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Can Federal Appliance Standards Spur Electrification?

Key features of existing programs limit their ability to foster fuel switching, but there are alternatives.

TOPIC: 14HEATPUMP
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The simplest way to get people to choose A instead of B is to eliminate B as an option. Ergo, if you want to get people to electrify their space heating, water heating, clothes drying or cooking, the most direct way is to simply ban the alternatives that use gas, propane or oil.

Some policies do exactly this. Arguably the biggest news on building electrification in the last few years is the banning of gas hookups in new construction in various cities, many here in California. Could something similar happen at the federal level?

The federal government doesn’t manage a national building code that can be amended to ban fossil appliances, but the Department of Energy does establish minimum efficiency standards for products and equipment that cover all the key appliances that electrification advocates seek to convert. Unlike building codes, which have thus far focused on new construction, a federal appliance standard could have a wider reach by influencing appliance replacements in existing buildings. Might DOE’s programs be a powerful tool to foster fuel switching?

Does electrification need a federal push?

If cities and local governments are creating a wave of electrification via local action, do we even need to worry about federal policy?

I think the answer is yes, both because it will be critical to harvest economies of scale from national action and because the fossil fuel industry is fighting back. In the last couple of years, the natural gas industry has pushed to enact state laws that prohibit local rules from restricting gas utility services. In effect, the gas industry asked to speak to the manager.

And their strategy seems to be working. In just the last two years, 20 states have adopted policies that protect gas connections, which I call “right to gas” laws. The map below, which colors “right to gas” states in red and states with some form of pro-electrification legislation in blue, will have a familiar pattern for followers of the electoral college.

These laws are creating a massive bulwark against local efforts, which swings us back around to the question of federal policy.

Map

Source: S&P Global

If electrification is a round hole, DOE’s standards are a square peg

DOE standards mandate a minimum efficiency level for specific types of appliances and equipment. Roughly, DOE determines whether there are sufficient market ready technologies such that it simply doesn’t make sense to settle for a less efficient product, when you take into account the up front costs of adding efficiency improvements, the energy savings during a product’s lifetime, and the impact on pollution.

How might this relate to fuel switching? DOE could directly compare, for example, electric water heaters to gas ones, creating a common standard that applies to both. If they determined that (again, taking pollution into account) the gas water heaters were inferior, then they might pass an efficiency standard that effectively eliminates the gas option. Alternatively, DOE could maintain separate regulations by fuel type. But, where viable electric options exist, they might consciously decide to ratchet up standards on fossil alternatives, knowing that consumers can go electric.

I recently had an opportunity to learn more than I thought I would ever want to about how these DOE standards get evaluated while I served on a National Academies committee that reviewed DOE’s methods. (If you are looking to nail down a great Mother’s Day gift ahead of schedule, for a recipient with distinctive tastes, you can find our final report here.)

Our review of DOE’s process left me deeply impressed by the efforts they take, but it also taught me that their program is ill suited to create the kind of fuel switching incentives I just described. In fact, their ability to force technology or lead the market in various ways is sharply constrained by the originating statutory authority.

The program was authorized by the 1978 National Energy Policy Conservation Act, which among other things stipulated that:

“the Secretary may not prescribe an amended or new standard . . . [that] is likely to result in the unavailability in the United States in any covered product type (or class) of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States at the time of the Secretary’s finding” (42 U.S.C. 6295(o)(4)).

In other words, we can’t have a standard that would threaten extinction of any configuration or feature that is currently on the market. In practice, DOE’s solution is to create a multitude of new product categories anytime some attribute has nontrivial energy implications.

There is both art and science involved in deciding what is functionally the same and what is different. For example, an LED was deemed to deliver the same service as incandescent bulbs. But, we have distinct efficiency minima for refrigerators based on their fresh food volume, frozen food volume, door type (french or single hinge), whether the freezer is on top, bottom or side, and whether there is through-the-door ice. Where one of these features causes a fridge to consume more energy, DOE creates a handicap for it, lest a standard nudging up the more efficient configurations prohibit some functional feature that consumers might value.

Giving related products with different characteristics a regulatory sliding-scale is a form of what economists call attribute-based regulation, the properties of which I’ve bemoaned in other contexts. The problem with standards built this way is that potentially efficient ways to reduce emissions include, for example, opting for smaller refrigerators with fewer energy-consuming features. The sliding scale approach fails to motivate that type of mitigation.

The upshot is that DOE is not only careful not to push the envelope within a product category, they are eager to steer clear of anything that will bring lawsuits (of which there are many) based on this provision. That means a standard that tilts the playing field towards one fuel source or another, even if it is based on sound science, is strictly out of bounds.

What role can the federal government play in pursuing electrification?

There are, of course, other levers to pull in the nation’s capital. First, consider the Energy Star program, which is sort of a first cousin to DOE’s rules. It lacks the teeth of DOE’s mandates, but it is far more flexible. The EPA could grant more stars to modern electric equipment, while raising the bar for fossil appliances, or even refusing to certify whole categories.

MostEfficientImage

Last fall they took a baby step in this direction, when they announced that they would not grant Most Efficient status (their “super star” badge, a tier above the regular label) to gas dryers, furnaces or boilers. The move came at the urging of environmental groups.

Second, the federal government can use its buying power to boost electrification. The Biden administration has made some important moves in this direction. It announced last year that it would develop the first ever federal building standard, which would set standards for federally managed properties. That standard is expected to heavily favor electrification, while leaving room for gas that comes from low-carbon pathways. This has  real potential to  accelerate market maturity for electric equipment, as the federal government owns or leases about 1 billion square feet of property (roughly 1% of all commercial space).

A third category is to simply throw money at the problem. This can include R&D spending to improve electric appliances, programs to train installers, financial incentives for installers and customer subsidies for fuel switching. Some of these things are already happening under provisions of the infrastructure bill, but it is unclear how many additional appropriations we can expect from Congress in the near future.

All of the policy options have strengths and weaknesses, and several, including standards that ban gas through either building codes or minimum standards, are usually viewed with disdain by economists, who prefer policies that fix prices but preserve choice. But, my hunch is that achieving deep decarbonization in this country is going to require that we deploy a wide range of tools, including some with major drawbacks and others we are only beginning to think through.

Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.

Suggested citation: Sallee, James. “Can Federal Appliance Standards Spur Electrification?” Energy Institute Blog, UC Berkeley, February 22, 2022, https://energyathaas.wordpress.com/2022/02/22/can-federal-appliance-standards-spur-electrification/

James Sallee View All

James M. Sallee is an Associate Professor in the Department of Agricultural and Resource Economics at UC Berkeley, a Research Associate of the Energy Institute at Haas, and a Faculty Research Fellow of the National Bureau of Economic Research. He is a public economist who studies topics related to energy, the environment and taxation. Much of his work evaluates policies aimed at mitigating greenhouse gas emissions related to the use of automobiles.

24 thoughts on “Can Federal Appliance Standards Spur Electrification? Leave a comment

  1. Your singular focus on electricity, carbon reduction and mandates is exceptionally short sighted and exposed to risk . Mandates to end the use of non-electric appliances and restrict the use of natural gas or other carbon based fuels eliminates the diversity necessary to address technical or other events that make electricity unavailable. Making communities dependent on a single fuel or power source increases political strategic as well as basic survival risks. Mandates also do a lousy job of creating vibrant sustainable markets.
    If the objective is the reduction of carbon based fuels why not focus on developing more efficient, less costly, and more environmentally compatible alternatives.

    • See my comment above on the market failure that biases HVAC repair towards gas-fueled options. We have a clear example our town despite its reputation of being forward looking. We have to get fossil methane out of residential and commercial buildings due to the multi-decade legacy of that choice.

      As for diversity, that is addressed by encouraging distributed generation that is still interconnected to the grid. See last week’s post and discussion about the merits of that issue. Electricity can be generated in multiple ways.

  2. It would be great if S&P Global’s US map showed more than 48 states! Hawaii is doing some very interesting things to reduce GHGs. My understanding is that very natural gas infrastructure has been installed there. In that regard, much of Hawaii is already living the mainland’s hoped-for future.

  3. We don’t need bans. We need advancement of reliable,cost effective, carbon free electricity. Once that is achieved, add in a carbon tax and let the market decide.

    • Unfortunately consumers too often rely no HVAC installers who have an interest in perpetuating the sales of their gas furnaces and water heaters. Given that most of these replacements happen on an emergency basis, consumers are much less concerned with price comparison. So that means that the government has to step in and dictate the preferred choice to overcome agency bias.

      • Richard your comment here very clearly states that members of the general public are uninformed, stupid and unable to make a rational decision while “government” has a monopoly on rational thought?

        • The general public has only a limited ability to gather all of the relevant information in any choice. In this case, a homeowner with a broken furnace or water heater does not have the several weeks it takes to rationally gather the pricing and cost data and then research the options available. (I know–we replaced our HVAC system in our house when we moved in 4 years ago and it took close to a month to go through this process.) A homeowner in winter without a furnace or water heater wants it tomorrow. The installers control the choices presented and they bias it towards their preferred option. (An installer her who has 60% of the market steers customers into gas appliances because the owner does not believe in climate change.) Because of this market failure arising from the principle-agent problem, the government must step in to fix it given the seriousness of its consequences to the environment.

  4. While certain appliances such as refrigerators and washing machines may have different characteristics that are apparent to consumers, space and water heating are generic commodities that largely can be supplied in similar manners with new appliances. (There were differences in the past, but those are largely gone.) Arguably even cooking is now comparable with induction cooktops and convection ovens. Using that premise would appear to be justifiable.

  5. A good post, but I feel misses the point. The goal is not to electrify everything, it is to produce less greenhouse gases. The best way to do this is to have a price incentive for greenhouse gas production and make it equitable and not subject to political meddling by a fee and dividend system. Under this everyone has the incentive to produce less carbon dioxide at the lowest cost per tonne of reduction. See Google search words “carbon fee and dividend” and advocacy group https://citizensclimatelobby.org/basics-carbon-fee-dividend/.
    Rating appliances by greenhouse gas production and lifetime cost of ownership would be a good rating system to fit with the carbon fee and dividend. If adjusted for different areas of the country, this would allow a consumer to determine if an electric appliance will produce less global warming gases than a gas or oil one. For example, where electricity is still generated with coal, natural gas appliances may still be the lowest greenhouse gas option. Then as the carbon fee increases the consumer will be able to estimate when they will get the most cost-effective appliance when considering their dividend.

    • And when a GHG fee is a political non starter (as it it now), what is the preferred option? (Please don’t tell the rest of us that this not true–the evidence is overwhelming against such a fee happening in the foreseeable future.) Probably standards that at least discourage installation of gas appliances.

    • A recent poll shows that even a fee-and-dividend system which Canada implemented several years ago is unpopular. And then there were the yellow jackets in France who initially rebelled against a higher gas tax. And the CA legislator who was recalled after supporting an increase in gas taxes. Setting carbon taxes high enough to make any difference is not politically possible EVEN with a fee-and-dividend approach. We need quicker action: rebates, reach codes, efficiency standards, cultural motivations. The whole gamut. Research has shown that PV in a neighborhood increases the rate that others get PV. I assume it’s similar with EVs, induction cooktops, etc.

  6. It’s good to see Energy Star finding new ways to help customers find the better products. I recommend Energy Star listing tables to start including the wattage of certain devices that count in NEC electric panel load calculations (hard-wired appliances and dryers and the upcoming 120 Volt plug in heat pump water heaters, etc) so customers can select the lower power versions that help them electrify without needing to upsize their electric panels. Especially useful would be to call out the category of combined (all in one) washer dryer machines that even save an additional circuit. These steps will enable more electrification with reduced congestion at the panel level, workforce level, grid distribution and transmission levels.

  7. Unfortunately, it seems that the entire National Academies site is down at the moment. Presumably this will be fixed, but out of my control at present…

  8. Mandates are the reflex of totalitarian bureaucrats and elite ‘planners’. Have we learned nothing from the failure of undemocratic ‘Command and Control’ aka Planned Economies? Hubris reigns in academia and in the bureaucratic Beast.

  9. This is a bad idea because the grid is not ready for the extra load and “cutting off options” cuts off our ability to transition to a hydrogen economy. Right now I’m struggling with NEC national electrical code rules that prevent plug and play 1.5 kW solar even though its technically possible to make plug and play solar safe. We have too many negative laws that prevent innovation.

    • Waiting for hydrogen will be like waiting for nuclear fusion. While appealing, we still don’t have a clear path to cost effectively producing enough green hydrogen to fuel the residential and commercial (vs. industrial) energy markets. It will be decades before hydrogen will be a cost effective substitute in these applications for fossil methane. We need to push forward with electrification, which will take a decade or more anyway.

    • NEC Rules only apply to electrical systems above 50 volts (NEC article 720). if you build an electrical solar panel to battery-based system and run it to your house with a Pure sine wave inverter that has UL approval, the low voltages of a 12 Volt, 24 Volt or 48 Volt off grid system preclude that system form erven needing an inspection or permitting. It does NOT connect to the electrical grid, so you do not even need the utility approve to connect because it does not connect to the utility. You and install as many electrical systems that you want in your home besides the one that connects to the utility meter and as long as they are below 50 volts between conductors or to ground, they are not covered by any rules in the NEC except for Fusing of conductors for overcurrent or fault conditions. I run a 12 Volt lighting and power system though out my home and that system powers 70% of my home. The utility system, that came with the home, just powers all the 240-volt appliances, a refrigerator and a few built in lights that are now equipped with LED lamps. The system I used is the same system that RV owners have used for off grid, on the road electrification without the use of a gasoline or LP powered generator. I run Air conditioning in the summer and electric heaters in the winter off the low voltage off-grid 12-volt system using 12-volt to 120-volt inverters that have UL or other nationally recognized approval. My main heating, in the winter, is firewood from an airtight wood stove. This article did not address firewood because it is not a Fossil Fuel but there are some who would argue it is an air pollution contributor and eventually would also need to be replaced by clean renewable electrical energy. I turned off my gas Furnas this year for the first time and my savings was over $300.00 on the December 17- January14 bill alone. This proves you can disconnect from the utility the Natural Gas as long as you have alternatives to heat your home and have hot water. This system does not come cheap but will have a long-term payback. The biggest expense is the batteries you bust buy and replace every 6 years. My 80 deep cycle marine/RV batteries costs $6,560 every 6 years to replace but i save $12,000.00 in Electrical and gas billing over the same 6 years here in California where prices are twice the national average at the meter. Good luck with your system.

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