For homeowners in the greater Sacramento area, it just became easier to buy or convert to an all-electric home.

Greentech Media reported earlier this month on local governments in California updating their building codes to encourage all-electric homes. Now, the Sacramento Municipal Utility District (SMUD) has moved to offer rebates to install heat pumps, induction cooktops, and other electrification upgrades.

With the launch of an incentive program for existing homes on June 1, Sacramento’s electric utility provides rebates promoting electrification in both retrofitted and new homes.

The rebate program for all-electric new homes launched last year. Some 700 units are in the construction pipeline under the program, according to Owen Howlett, project manager of energy strategy research and development at SMUD.

SMUD’s electrification rebate packages are worth up to $5,000 for new homes and up to $13,750 for gas-to-electric conversions in existing homes.

SMUD as a testing ground

SMUD, which serves more than 1.5 million customers in the Sacramento region, is the nation’s sixth-largest community-owned electric utility.

SMUD is not regulated by the California Public Utilities Commission and is therefore free from the policy constraints preventing the state’s large investor-owned utilities from encouraging their customers to fuel-switch from natural gas to electricity.

“We have some diversity. We can try things out. And we can study whether they work,” Howlett told GTM in an interview.

According to Howlett, a little more than 50 percent of SMUD’s current power generation mix is carbon-free, including large hydro projects and wind farms along the Sacramento-San Joaquin River Delta. SMUD’s long-term greenhouse gas emissions reduction target — 90 percent below 1990 levels by 2050 — is more aggressive than California’s 80 percent target.

Ten percent of California’s greenhouse gas emissions come from burning fossil fuels for space and water heating in buildings. SMUD’s electrification initiative is an essential element of the utility’s plans to achieve its 2050 GHG reduction target.

“Electrification provides a magnitude of GHG reduction that cannot be matched by energy efficiency measures,” said Howlett in a presentation delivered at a June 14 California Energy Commission zero-emission buildings workshop.

Electrification can save residential customers money today

At the CEC workshop, Howlett presented data showing how operational costs for space and water heating “can be cost-effectively electrified immediately” for SMUD’s residential customers on an annual basis.

SMUD determined that a family in an older 2,700-square-foot home built prior to the adoption of California’s building energy efficiency standards could save $280 annually by switching from a natural gas furnace to an electric heat pump for space heating. A family in high-efficiency 1,500-square-foot home built after 2001 would save $102 annually under the same gas-to-electricity conversion.

Howlett conceded SMUD’s rates are low compared to other utilities in California.

The average retail rate of electricity for SMUD’s residential customers is 13.8 cents per kilowatt-hour, slightly higher than the national average (12.89 cents/kWh) but lower than the California average (16.08 cents/kWh), according to the latest EIA data.

So SMUD repeated the analysis but used a 20 percent higher electricity rate. Savings declined by about half, but customers still came out ahead on annual operating costs for space heating, said Howlett.

Overcoming market barriers

SMUD offers rebates for all-electric homes because awareness of technologies such as heat-pump water heaters among homeowners, and even among plumbers and other building professionals, is so low.

“There are a lot of market barriers to overcome,” said Howlett. “Perception barriers. Awareness barriers. The faster we address those, the faster we get through the critical phase.”

Howlett cited SMUD’s research on installation costs for electric heat pump water heaters. The utility’s best estimate for a base cost is around $2,800, of which $1,300 is for the water heater itself. But all-in installation costs ranged widely in the cases tracked.

“We have seen costs up to $4,500 for installation of a heat-pump water heater,” said Howlett. “We’re pretty sure those are exceptional based on some overpricing from plumbers who are factoring in a higher degree of risk in their pricing and maybe choosing their customers carefully.”

Experience and economies of scale should drive down costs. In the meantime, SMUD’s gas-to-electric conversion rebate for heat pump water heaters is $3,000.

Leaving gas behind

For SMUD, the readiness of electric technologies to take over today means there’s no reason to build new gas infrastructure.

“When we install gas infrastructure in new homes, we know that we’re going to have to take that out at some point,” said Howlett. “Putting gas pipes in the ground in 2018 doesn’t make any sense.”

He added, “California is wasting money every day by continuing to build homes with gas infrastructure that will have to be retrofitted.”