The Power of Incentives: Promoting the Home of the Future
Last month our General Manager and CFO Yolanda Duperret spoke at a Renewable Energy Summit panel in Boulder focused on ‘Moving Beyond Fracked Gas.’ The speakers discussed emerging alternative solutions to gas usage in homes, and Yolanda spoke to the powerful role incentives can play in transitioning away from natural gas.
Thank you to 350 Colorado, the Unitarian Universalist Church of Boulder’s Climate Action Ministry, and Physicians for Social Responsibility Colorado for hosting the Renewable Energy Summit on October 26th. To hear Yolanda’s full Renewable Energy Summit talk and to learn more about reducing natural gas dependence, watch the video of the panel here:
An important and logical next step is adding fuel switching incentives to the mix. As electricity becomes progressively cleaner overall, the homes of the future should be ready to take full advantage by electrifying conventional gas appliances like furnaces, water heaters, and stoves.
NATURAL GAS DEPENDENCE IN THE HOME
Natural gas is firmly established as America’s home heating choice though perhaps not for long. About half of US homes use natural gas for space and water heating, cooking, and/or drying clothes. That means 57 million homes are using natural gas for a quarter of all their energy needs. When also including business and homes, on-site fuel use like natural gas or propane is responsible for roughly 10% of US greenhouse gas emissions.
There was a time where natural gas was seen as the ideal transition or “bridge fuel”, a cleaner alternative to coal, to be used until renewable energy had advanced far enough. A few decades ago, natural gas was the preferred option over electricity primarily generated by coal plants, but the “bridge fuel” paradigm is quickly losing relevance. There is a tremendous opportunity for greenhouse gas reductions and cost savings by using incentives targeted for fuel switching US homes from gas to electric. With the increasing threats posed by climate change, there isn’t a second to lose either.
WHAT DOES FUEL SWITCHING AT THE RESIDENTIAL LEVEL LOOK LIKE?
Space heating is the biggest use of residential natural gas, followed by water heating. A budding electric alternative to meet both of those needs is a heat pump. Heat pumps use electricity to move heat from a cold space to a warm space, making warm spaces warmer and cold spaces colder. They are an energy-efficient alternative to furnaces and air conditioners and will save money over the lifetime of the appliance in new homes.
Gas ovens and stoves have long had electric competitors. Electric cooktops, in particular, have often been labeled as substandard to the gas stoves. A new electric stove option is starting to make waves and could make the transition away from gas more palatable. Induction cooktops use an electromagnetic field to heat compatible cookware directly and are faster than electric smooth tops and gas stoves.
THE POWER OF INCENTIVES
As Yolanda put it, “Incentives are paramount to jump-starting emerging markets.” The boom in solar development over the last decade would not have happened without the initial boost from federal, state, city, and utility level incentives. Energy storage is just starting to get similar attention, especially with exciting new developments like lithium-ion batteries. Governments and utilities now realize how impactful distributed generation can be when coupled with energy storage. For example, battery storage projects charged by photovoltaics can take advantage of the generous 26% Federal Investment Tax Credit while it lasts.
Solar plus energy storage plus whole-home electrification incentives all bundled together is an important next step. Electrification of gas appliances can save money for the consumer while reducing a home’s environmental footprint. A report from the Rocky Mountain Institute found that new homes will save money over the lifetime of the appliance by picking electric options. When retrofitting from gas to electric, it is not as cost-effective, unless the customer also combines the retrofit with rooftop solar.
However, like solar and battery storage, there are common emerging market barriers that can be overcome with incentives. Electric alternatives usually have higher up-front costs and can be seen as complex and confusing since they are not yet commonplace for consumers. Rebates, tax credits, and low-interest loans will make electric alternatives accessible to a broader base of consumers, from early adopters to the average homeowner.
Some states and utilities have already started incentivizing fuel switching in homes. A statewide program in Maine, for instance, offers rebates up to $750 for high-efficiency heat pumps, leading to over 30,000 installations over the last five years. Similarly, the Sacramento Municipal Utility District offers $1,500 to those who switch from gas water heaters to an electric heat pump model.
Vermont added an “Energy Transformation” requirement to their renewable energy standard that mandates utilities contribute 3% of sales towards acceptable energy transformation projects. Utilities in the state have created programs that offer no-money-down financing for heat pumps to help meet the Energy Transformation requirement. Some places have gone a step farther than incentives. Berkely, California, became the first US city to ban natural gas piping to most new buildings in 2019.
There is no doubt that the home of the future will use appliances running on renewably generated electricity. The question now is how quickly can we adapt to that new model. Government and utility incentives will assuredly be an essential part of that process.