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Building electrification already fairly widespread, driven by energy costs, paper says

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  • Jan 6, 2021

Like electrifying the transportation sector, electrifying buildings is becoming widely viewed as a necessary step to reducing greenhouse gas emissions.

And, like the electrification of the transportation sector, the electrification of buildings has the potential to create large load increases that electric utilities need to be prepared to deal with.

A new paper by a professor at the University of California’s Haas School of Business points out two things that may make dealing with it easier. One is that building electrification, or at least the electrification of residential heating, has already taken place in large parts of the country, most notably the Southeast. The other is that to this point by far the largest factor driving building electrification has been cost — i.e., whether heating a home electrically is cheaper than heating it by burning natural gas or heating oil.

The paper, which is called “What Matters for Home Electrification? Evidence from 70 Years of U.S. Home Heating Choices,” also looks at the cost of electrifying residential heating based on the cost of electricity and fossil heating fuels in each state. That determines not only where the electrification of home heating is likely to continue on its own and where mandates may be needed to make it possible, but also how much those mandates would cost homeowners or renters who currently heat their residences with natural gas or heating oil.

In a post about the paper on the Energy Institute at Haas’ blog Lucas Davis wrote that the paper shows that 50 million U.S. households have electrified over the last seven decades with the percentage of households that use electric heat going from 1 percent in 1950 to 39 percent in 2018.

That, plus the fact that electrification would be relatively inexpensive for many households, means “encouraging electrification may be a lot easier than is generally believed,” Davis, a professor of economic analysis and policy at the Haas School, wrote on the Energy Institute Blog.

How much encouragement would be needed is one of the focuses of the paper, along with why so much electrification has occurred already.

To explore the latter topic, Davis proposed and tested five hypotheses. He found that collectively, they explained 90 percent of the electrification since 1950, but that energy prices comprised the most important factor, accounting for 70 percent by themselves. Since 1950, his research found, residential electricity prices have fallen more than 50 percent in real terms, while residential natural gas and heating prices have increased.

“Changes in other factors like where new homes are built, housing characteristics, and climate also matter, but collectively can explain only about 20 percent of the increase in electrification since 1950,” Davis wrote on the Energy Institute blog.

The relationship between energy prices and electrification is true today. Davis said the model he used in his paper shows that, with everything else being equal, “going from 21.6 cents per kilowatt hour (the current price in Massachusetts) to 9.6 cents per kWh (the current price in Louisiana) implies a 32 percentage-point increase in electric heating.”

Not surprisingly, therefore, electric heat is the predominant form of heating in the Southeast and also popular in the West and Midwest, as maps on the Energy Institute Blog show.

In his paper, Davis also looked at what electrification mandates would cost homeowners and renters per year in each state. His findings are largely what would be expected.

The northern borders of states from Arizona in the west to North Carolina in the east nearly constitute a straight line with 13 states to the south of it. In 11 of those states, the cost would be less than $600. “In Florida, for example, most households prefer electricity anyway so a mandate would impose low economic costs,” Davis wrote on the Energy Institute Blog.

The three states comprising northern New England would pay the most under an electrification mandate, according to Davis’ research, which found that electrifying residential heating would cost homeowners and renters more than $3,500 a year in Vermont, New Hampshire and Maine.

In fourteen states, an electrification mandate would cost homeowner and renters $2,500 to $3,500 a year. Six of those are in the Northeast — Massachusetts, Connecticut, Rhode Island, New York, New Jersey and Pennsylvania; four — Illinois, Wisconsin, Michigan and Minnesota— are in the Midwest; and the remaining four are the Rocky Mountain states of Colorado, Utah, Wyoming and Montana.

While building electrification is meant to reduce greenhouse gas emissions, its effectiveness at doing that depends on how the power consumed by the electrified buildings is generated. Combined with Davis’ paper’s findings, the map on his blog post about the paper indicates that increasing renewable generation may make building electrification easier to swallow for many consumers if renewable power prices continue to fall.

For example, with the exception of Utah, the Rocky Mountain states in which electrification would cost consumers the most money are ripe for and/or border Great Plains states that are ripe for wind farm development. Similarly, barring a major seismic event, all the Northeast states except Pennsylvania and Vermont where consumers would see their heating bills rise substantially from electrification, border the Atlantic Ocean. As a result, if large wind farm deployment can drive down power prices — which seems likely in the Plains and Rockies but less certain on the East Coast — making the grid greener can also help boost building electrification, thereby reducing emissions even more.

Additionally, a recent report by Rewiring America suggests that building and transportation electrification may save consumers money even without massive windfarm development.

The Washington, D.C., nonprofit was formed last summer to promote building and transportation electrification, rooftop solar development and bidirectional grids. A report it put out in December said building and transportation electrification would lower the annual energy costs of the average New Hampshire’s resident by roughly $3,900 to nearly $2,300, according to a story by Annie Ropeik for NHPR.

Davis’ study also found that there’s some low-hanging fruit for building electrification advocates if they want to pluck it — multi-family units, whose residents have lower demand for heating and therefore would be less affected by any price hikes electrification would cause.

Additionally, he said that his working paper doesn’t take into account how households could be affected by technological developments that might do such things as increase the efficiency of electric heat pumps, thereby lowering the cost of electrification.

Matt Chester's picture
Matt Chester on Jan 6, 2021

I think what would help further electrification (not necessarily as a replacement for policy) is better consumer education on what electrification can accomplish, the full suite of benefits of doing so, and the cost-benefit analysis most of all. 

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