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Electrification? We Are Already On The Way

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.

Looking at all this fossil fuel consumption, policymakers and climate advocates are eyeing electrification of home heating as a potentially low-cost path to reduce carbon dioxide emissions.

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.

Other Factors

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.

Policy Implications

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 View All

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.

27 thoughts on “Electrification? We Are Already On The Way Leave a comment

  1. Hi Lucas – this is an interesting take on the electrification of space heating in the US. But not all forms of electrification are equal. Electric resistance heating should never be used unless there are no other possible solutions, and even then it shouldn’t be the primary system for a building. Resistance delivers just 1 unit of heat for each unit of electricity used.

    But modern heat pumps deliver 3 units of heat for each 1 unit of electricity. Granted their performance varies based on where the heat comes from, air, water or the ground, and at what temperature. But they should be the only technology under consideration for the electrification of space heating and other thermal loads. Throughout much of the midwest and northeast, carbon emissions and costs would be higher for electric resistance than traditional gas boilers.

  2. I read this article with interest as well as the comments in response. I wonder why hydrogen is not part of the conversation to decarbonize. Sure, hydrogen has always had the hype and then the hype fades away as reality of high cost of production and transport sets in. However, falling renewable prices are making the production of hydrogen potentially cost effective and the stringent climate change policies will keep hydrogen relevant. The only issue is cost effective transport of low carbon hydrogen from production areas to demand centers.
    The other issue that I think gets ignored is the stranded cost of existing energy infrastructure. As we decarbonize and in this case electrify everything what happens to the trillions of dollars in stranded assets. Hydrogen can also re-use the natural gas pipelines which could make the cost of decarbonization more affordable rather than building new electric lines (transmission lines in an era of increasing fire risk).

    • Hydrogen is attractive, but the problem with the existing distribution system is the leakage. The hydrogen molecule (atom?) is so small, and methane leakage is already a huge, largely undisclosed, problem, that the losses might make transporting the fuel uneconomic without a complete rebuild of the lines. Likely a more cost effective solution would be onsite or distributed hydrolysis using local water sources.

    • Marzia, elemental hydrogen does not exist in nature. It must be separated from other compounds, typically from water (H20) using electrolysis, or methane (CH4) using the process of steam reformation. Because steam reformation is more cost-effective, 95% of hydrogen used in industry is currently manufactured using methane as a feedstock. After the hydrogen is removed from methane, however, carbon is expelled into the atmosphere as a by-product, and combines with oxygen to form CO2, a greenhouse gas.

      Recognizing the potential for electric cars and a limited future for gasoline, oil companies in the 1990s set about to promote hydrogen produced from methane as a “clean”, alternative liquid fuel. To do so, they trumpeted the fact the only exhaust from a hydrogen fuel cell vehicle is water, while failing to acknowledge the carbon emissions from the production of its fuel. And they’re significant: well-to-wheels, hydrogen fuel cells using methane-sourced hydrogen emit even more carbon than modern, high-compression gasoline engines.

      In summary, liquid hydrogen fuel is a wolf in sheep’s clothing, another fossil fuel with pretty renewable packaging. When you see liquid hydrogen fuel or fuel cells promoted today there is invariably oil company money financing the effort. A prime example is Royal Dutch Shell and Chevron’s “California Fuel Cell Partnership”:

      http://www.cafcp.org

  3. Wow, there is a lot of confusion, to put it lightly. Here are some facts that I hope help the conversation:

    1) heat pumps are 300%-400% as efficient as electric resistance. For every kWh of energy put into a heat pump, they move 3 to 4 kWh worth of heat from the outside of the structure to the inside. Heat pumps are by far the way to go if emissions matter at all. (Strange that there was no mention of this huge difference in the article)
    2) If someone installs or replaces AC, then the incremental charge to upgrade that AC unit to a heat-pump is near zero. The equipment is virtually the same and there are a couple extra valves and controller that switch the flow of refrigerant in heating mode vs. cooling mode. So retrofitting a building / house that has AC does not cost much at all, particularly if done simultaneously when the appliance is due for replacement anyway.
    3) Heat pumps work in cold climates. There is a lot of FUD and mis-information that they don’t, because old heat pumps were terrible in cold climates. Modern heat pumps from the past decade work fine in very cold climates (assuming installation keeps the outside unit free from snow accumulation).
    4) Electric induction cooktops respond as fast or faster than gas. Numerous folks, myself included, have cooked on horrible electric resistance cooktops and vowed never again. Electric induction cooktops, now readily available, are excellent to cook on.
    I hope some of these facts help clarify things a bit.

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