Option 1: Everybody in MA installs heat pumps in their homes.
Option 2: Everybody in MA installs heat pumps in their homes, as well as re-insulates and enhances air-sealing.
Government is deciding how they want to allocate funding for home energy retrofits. If you are a grid operator, which plan would you want the government to support? Keep in mind that you will be negotiating with regulators to set rates which will correspond to a guaranteed rate of return given your CapEx.
Obviously you as a utility would pick the scenario which will end with you just spending more money, as that will allow you to justify higher rates to the regulator. Your rate of return would be the same, but your actual profit will be higher. Who actually bares that cost? The consumer. Option 1 above will lead to higher demand and higher peaks than option 2, so it is in the utilities’ interest to advocate for the government setting incentivizes for option 1, as it will allow them to negotiate higher rates, spend more capital, and make more profit.
The state/local governments have a responsibility to the constituents IMO to incentivize option 2 over option 1.
But the utility would have an incentive to lobby for legislation which only allocates funding to heat pump incentive programs, as opposed to programs which couple those incentives with requirements/incentives for deep energy retrofits.
They certainly have skin in the game for shaping the legislative/policy outcomes which will affect their ability to negotiate for rates and how they invest in the grid (which is == higher rates and revenue, which in turn == higher profit given the agreed rate of return).
Option 1: Everybody in MA installs heat pumps in their homes.
Option 2: Everybody in MA installs heat pumps in their homes, as well as re-insulates and enhances air-sealing.
Government is deciding how they want to allocate funding for home energy retrofits. If you are a grid operator, which plan would you want the government to support? Keep in mind that you will be negotiating with regulators to set rates which will correspond to a guaranteed rate of return given your CapEx.
Obviously you as a utility would pick the scenario which will end with you just spending more money, as that will allow you to justify higher rates to the regulator. Your rate of return would be the same, but your actual profit will be higher. Who actually bares that cost? The consumer. Option 1 above will lead to higher demand and higher peaks than option 2, so it is in the utilities’ interest to advocate for the government setting incentivizes for option 1, as it will allow them to negotiate higher rates, spend more capital, and make more profit.
The state/local governments have a responsibility to the constituents IMO to incentivize option 2 over option 1.