthetic value of a natural gas fireplace, but don’t consider or realize that they can achieve 92-percent efficiency. A natural gas fireplace can provide efficient space heat for about 50 cents an hour, especially in apartments where it could provide all or most of the heat.

In addition to developing new technologies and bringing them to market, the collaborative will work to increase awareness and accessibility to the high-efficiency tiers of hearth products already available to consumers.

Rooftop HVAC – Rooftop unitary systems are the dominant way that commercial buildings are heated in the region. While efficiency experts can make control improvements, “There is not a commercially viable and cost-effective option to increase the efficiency of the heating system itself,” said Gordon. “Condensing rooftop heaters might do that if they are proven cost-effective and salable in our climate.”

Taking stock and moving forward

In the Northwest, state public utility commissions oversee gas investor-owned utilities, and use a variety of methods to judge the effectiveness of utility investments.

These include a Utility Cost Test, which looks at costs paid for efficiency programs by utilities; and a Total Resource Cost Test, which also includes those costs paid directly by the program participants. While the intent of each is to ensure wise efficiency investments, the specifics vary from one state to the next, which may in turn make an incentive affordable under one utility’s program, but not another’s.

Gordon acknowledges that state-to-state differences exist, but they haven’t been barriers to a regional approach. “All four Northwest states have consistently supported NEEA’s electric market transformation initiatives since the late 1990s, and the Northwest’s utility customers have benefitted by saving money on electricity,” he said.

“Improving gas efficiency is considerably less expensive than bringing in additional new gas supplies, so we can hope for the same support.”

“As the first of its kind, this collaborative will break new ground, both in how we work together and how we interact with the market,” said Harris. “Therefore, we need to be flexible and learn as we go. We have built checkpoints into the effort to ensure that we are doing all we can to keep this effort moving in the right direction in the right way.”

The strategy of implementing a small portfolio enables both NEEA and its funders to gain experience in this gas market transformation without major organizational changes. Once the model has proven effective, organizers intend to integrate gas market transformation into overall strategic planning efforts.

Inspiring regional models

NEEA’s model has served as an example for effective energy efficiency partnerships in other regions. Policymakers in California are studying NEEA to see how they might infuse its efforts into their regulatory and organizational landscape. There also are regional efforts in the Midwest, Southeast and New England that have benefited from the groundwork NEEA has laid.

“At NW Natural, we are thrilled to partner with NEEA and the gas collaborative on new innovative technologies that will allow consumers to save even more energy with already efficient natural gas,” said Meyer. “The gas-fired, heat-pump water heater could end up drastically lowering current water heating costs. Combining the equipment with space heating will mean an even bigger splash in the market.

These are the innovations that will help fuel our imagination of what could be in transforming how our employees and the public see the gas utility of the future.”

  1. Estimated savings of 280 million therms annually are at a weighted average Total Resource Cost (TRC) levelized at $0.28/therm. This falls below recently revised wholesale near-term market forecasts, and below the expected, long-run marginal cost of gas.
Natural gas-fired heat-pump water heater, currently being market tested, could be a game changer for the industry.

About the Author

Veronica Marzilli, NEEA
Veronica Marzilli is the corporate marketing and communications manager for NEEA. In this role, Veronica develops and manages strategic marketing and communications strategies with NEEA’s partners, as well as curating NEEA’s website and outbound communications.