New Study Confirms Benefits of Electrifying CA Buildings

Replacing natural gas with clean electricity will slash greenhouse gas emissions from CA's single-family homes by up to 90% within the next 3 decades and save consumers money, according to a new analysis. The study confirms electrification is a vital & cost-effective tool in reducing climate and toxic air pollution from gas combustion in buildings.
Annual GHG emissions from a mixed-fuel and all-electric 1990s vintage home in Sacramento
Credit: E3, 2019

5/16/2019: This post has been edited to be more specific about the study’s findings of the customer economics of electrification.

6/30/2020: The NOx emissions were updated match CARB's data.

Replacing natural gas (methane) with clean electricity, particularly for heating and hot water production, will slash greenhouse gas emissions from California's single-family homes by up to 90 percent within the next three decades and save consumers money in the process, according to a new analysis released today. The study confirms electrification is a vital and cost-effective tool in reducing climate and toxic air pollution from gas combustion in buildings, which account for a quarter of the state total climate emissions.

About half the pollution from California's buildings comes from burning gas, primarily for heating and hot water. The state's ability to achieve its goal of carbon neutrality by 2045 will require the majority of buildings to shift that energy usage toward the electric grid powered by renewable electricity. That means outfitting new homes with high-efficiency, electric-powered heating systems and water heaters, and retrofitting existing homes when the old gas equipment needs replacing.

The new study—conducted by research firm Energy+Environmental Economics (E3) and jointly funded by Southern California Edison, the Los Angeles Department of Water and Power, and Sacramento Municipal Utility District—is the most comprehensive effort yet to assess the impacts of California building electrification for the climate, consumers, and the grid. Covering six climate zones (San Francisco, San Jose, Sacramento, coastal Los Angeles, downtown Los Angeles, and Riverside) that represent about half the state's population, the analysis forecasts dramatic emissions, pollution, and cost reduction benefits.

The study focuses on electrification as the primary pathway to decarbonize buildings. Another pathway, using renewable gas instead of fossil gas to fuel furnaces and water heaters, is also being considered in California. However, there is very little renewable gas available today (less than 1 percent of the gas used in California versus 34 percent renewable electricity in 2018), and the potential future supply from sustainable sources is limited. It is also much more expensive than fossil gas, while renewable electricity is getting cheaper than electricity from gas power plants. When produced sustainably, renewable gas can play an important role in reducing emissions, but given its limited availability and high cost, it is unlikely to ever replace a large enough share of the state’s fossil gas use. The scarce supply may be better used in harder-to-decarbonize sectors like industry.

Compared with gas-fueled single-family homes, full electrification would reduce greenhouse gas emissions in single-family homes by about 30 percent to 60 percent as soon as next year. As the carbon intensity of the grid decreases over time, the savings increase to about 80 percent to 90 percent by 2050.

Customer Economics

For new construction, going all-electric will save money compared to building a gas-heated home in most cases, with lifecycle cost (upfront cost plus operating costs) savings of $130 to $540 per year. This includes avoiding the $6,000 on average paid upfront by the builder for the gas line connection, but does not include the share of the pipeline connection that the utility charges to all gas customers. When retrofitting existing homes with a heat pump water heater and space heating, all homes modeled experienced lower total utility bills, and most single family home retrofits resulted in reduced lifecycle costs. 

The study's conclusions are based on technologies available today at current costs, without any incentive programs. As the market transforms and costs come down, electrification will become cost-effective for even more Californians.

Policy Recommendations

California began to focus attention on this issue last year with two building decarbonization laws, one requiring an assessment of how to reduce building emissions by 40 percent from 1990 levels by 2030 and the other designed to jump start the market for clean heating technologies. Accordingly, the state's energy commission for the first time put cutting pollution from buildings as a front and center priority in its biannual policy report earlier this year.

Despite the benefits of electric heat pumps and other technologies, they face hurdles in the market. Upfront costs for equipment and installation can be higher than those for gas-fueled counterparts, while customers and contractors lack awareness of the options. The E3 report offers five recommendations aimed at removing these barriers to adoption:

  1. Facilitate all-electric new construction and update the building code. California should align its building efficiency standards with GHG saving opportunities to capture one of the best opportunities to reduce construction costs, reduce utility bills, and slash GHG emissions.
  2. Incentivize high-efficiency heat pump HVAC, particularly in areas with high air conditioning loads. California should develop new programs to encourage customers to adopt building electrification technologies, particularly where the highest customer and societal benefits can be achieved.
  3. Ensure efficient price signals are conveyed in electric and natural gas rates. The state needs electricity rates and other price signals that incentivize, rather than penalize beneficial electrification.
  4. Develop a building electrification market transformation initiative. Implement policies that increase the range of high efficiency and “retrofit” ready products available in the market, develop a highly trained workforce to ensure experienced installers and service providers are readily available and operating competitively across the state, and make more information available to consumers about electrification options, costs and benefits.
  5. Align energy efficiency goals and savings with GHG savings opportunities. California should pursue a combined, all-fuels approach to cost-effectively reduce carbon emissions from buildings, reducing silos between natural gas and electrical efficiency programs.

Climate Resiliency

Decarbonizing homes doesn't just reduce carbon pollution and contribute to state climate goals. It "can support sustainability and equity policy goals. For example, heat pump systems provide a climate adaptation advantage, because they provide both air conditioning and heating. Air conditioning, along with better building design and more resilient communities, can help protect public health in low-income and vulnerable communities as heat waves become more severe under climate change," the authors point out. Electrified buildings would also benefit the bulk power grid, the study found, making fuller and better use of the state's electric infrastructure.

While not covered in the study, zero-emissions homes with clean electric heating and hot water will also help clean up air pollution, especially in California’s regions most affected by smog: according to the California Air Resources Board, buildings are responsible for 82 tons of nitrogen oxide pollution (NOx) daily, more than seen times that of power plants (12 tons per day).

To achieve the high adoption rates for electrification needed by 2050, the analysis notes, at least half of existing residential buildings, or more than 7 million homes, will require retrofits. That is a huge task. However, every single home inhabited today will need to replace worn-out equipment at least once in the next 30 years. These natural replacements are an important opportunity to help homeowners upgrade to healthier, safer, and lower-bill electric alternatives in a cost-effective manner.

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