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Two recently released studies came to opposite conclusions on the consumer and climate benefits of electrification in residential and commercial buildings.
The first study, prepared for the American Gas Association (AGA) by the consultancy ICF, assessed the implications of what it terms “policy-driven residential electrification.” That is, electrification of space and water heating driven not by market forces but, in this case, by “the halt of sales of furnaces and water heaters fueled by natural gas, fuel oil, and propane, starting in 2023.” AGA is the national trade organization for the gas industry.
The study assumed the policy would result in a fossil-fuel-to-electricity shift in about 60 percent of the U.S. housing stock by 2035 in the regions where the policy is implemented.
The AGA study concluded that policy-driven electrification would be “burdensome to consumers and to the economy [and] have profound impacts and costs on the electric sector. A very costly approach for a relatively small reduction in emissions.”
AGA: High costs, higher peak and more emissions
On Twitter, AGA’s Managing Director of Energy Analysis Richard Meyer presented key findings from the study.
“Potential [greenhouse gas] emission reductions from policy-driven residential electrification are small,” he said. “Under an aggressive electrification policy, total U.S. greenhouse gas emissions would be reduced by 1 to 1.5 percent.”
Residential natural gas, fuel oil and propane greenhouse gas emissions are estimated to account for about 5 percent of U.S. GHG emissions in 2035, according to Energy Information Administration data cited in the study.
Meyer wrote that policy-driven residential electrification would also result in total energy system costs as high as $1.2 trillion or up to $21,000 per converted household on average.
The AGA study also found that extensive residential electrification would drive up peak electricity demand.
“Electrifying all residential natural gas space heating could nearly double the U.S. electric grid ’s peak hourly demand and could shift the U.S. electric grid from a summer peaking to a winter peaking system,” said Meyer.
The study’s “Renewables-Only Case” assumes that the increase in electricity demand driven by electrification of space and water heating would be met only by renewable energy sources and battery storage.
In the “Reference Case,” 84 gigawatts of retired power generation capacity, including coal-fired power plants and oil and gas steam peaker plants, is replaced with new combined-cycle natural-gas-fired power plants. In the Renewables-Only Case, that retired capacity is not replaced with new more efficient natural-gas plants and the retirement of the plants is delayed.
“As a result,” the authors state, “the Renewables-Only Case results in higher emissions from existing generation plants than occurs in the Reference Case, which reduces the overall emissions benefits associated with policy-driven electrification.”
Taking issue with the assumptions
In an interview, Mark Kresowik, regional deputy director of the Sierra Club, said assumptions made in the study favor natural gas over electricity.
“Their mislabeled Renewables-Only scenario assumes that the oldest and dirtiest power plans continue to operate. They are essentially assuming dirty electricity is powering those heat pumps,” he said.
“Probably the most egregious problem with their cost assumptions is that they’re not actually built around heat pumps at all," he added. "They’re massively overestimating the cost because their cost assumptions are actually built on using inefficient electricity resistance heating on the coldest days of the year.”
The study assumed that at temperatures below 4 degrees Fahrenheit, 100 percent efficient electric resistance heating takes over for 300 percent or more efficient electric air-source heat pumps.
“At very low temperatures, heat pumps typically cannot provide adequate heat and require some form of backup energy, typically electric resistance heat,” the study authors write.
Practitioners with long experience in the field say the belief that air-source heat pumps can’t operate effectively in extreme cold is a relic.
“Cold climate performance has historically been the Achilles' heel of air source heat pumps. Below 40 degrees Fahrenheit the compressor wouldn’t put out heat, and electric resistance heaters were required,” wrote Redwood Energy’s Sean Armstrong in a recent blog post.
"That was then," he added. "For almost 15 years now there have been inverter-controlled compressors that can operate inside the Arctic Circle and are effective down to 27 degrees below zero.”
ACEEE: Consumer savings and emissions reductions
The second study, released last month by the nonprofit American Council for an Energy-Efficient Economy (ACEEE), focuses on what electrification means for homes and businesses reliant on oil- or propane-fired furnaces, boilers and water heaters.
According to ACEEE, fuel oil and propane are the primary heat source for 12 percent of U.S. homes — and even higher percentages in the Northeast, Mid-Atlantic and rural areas nationwide.
The study focused on space and water heating electrification via full replacements of oil and propane equipment with electric alternatives at the time the existing system fails.
“Replacing oil and propane furnaces, boilers, and water heaters with high-efficiency electric heat pumps can often reduce total energy use and energy bills and will also reduce emissions in many cases,” wrote ACEEE Executive Director and report author Steven Nadel in a blog post.
“The energy and money saved by installing electric equipment instead of propane- or oil-powered equipment can often make up for the upfront cost in relatively short order," he said.
Based on 2016 power-sector emissions data, ACEEE found that “in all but a few states, replacing oil or propane space and water heating systems with heat pumps will generally reduce emissions.”
“For most of the country,” the report found, “homeowners will benefit from substantial life-cycle cost savings by replacing an oil or propane furnace with a high-efficiency heat pump.”
Payback periods to replace oil- or propane-fired devices with electric models ranged from immediate (an oil water heater replaced with an electric heat pump water heater) to one to two years (an oil or propane furnace replaced with a high-efficiency electric heat pump) to eight to 16 years (a propane boiler replaced with a ductless electric heat pump).
In compiling the findings, ACEEE did not assume rebates would be available for electric heat pump systems, nor did it include a price on greenhouse gas emissions.
After conducting a survey of programs nationwide, ACEEE concluded that the most successful heat pump programs — such as those in the Northwest, where ductless heat pumps have a 13 percent market share — provide upstream incentives to wholesalers or midstream incentives to contractors and include contractor training and certification.
ACEEE also offered recommendations for state policymakers interested in establishing programs to promote heat pumps. In addition to financial incentives, the suggested measures include: training for contractors and education for homeowners; field monitoring of real-world heat pump performance; research on supplemental heat for cold-climate heat pump replacements; and R&D to develop improved electric ducted air-source heat pumps and gas-fired heat pumps for cold climates.
To the extent that policy changes drive greater electrification of space and water heating, expect the numbers battle to get hotter.