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Research Shows Natural Gas Is the Fuel of Choice in Much of the U.S.

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Over the past 70 years, the percentage of Americans heating their homes with electricity has steadily increased – but when given the choice, consumers in much of the colder parts of the country prefer natural gas and would pay more to keep it. A recent report from the Energy Institute at Haas investigated the causes behind the increase in home heating electrification since 1970, uncovering findings that are a mixed bag for electrification proponents.

According to Census data, the use of electric heat has steadily increased from 1970, when only 1 percent of homes had it, to 39 percent in 2018.

While crediting the shift to a combination of energy prices, geography, climate, housing characteristics (apartments are more likely to have electric heat), and income, the researchers found that lower electricity prices was “by far the most important single factor.” Notably, the researchers failed to credit natural gas – which has helped save $203 billion ($2,500 per family) annually – with lowering the cost of electricity prices.

“As mentioned earlier, average residential electricity prices have fallen 58 percent in real terms since 1950, while average residential prices for natural gas and heating oil have increased 27 percent and 79 percent, respectively.”

The use of affordable, reliable natural gas as a fuel source for electricity generation is one of the key reasons behind falling electricity prices in the past decade. According to statistics from the U.S. Energy Information Administration, natural gas fuels 38 percent of the American electric power sector.

Nor did the report explain that, despite increased costs for natural gas since the 1950s, households heating with electricity this winter were expected to pay more than double that of those using natural gas, according to the Energy Information Administration.

Meanwhile, federal data on home energy costs have shown that homes with natural gas appliances save approximately $900 annually over homes with electric ones. And anticipated increases in electricity prices mean that this savings gap is likely to grow over time.

These cost differences are important as price is a key driver of heating choices. The study finds that this is particularly true in colder areas:

“Households in cold climates tend not to choose electricity because of the high price per unit of heating.”

While residents of warmer areas have little to no preference for natural gas heating, in states with very cold winters—including in the Mountain West—consumers are willing to pay a price premium to avoid an electrification mandate. According to the study, Coloradans would pay $2,789 to avoid such a mandate, while residents of Montana would pay up to $3,159, and Wyoming residents $3,093. According to researchers, these figures give a sense of the size of the subsidies that would be needed to convince households to change to electric heat.

The study also found that higher income households were “slightly less likely” to choose electric heat, more evidence that consumers with more choices of home heating fuels pick natural gas.

It turns out that while more Americans may be heating their homes with electricity, where the winters are coldest, consumers continue to trust natural gas to keep them warm.

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