California utilities jointly release economic study of housing electrification costs and benefits
Meeting California’s ambitious greenhouse gas emission reduction goals will require a significant electrification of homes and other buildings. Electrification can reduce greenhouse gas emissions in homes by up to 60 percent in 2020 and by up to 90 percent in 2050 compared to mixed-fuel homes. No other home decarbonization strategies have been demonstrated to meet this level of decarbonization in this time frame. The good news, according to a study released today by consulting firm Energy + Environmental Economics (E3), is that home electrification will also provide cost savings for most homeowners and developers.
The study, titled “Residential Building Electrification in California,” assesses the energy savings, greenhouse gas savings, impacts to the electric grid and overall economics of residential building electrification for customers across many regions of California. The study was commissioned by Los Angeles Department of Water and Power (LADWP), Sacramento Municipal Utility District (SMUD) and Southern California Edison (SCE). It looks at housing in six different climates and three different housing vintages, and covers both single-family and low-rise multifamily homes. E3 estimates that the climate zones modeled in the study are broadly representative of 87 percent of California’s single-family and low-rise multifamily housing.
E3 modeled the performance and costs of both all-electric new construction homes and existing homes retrofitted with heat pump HVAC systems and heat pump water heaters. These were compared to mixed-fuel homes that use natural gas and electricity.
The study finds that all-electric new construction results in savings of $130-$540 per year relative to a gas-fueled home over the life of the equipment. There are cost savings to developers, who don’t have to lay gas lines and can pass on construction savings, as well as to homeowners, who will see lower bills. Given that for every $1,000 increase in housing cost in California, 10,000 people are priced out of buying a home (according to a recent study by the National Association of Home Builders), these are important affordability measures that should increase the pool of prospective homebuyers and help meet the State’s housing needs.
E3’s modeling suggests that 76 percent of new all-electric homes will save at least $15 per month on equipment and energy bills over the life of the equipment relative to new mixed-fuel homes. For retrofits, the modeling suggests that all households in single-family homes will save between $10-$60 per month on energy bills and 84 percent will save up to $30 per month on total lifecycle costs. This includes the bill savings and the relative cost of installing efficient electric equipment instead of replacement gas equipment.
The study does not account for any state or utility incentives. When incentives are considered, the benefits become even more positive for consumers.
“Building electrification is a key component of reducing greenhouse gas emissions and providing savings for our customers, which is a win-win for everyone,” said SMUD CEO and General Manager Arlen Orchard. “This study will help us meet our climate goals, maximize our reductions and improve air quality across our region.”
To this end, the study recommends certain steps that can be taken to encourage both higher rates of electrification and to boost the market transformations that will reduce costs even more. These include developing programs to educate customers about the usability and the environmental and economic benefits of electrification, examining utility rate structures to help ensure that electrification benefits customers and updating building codes and standards to enable cost-effective electrification.
“People care tremendously about their comfort, their safety and their energy costs,” said Jill Anderson, vice president of customer programs and services at SCE. “That is why a study like this, providing a roadmap to housing electrification benefits as well as the challenges, is so important. We will be using this study to inform what steps utilities, state regulators and policymakers can take to enable cost-effective electrification while preserving customer choice.”
“We at LADWP are grateful to be a part of an effort in California with our partner agencies and organizations who see building electrification as a critical part in the larger goal of a sustainable future,” said Nancy Sutley, chief sustainability officer for LADWP. “The results of this study provide additional insights that complement LADWP’s ongoing efforts toward our overall clean energy goals, and we are committed to doing our part.”
The study is available online at https://www.ethree.com/wp-content/uploads/2019/04/E3_Residential_Building_Electrification_in_California_April_2019.pdf
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About Los Angeles Department of Water and Power
The Los Angeles Department of Water and Power (LADWP) is the nation’s largest municipal utility, with a 7,880 megawatt (MW) electric capacity and serving an average of 438 million gallons of water per day to the 4 million residents of the City of Los Angeles, its businesses and visitors. For more than 100 years, LADWP has provided the city with reliable water and power service in a cost effective and environmentally responsible manner.
As the nation’s sixth-largest community-owned, not-for-profit, electric service provider, SMUD has been providing low-cost, reliable electricity for more than 70 years to Sacramento County and small adjoining portions of Placer and Yolo counties. SMUD is a recognized industry leader and award winner for its innovative energy efficiency programs, renewable power technologies and for its sustainable solutions for a healthier environment. SMUD’s power mix is about 50 percent non-carbon emitting. For more information, visit smud.org.
About Southern California Edison
An Edison International (NYSE:EIX) company, Southern California Edison is one of the nation’s largest electric utilities, serving a population of approximately 15 million via 5 million customer accounts in a 50,000-square-mile service area within Central, Coastal and Southern California.