Enbridge relied on faulty study to pitch Ontario gas network expansion

A key study used by Enbridge in its application to expand its Ontario gas network erroneously inflated the cost of switching from gas to electricity to heat buildings by billions of dollars.

Enbridge is currently in hearings before the Ontario Energy Board (OEB) seeking approval for a customer rate hike to fund a massive gas network of new pipes across the province.

Evidence filed with the regulator includes a report from consulting firm Guidehouse commissioned by the Calgary-based fossil fuel company. It examined two paths to net-zero emissions by 2050 and concluded a heating grid with further gas investments is a far cheaper option than electric for home heating. Net zero is generally understood to mean a situation where any heat-trapping greenhouse gas emissions produced are offset by emissions absorbed from the atmosphere.

Enbridge used the study to claim electrification would be too expensive in the pages of the Toronto Star and has relied on it to justify further investments in natural gas infrastructure in Ontario. The company also referred to the Guidehouse study in a PowerPoint presentation as one of the “inputs” used to develop its “vision of Ontario’s energy sector,” which includes significant investments in gas infrastructure and renewable natural gas –– a fuel that some experts believe is greenwashing.

The study surprised experts from the Industrial Gas Users Association and advocacy group Environmental Defence, who are intervening in Enbridge’s rate hike application. Conclusions reached in the report contradicted other studies that state as the carbon price increases and the cost of wind and solar energy come down, renewable energy is the clear winner from a cost perspective.

Kent Elson, a lawyer representing Environmental Defence, wanted to see the assumptions the Guidehouse study relied on to reach its conclusion. Enbridge balked at releasing that information, and it took an order from the OEB to make the figures available for cross-examination.

“When they had to disclose what was underneath the hood, it became clear that it was just full of errors, so much so, they were forced to do a correction and that swung the results by $140 billion,” Elson told Canada’s National Observer. “It's an enormous set of mistakes.”

Despite the $140-billion swing, Enbridge defends the Guidehouse study. The analysis Guidehouse has since updated “reduced the differential between the two [scenarios] from $181B to $41B,” with the gas system still remaining as the lower cost pathway, an Enbridge spokesperson said.

“While the cost gap between the two scenarios has decreased, the overall findings of the study remain unchanged,” the spokesperson said.

Even though Guidehouse amended its faulty numbers, the report’s validity is still being questioned by experts.

After days of back and forth over the report’s findings at the hearings, the report’s authors conceded they are not experts on the best path forward for the energy transition. They also admitted they did not receive expert opinions on the best paths available. However, one of the report’s authors, Decker Ringo, defended the study, explaining they didn’t intend to analyze the “entire universe of potential pathways” and haven’t claimed that they did.

Previously, Enbridge has described the study as important because in recent years, “we feel that emissions reductions have become equated with just electrification,” Enbridge Gas vice-president for business development and regulatory affairs Malini Giridhar wrote in a sponsored content article in the Toronto Star.

“We don’t think of gas and electricity as alternatives. We actually want to be asking the question, ‘How can gas complement electrification?’” Giridhar wrote.

Burning fossil fuels to heat buildings is one of Canada’s toughest challenges in the race to decarbonize, causing more greenhouse gas emissions than power generation or agriculture. In Ontario, buildings are the third-largest source of planet-warming pollution, responsible for a quarter of the province’s total. Beyond the known climate impacts, gas stoves are also increasingly linked to diseases like asthma in children.

The climate science is clear that fossil fuels must be phased out, not simply made cleaner if the planet’s temperatures are to stabilize.

Canada and Enbridge’s goal is to reach net-zero emissions by 2050, 27 years from now. A typical building heating system lasts 20 years, according to evidence filed with the OEB. That means there’s one good shot left to replace gas furnaces, adding to the stakes of the ongoing hearing.

Elson worries if further gas investments are permitted, it will lock in more fossil fuels for decades to come and risks being extremely costly for customers unable to make the switch to renewables. Because renewable or energy-efficient technologies like heat pumps have a higher upfront cost, Enbridge could find itself in a situation where more affluent customers leave the gas grid in favour of cheaper renewables, leaving a shrinking pool of poorer customers footing the bill for gas infrastructure for decades.

“Both our expert Chris Neme and the expert for the Industrial Gas Users Association have found that [the Guidehouse study has] got a pro-gas bias, and can't really be relied on for what Enbridge is trying to rely on it for,” Elson said.

Neme is the co-founder and principal of the Energy Futures Group and has worked for decades in the energy industry. A 54-page report he wrote analyzing Enbridge’s application to expand its gas grid concluded the Guidehouse study at the centre of Enbridge’s justification is “highly biased” in favour of gas and thus “not credible.”

“Major declines in peak and annual gas demand are very likely in the future as efforts to decarbonize the Ontario economy accelerate,” Neme wrote. “This is the conclusion of most independent decarbonization pathways studies.”

According to Neme, there are multiple instances of “optimistic leaps of faith” made about gas to make that fuel appear economically viable, while “much more conservative assumptions are made about electric alternatives.” For example, Guidehouse assumes residential gas heat pumps and fully hydrogen furnaces can achieve high market penetration despite not being commercially available yet, while at the same time assuming electric heat pumps will fail to do so. The Guidehouse study also assumes the efficiency of electric heat pumps will degrade over time, but gas furnaces and heat pumps won’t.

In fact, Neme identifies at least 13 major issues with the Guidehouse study that amount to tipping the scales in favour of gas.

Evidence with the regulator shows the Industrial Gas Users Association agrees the Guidehouse study isn’t reliable. An expert hired by the Industrial Gas Users Association said it is “not sufficient to determine a path forward” and agreed the report has a pro-gas bias.