In 1960 only 2% of U.S. homes were heated with electricity. Today it’s 38%.
U.S. households burn vast amounts of fossil fuels on-site for home heating: 2.7 trillion cubic feet of natural gas, 2.9 billion gallons of fuel oil, and 2.5 billion gallons of propane. In terms of carbon dioxide emissions, this is equivalent to having 40 million cars on the road.
But electrification of home heating is nothing new. In today’s blog, I look at data documenting a large increase in electrification of U.S. home heating over the last 60 years.
While well short of what the United States would need for “deep decarbonization”, this trend suggests that getting people to switch to electricity may not be as hard, or as expensive, as previously believed.
The Rise of Electric Heating
Only 2% of U.S. households in the 1960 Census reported using electricity as their primary heating fuel. Electric heating has increased steadily since that time, reaching 18% in 1980, 29% in 2000, and 38% in 2017. This is a large increase; much bigger than I would have guessed, frankly.
The geographic pattern is interesting. Perhaps most strikingly, the maps show how electricity has grown to become the dominant form of heating in the Southeast — 50%+ throughout the region and 90%+ in Florida. Electric heating is also prevalent throughout the West and Midwest, albeit less than 50% in most states.
Electricity Prices Matter
Why has electricity’s market share grown? I have not seen much written on this topic, but I think part of the explanation is electricity prices.
In 1960, U.S. residential electricity prices were 40% higher in real terms than they are today. Prices dropped sharply during the 1960s and have remained approximately flat during this long period of growth in electric heating. We would expect there to be a negative correlation between electricity prices and electric heating, and this appears to be the case.
New home construction matters too. During this period of low electricity prices, there have been relatively more new homes built in the sunbelt. It’s the interaction between electricity prices and new home construction that drives these trends.
States with cheap electricity tend to have more electric heating. In 1960, the four states with the most electric heating were Washington, Oregon, Nevada, and Tennessee. This is no coincidence. These four states had access to cheap Federal electricity — via the Bonneville Power Administration and the Tennessee Valley Authority.
This correlation continues to date. The Southeast and Northwest have lower than average electricity prices — and more electric heating. California has higher electricity prices – and less electric heating than neighboring states.
Clean and Convenient
Another potential explanation for the growing use of electric heating is household income. Median household income approximately doubled in the United States between 1960 and today. As incomes have increased, U.S. households have increasingly selected electric heating.
I think this makes sense. Electric heating is cleaner and more convenient than other forms of heating. There is no on-site combustion, so there are no on-site emissions. Also with electric heating you do not have to deal with a furnace, storage tank, or ductwork. You don’t have to schedule deliveries like you do with heating oil.
With electric heating, it is also particularly easy to control the heat levels in different rooms. Many new multi-unit buildings use electricity, simply because it so easy to work with and not capital-intensive.
There are certainly other factors that matter too. For example, the overall “scale” of heating demand matters a lot for this decision. Electric heating has high incremental costs, so it makes most sense in relatively mild climates.
Households in cold climates tend to choose natural gas because of the low price per unit of heating. But not everyone has access to natural gas. In many rural areas with low population density there are no natural gas distribution lines. This helps explain the popularity of electricity in North Dakota and South Dakota, for example.
What does this mean for electrification policy?
As my colleague Max Auffhammer recently wrote about, the city of Berkeley has become the first U.S. city to ban natural gas in new homes. This evidence on historical U.S. heating choices has a couple of implications for policies like this.
First, while there has been steady, continual progression towards electric heating, the pace of change has been slow. The building stock turns over slowly, and there is considerable inertia with home heating choices. Thus, whatever policy interventions are made in this sector, policymakers will need to be patient.
Second, these data imply that households like to heat their homes with electricity. Before I pulled these data, I had not realized the degree to which electricity’s market share has grown over time. Particularly in relatively warmer climates, U.S. households have a strong revealed preference for the cleanliness and convenience of electricity.
Bottom line: if electrification is the road to GHG reduction, it may not be as steep a road as some people think. The key will be avoiding prices that over-penalize electricity use.
Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.
Suggested citation: Davis, Lucas. “Electrification? We Are Already On The Way” Energy Institute Blog, UC Berkeley, November 4, 2019, https://energyathaas.wordpress.com/2019/11/04/electrification-we-are-already-on-the-way/
Lucas Davis is the Jeffrey A. Jacobs Distinguished Professor in Business and Technology at the Haas School of Business at the University of California, Berkeley. He is Faculty Director of the Energy Institute at Haas, a coeditor at the American Economic Journal: Economic Policy, and a Faculty Research Fellow at the National Bureau of Economic Research. He received a BA from Amherst College and a PhD in Economics from the University of Wisconsin. Prior to joining Haas in 2009, he was an assistant professor of Economics at the University of Michigan. His research focuses on energy and environmental markets, and in particular, on electricity and natural gas regulation, pricing in competitive and non-competitive markets, and the economic and business impacts of environmental policy.