Experts Discuss the Biggest Barriers Holding Back Building Electrification

Even the stunning views of the Sandia Mountains couldn’t distract the experts gathered at Rocky Mountain Institute’s recent e-Lab Summit from maintaining focus on the task at hand: untangling some of the knottiest challenges facing the electricity industry.

Each year, RMI assembles a diverse group of practitioners and thought leaders for three days of small group discussions on a handful of topics of pressing interest to electricity sector stakeholders. In all, more than 100 experts participated in this year’s summit, which was convened at a resort north of Albuquerque, New Mexico.

Greentech Media was invited by RMI to report on the summit* and observed the multi-day small group session, or “pod,” devoted to building electrification.

Other pods addressed comprehensive regulatory reform; integrated planning; transforming rural electric supply; low- and moderate-income customers and regulatory proceedings; distributed energy resources in wholesale markets; and delivery and compensation for resilience.

More than a dozen representatives from investor-owned and municipal utilities; environmental advocacy groups; state energy agencies; and energy technology organizations participated in the building electrification pod sessions.

To foster candid dialogue at the summit, all participants (including GTM, the only media outlet at the event) were asked to follow a modified Chatham House Rule. Participants’ summit comments and opinions can be cited with attribution -— direct or indirect — only after securing explicit written permission from the source.

GTM reached out to building electrification participants after the summit for reflections on the group’s discussions.

Clarifying the scope of the challenge

The push to adopt building electrification, as a decarbonization strategy, is a relatively recent development in the electricity industry. For that reason, the fact that pod participants were able to quickly identify adoption barriers and clarify the scope of the challenge ahead is a significant step forward.

“Everyone came to the meeting with a fair grasp of the opportunity, but we all left with a deeper understanding of how interconnected, and complex, pursuing electrification at scale will be,” wrote Rory Christian, New York director of clean energy for the Environmental Defense Fund, in an email.

“While the group identified a significant number of challenges and barriers to using electrification to decarbonize our building stock, none of them are insurmountable,” added Lindsay Robbins with the Natural Resources Defense Council’s Healthy People and Thriving Communities Program.

Obstacles to widespread building electrification identified by the group fall into three buckets: regulatory hurdles, market barriers and equity concerns.

Regulatory hurdles

“Electrification’s technical potential for reducing greenhouse gas emissions and buttressing renewable energy is well documented, but the regulatory barriers and considerations are just as important, far more diverse and generally less understood,” wrote EDF’s Rory Christian.

A formidable hurdle to building electrification in California that surfaced multiple times in the group’s discussions is existing California Public Utilities Commission (CPUC) policy that prevents the state’s largest utilities from using ratepayer-funded energy efficiency dollars to promote fuel substitution. That is, a homeowner cannot receive a rebate from Southern California Edison or one of the other investor-owned utilities regulated by the CPUC when replacing a natural-gas furnace with a high-efficiency electric air-source heat pump.

“Although this is not directly a barrier for SMUD [Sacramento Municipal Utility District], it is a barrier in the IOU territories, and less electrification occurring in the territory surrounding us will make adoption much more difficult,” Scott Blunk, a SMUD energy efficiency and electrification planner, wrote in an email. SMUD is not regulated by the CPUC and has more flexibility to pursue electrification in its territory.

Regulators in California and elsewhere must also resolve how and on what schedule to retire or decommission natural-gas infrastructure in a world in which widespread building electrification takes hold.

“[Electrification] ultimately will be held up by the question of what to do with existing gas infrastructure,” wrote Blunk.

He went on, “CPUC’s aims are to transition the majority of buildings to all-electric but [it is] still pondering what to do with legacy gas assets and who pays. They are trying to answer the question that needs an answer in 20 to 30 years and [are] not yet taking the appropriate steps to answer the one- to five-year questions.”

The group agreed that independent research is needed on the question of whether renewable natural gas sourced from organic waste streams is a viable substitute, at scale, for fossil natural gas.

In an email, David Lis, director of technology and market solutions for Northeast Energy Efficiency Partnerships (NEEP), said collaboration will be necessary to solve looming regulatory challenges.

“There are going to be multiple stakeholders and industries impacted by electrification,” he wrote. “It’s critical that these key stakeholders can come together, facilitated by an ‘impartial’ actor, with information and analysis to inform best paths forward. Without some cohesive plan, opponents will actively oppose.”

Add to these hurdles the question of how to properly value the carbon reductions provided by electrification on increasingly low-carbon power grids. Here, SMUD’s Blunk highlighted the need to embed a carbon metric in building energy codes.

Market barriers: Consumer perceptions, contractor awareness

If equipment that enables all-electric homes is to reach scale, manufacturers will have to persuade consumers to budge from some widely shared, deeply held beliefs — for instance, that serious cooks should only use gas.

The “ubiquitous public perception [is] that electricity is more expensive [and] less reliable, and overall [is] not favorable to gas,” said SMUD’s Blunk.

The group highlighted the need to convince plumbers, HVAC technicians, and building contractors it’s in their long-term financial interest to install air-source heat pumps, heat pump water heaters, induction cooktops, and other electric equipment.

“Awareness, not education” is the problem, said Blunk. “This is much like the public, but a more sophisticated technical perspective is needed. I believe many (most) have the technical skills to do the work, but like the public, they think the equipment is expensive to install and operate, and will have more maintenance problems, and as a result, they see potential warranty concerns that eat into their profits.”

He went on: “They are not yet seeing the opportunity that, for instance, in SMUD territory, we need contractors to install more than 300,000 heat pump space heaters in the next 15 to 20 years. We need to create awareness, so they can realize this could be a huge business opportunity, if they take the time to install the equipment properly.”

Another potential barrier, especially in older homes, is that the main electrical panel may need to be upgraded to handle the increased load in an all-electric home.

“There are many panels that lack the capacity to turn a home into an all-electric home,” said Blunk. “In some situations, it will be cost-prohibitive to replace the panel.”

He added, “That doesn’t alleviate the desire of homeowners for EVs, solar PV and batteries. In the future, they, too, will want an all-electric home. There is a need for a load management system that can be used in conjunction with the existing panel that will allow the home to meet future consumer expectations.”

NEEP’s David Lis stressed the need for innovative business models capable of bringing heat pump technologies and building retrofits to scale.

“How do we bring the necessary capital to these markets that would enable a wide-scale transition from a set of incumbent technologies to new heat pump technologies in a way that is attractive to homeowners and business owners?” he asked.

Ensuring equity

Both EDF’s Christian and NRDC’s Robbins urged policymakers to shield low-income customers from disproportionate adverse impacts with a natural-gas-to-electricity shift.

“Both electric and gas utilities will play significant roles in how electrification plays out in the near future, and we’ll need to ensure that whatever actions are taken benefit consumers equitably,” said Christian.

For instance, what if the owner of an apartment building with low-income tenants replaces aging gas-fired boilers or furnaces with electric heat pumps? Tenants who had received a subsidy to offset their natural-gas consumption could see their electricity usage increase — potentially without a commensurate increase in support on the electricity side to cover the difference on their utility bill.

“Our current system doesn’t consider the full suite of costs and benefits involved in achieving our GHG reduction goals in an equitable manner,” said Robbins.

She added, “If we can identify and agree upon metrics and targets to properly account for costs and benefits in that context, we can unlock the full potential of reducing emissions through electrification, energy efficiency, and the other tools we need to meet our GHG reduction goals. That also will allow us to take advantage of efficient electrification’s ability to improve the affordability, comfort, health, safety and resiliency of our buildings.”

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*Disclosure: RMI provided room and meals for Greentech Media’s correspondent at the e-Lab Summit. GTM retains full editorial control over coverage of the event and its outcomes.