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heat-pump.0 Most American homes are still heated with fossil fuels. It’s time to electrify.

Replacing all those natural gas furnaces is going to be tricky.

Around five years ago, my wife and I decided to do a whole bunch of the more boring home maintenance jobs at once, just to get them out of the way. We outfitted our little house with new plumbing, better insulation, a new electrical box, a new water heater, and a new furnace. (Yes, we’re still paying it all off.)

The furnace we replaced was the original oil furnace, installed when the house was built in 1954, fed from an oil tank buried in the yard. It was giant, bigger than I could put my arms around and well taller than me, boasting that unfortunate salmon color that was popular at the time. When it kicked on, it sounded like a jet was taking off in the closet. The house shook.

oil-furnace Most American homes are still heated with fossil fuels. It’s time to electrify.DR
Behold.

So we wanted to ditch oil. And I live in Seattle, where electricity is both clean (mostly hydro) and cheap, so I wanted to go electric. Certainly the last thing I wanted to do was bring a new fossil fuel into my house.

Here’s the thing, though. There are rebates out the wazoo for switching from oil to natural gas up here, thanks to our natural gas utility, Puget Sound Energy. But while there were rebates available for fancy-pants electric “ductless, mini-split” heat pumps — ill-suited to both my house and my budget — there were none available for the normal electric heat pump I wanted. (Far as I can tell, there’s still no rebate available for switching from oil to electricity, probably because two separate utilities are involved.)

[Correction, June 20: I spoke too soon. A couple of eagle-eyed Seattle readers wrote to let me know that the City of Seattle (not, interestingly enough, either utility) offers a $2,000 rebate in partnership with Mitsubishi, specifically for people switching from oil to heat pump. Wish it had been around five years ago!]

I’ll spare you the months of deliberation and anguish, but in the end, even in our temperate climate, even with our cheap electricity, having a natural gas line extended to our house and buying a natural gas furnace was about $7,000 cheaper than getting an electric heat pump.

It would have taken 20-some years for the heat pump to pay off the difference, and my wife’s discount rate, even factoring in adjustments in the name of marital harmony, is somewhat higher than that.

So now my family is warmed through the chilly Seattle winters with a fossil fuel. We remain Part of the Problem. It galls me to this day.

I found, in my quest to ditch oil for electricity, virtually no encouragement, help, or guidance from any agency or organization. And that seems to be true for many families trying to electrify. In April, Justin Gerdes wrote a fantastic piece for Greentech Media about efforts by a California environmentalist and his family to go all electric. They ran into some of the same perverse incentives, the same maze of bureaucratic hassles and confused contractors (even in lefty, enviro California!), but they were less lazy than me and triumphed in the end. Still, it was a saga.

Their experiences, and mine, illustrate one of the more difficult challenges of decarbonizing the economy: Right now, most homes are heated and cooled by fossil fuels, and changing that is going to be complicated and painstaking. A new report breaks down the numbers (more on that in a moment), but first, let’s quickly review why it needs to happen at all.

Decarbonizing means electrifying — yes, including your furnace

We know that over time, we need to Electrify Everything! That is to say, a crucial part of reducing carbon emissions is switching energy uses that currently run on combusted fossil fuels — notably, transportation, heating and cooling, and heavy industry — over to electricity, to the extent possible, so that they can run on zero-carbon power.

The heating and cooling of buildings accounts for about 10 percent of US emissions. While that’s not as big a carbon challenge as, say, transportation (28 percent), in many ways, electrifying the residential sector is trickier.

Right now, roughly 37 percent of US homes are electrified, mostly in the South, mostly using inefficient baseboard heating rather than efficient heat pumps. (Only about 1 percent of American homes currently have heat pumps.) Some 48 percent of homes use natural gas, which dominates in every region except the South. And 14 percent use “other,” i.e., fuel oil or kerosene, almost entirely in the Northeast. (Climate Central has a great breakdown of heating fuels in the US; so does the Department of Energy.)

main Most American homes are still heated with fossil fuels. It’s time to electrify.DOE
Gotta grow those blue bars.

That adds up to millions and millions of fossil fuel furnaces that need to be replaced. And new natural gas furnaces are still going in every day. Until fairly recently, the conventional wisdom was that highly efficient natural gas furnaces were the environmentally preferable option, given that electrical appliances often draw on coal-heavy grid power (and fuel oil is just filthy). Natural gas heat is still generally considered the cheaper option (though, as we will see below, that’s not always true).

In short, there’s still a lot of momentum behind the expanding natural gas network. Conventional wisdom in the industry, and among policymakers, lags behind the latest thinking in decarbonization.

So how can we get the electrification ball rolling in American homes? Funny you should ask.

shutterstock_225273661 Most American homes are still heated with fossil fuels. It’s time to electrify.Shutterstock
The heat pump in winter.

The economics of home electrification is strong and getting stronger

Earlier this month, the Rocky Mountain Institute released a report on “The Economics of Electrifying Buildings.” It’s a close look at the current economics of switching from fossil fuels to electric heat pumps in the residential sector, along with a set of recommendations for how the process might be accelerated.

To begin with, RMI runs the numbers on the costs of electrification under a variety of utility rate designs, for both new construction and retrofits, in four markets: Oakland, California; Houston, Texas; Providence, Rhode Island; and Chicago, Illinois.

There are three big factors that make the difference in the cost of electrification for individual homeowners. The first is whether the home is new construction (with new appliances) or a retrofit, i.e., replacing existing appliances. The second is whether a homeowner wants to buy/replace only a furnace, or a furnace and an air conditioner at once (heat pumps serve both purposes, so they can replace both appliances).

Third has to do with electricity rates and how they’re structured — whether they are a flat rate or vary with the time of day. Varying rates tend to boost the economics of electrical appliances.

Here’s a summary of the high-level results:

In many scenarios, notably for most new home construction, we find electrification reduces costs over the lifetime of the appliances when compared with fossil fuels. However, for the many existing homes currently heated with natural gas, electrification will increase costs at today’s prices, compared to replacing gas furnaces and water heaters with new gas devices.

In other words, heat pumps are beating natural gas in all the edge cases. Here’s a summary of who can benefit financially from electrification:

We find electrification is cost-effective for customers switching away from propane or heating oil, for those gas customers who would otherwise need to replace both a furnace and air conditioner simultaneously, for customers who bundle rooftop solar with electrification, and for most new home construction, especially when considering the avoided cost of gas mains, services, and meters not needed in all-electric neighborhoods.

That heat pumps beat natural gas in all these cases is good news, and needs to be more widely known, but it doesn’t really get at most of those millions of natural gas furnaces already installed and running.

We need to replace those too, but right now, we have a classic collective action problem. The emissions from these appliances are not factored into their prices, so they appear misleadingly cheap. And there are even some remaining cases, in places with lots of coal power on the grid, where natural gas is lower-carbon than electrical heat, at least for now (for instance, Chicago). And builders and contractors are still in the mindset that natural gas is the best choice; many are unfamiliar with, and ignorant about, heat pumps.

Ambiguous current economics and lack of familiarity make the task of replacing home fossil fuels particularly vexing.

Electrifying heating and cooling helps grid flexibility

But in the long term, we need our homes electrified. It’s not just that coal plants are closing all over the place and grid power is getting cleaner, which boosts the environmental advantages of heat pumps. And it’s not just that there’s likely to be a price on carbon at some point, which will make all that natural gas infrastructure and those natural gas appliances more expensive.

It’s also that getting more appliances hooked up to the electrical grid can offer grid managers flexibility with which to integrate more renewable energy. As renewables grow, that flexibility will be more and more prized.

Because wind and solar power cannot be directly controlled — they come and go on their own schedule — a grid that integrates them needs other sources of flexibility, and one of those is flexible demand, i.e., demand for electricity that can be moved around in time to better match renewable generation schedules.

Electrical appliances can serve that purpose, RMI writes, “by applying automatic control to reshape a customer’s demand profile continuously in ways that either are invisible to or minimally affect the customer, and by leveraging more-granular rate structures that monetize demand flexibility’s capability to reduce costs for both customers and the grid.” Put more simply: They can shift their consumption.

RMI_2018_electrification_demand Most American homes are still heated with fossil fuels. It’s time to electrify.RMI
On the top, uncontrolled demand from home appliances; on the bottom, demand shifted to make better use of cheap renewable energy.

Water heaters, especially, can be scheduled to heat their water at night when power is cheap, or at midday when more solar is on the grid. They can also provide “ancillary services” like frequency regulation to the grid.

Here’s a graph of a water heater shifting demand in Hawaii:

rmi_2018_electrification_water_heater Most American homes are still heated with fossil fuels. It’s time to electrify.RMI

But currently, only 1 percent of US water heaters take part in demand-response programs.

Speaking of which: How can the electrification of residential heating and cooling be accelerated?

Recommendations for boosting electrification

Right now, electrifying the residential sector by replacing fossil fuel furnaces with heat pumps is basically … nowhere. It hasn’t even really gotten underway. The level of understanding of electrification, both within the building trades and in the public more broadly, remains abysmally low. And natural gas is still gaining momentum and market share. Policymakers — states, cities, utilities, the feds — need to intervene.

Having given the matter a ridiculous amount of thought (you really should check out the report), RMI offers five concrete recommendations for how the residential electrification ball could get rolling.

1) Prioritize rapid electrification of buildings currently using propane and heating oil in space and water heating.

Propane and heating oil — again, mostly confined to the Northeast — only provide 10 percent of residential heat in the country, but they produce 20 percent of its emissions. And electrification beats them all to hell on economics. So they are low-hanging fruit for policymakers, who can target them through incentive programs, through education programs via utilities, or through special provisions in renewable energy mandates.

2) Stop supporting the expansion of the natural gas distribution system, including for new homes.

Utilities and public utility commissions often support expansion of the natural gas network. So do states, which still frequently promote switching to natural as the environmentally friendly option. But as the RMI report shows, for new construction homes, electrification is both lower-carbon and lower-cost. Building new natural gas infrastructure — especially in states with ambitious carbon targets — risks stranded assets, likely at ratepayer expense. At the very least, states should assess electrification options when they are considering natural gas expansions. Better yet, they should just stop building new natural gas infrastructure, period.

3) Bundle demand flexibility programs, new rate designs, and energy efficiency with electrification initiatives.

Electrification will mean greater demand for electricity and more importance placed on grid flexibility. New power demand needs to be managed well; for instance, in some climates, especially colder climates, more electrified heating will mean bigger demand spikes in colder weeks and months. New and more volatile patterns of demand will require extra efforts from utilities and state regulators to boost flexibility and drive demand reduction, to smooth out the spikes.

4) Expand demand flexibility options for existing electric space and water heating loads.

The raw materials for demand-response programs are already in place, which is to say, there are already lots of space and water heating appliances out there in the country. Let’s get more of them hooked up to the grid! (Here’s a fun Brattle Group report on water heaters for flexible demand, if you’re as obsessed with that topic as I am.)

5) Update energy efficiency resource standards and related goals.

This one is slightly obscure, but important. Often, policies that reward energy efficiency penalize electrification, for the simple reason that electrification — moving energy uses onto the grid — sometimes raises power consumption, at least in the short term. Properly rewarding energy efficiency and electrification requires coordination across policymaking bodies (states, counties, cities, utilities) that don’t always communicate well.

More education about electrification would bring edification

So that’s where things stand in electrifying American homes: The economics are already favorable in many cases, but with little policy coordination to speak of and very little public awareness, it remains something of an unpleasant adventure for individual homeowners. There’s no social or policy push for it yet.

That needs to change. While I’m usually skeptical about campaigns to “raise awareness” (involuntary eye roll), this does seem like one case where a little bit of public education and good branding can help.

Since there’s no powerful industry to lobby for such an educational campaign (Big Heat Pump isn’t exactly rolling in profits), it’s up to states and utilities that understand the need, to nonprofit climate and decarbonization groups, and to you, readers, through discussion with your homeowner friends.

Time to make heat pumps cool again. Or, uh, cool for the first time.

In the meantime, if you’ve had your own adventures with home electrification, good or bad, I’d love to hear about them. Drop me an email: [email protected]

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