Three Facts about Electric Heating in California
California has a long way to go if it is going to electrify homes.
Two weeks ago a federal court overturned Berkeley’s ban on natural gas in new buildings. According to the court, bans like this one are preempted by federal law, and therefore illegal. The decision raises questions not only for Berkeley, but also for the other 70+ cities in California with similar policies.
But as this “stick” goes away, the “carrot” from the Inflation Reduction Act is just arriving. Low- and middle-income households, for example, will soon be able to access point-of-sale rebates of up to $8,000 when purchasing a new heat pump. California offers additional subsidies of up to $3,000.
I’m very curious to see how these subsidies will impact choices. In some ways California is a good candidate for heat pumps and other forms of electrification but, as I emphasize in today’s post, the state has a long way to go compared to most other states.
Fact 1: 28% of California households have electric heat, compared to 40% nationwide.
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The U.S. has a lot of electric heating. It is the dominant form of home heating throughout the Southeast, and is quite common as far north as West Virginia, Maryland, and Delaware.
Not so much California, however. With only 28%, California is far below the national average (40%), and well below the average for all Western states (34%).
Particularly striking is the comparison between California (28%) and Oregon (48%). Based on climate factors alone we would have expected the exact opposite pattern for these two bordering states.
You may already have a hypothesis in mind. I’ll get there, but first let’s look at more facts.
Fact 2: 6% of California households have a heat pump, compared to 15% nationwide.
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Of the 3.7 million California households with electric heating, only 800,000 have heat pumps. To put this in context, there are more heat pumps in South Carolina (900,000) than in California, despite California’s population being 6 times larger.
Whereas only 6% of California households have a heat pump, adoption ranges between 20% and 40% throughout the Southeast. In Florida, for example, 33% of households have heat pumps.The Pacific Northwest has higher adoption too, 13% in Washington and 15% in Oregon.
This distinction between heat pumps and other forms of electric heating (i.e. electric resistance) is critical from a climate perspective. With one kWh of electricity, electric resistance heating delivers one kWh of heat, whereas a heat pump delivers 2, 3, or even 4 kWh of heat. This means that as long as the electric grid is served by fossil fueled power plants, a heat pump can deliver the same heat as electric resistance heating with a fraction of the emissions.
Thus most decarbonization studies conclude that heat pumps will play a crucial role in reducing carbon emissions. A recent report by the International Energy Agency, for example, finds that global adoption of heat pumps will need to more than double by 2030 to meet the carbon abatement goals outlined by the Paris Agreement.
And it’s not just space heating.
Fact 3: 21% of California households have an electric hot water heater, compared to 47% nationwide.
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Californians are also much less likely to use electricity for hot water heating. As Max wrote about two weeks ago, American households use vast amounts of energy for water heating, and, in California, this energy is much more likely to come from natural gas.
Strikingly, if you rank all states in terms of electric hot water heating, California is number 47 out of 50. Throughout the Southeast, households are approximately four times more likely to have electric hot water heating, e.g. Florida (88%), South Carolina (77%), North Carolina (75%).
Beyond space and water heating, it turns out this same pattern holds for stoves and dryers too. I’ll spare you the details, but I’ve looked at the data and California households are also much less likely to use electricity for these other appliances, all of which are increasingly seeing available federal and state subsidies.
The bottom line is that California has a long way to go if it is going to electrify homes.
Leading Hypothesis
Why? Why so little electric heating in California?
There are certainly multiple explanations. I agree with Jim Sallee that installers and contractors play a big role. When certain choices are made over and over, there is an inertia in the system and it can be hard to go against the status quo. My colleague Carl Blumstein has also explained to me that California building codes historically tended to favor natural gas over electricity.
But the leading hypothesis has to be California’s high residential electricity prices. It’s pretty simple. High electricity prices discourage adoption of electric heating, electric heat pumps, and electric hot water heaters.
Yes, there are some other states, mainly in the Northeast that also have high electricity prices. And, guess what? They also tend to have low adoption of electric space and water heating.
Subsidies for heat pumps, and changes to the California building code will help steer the state toward electricity, but if we don’t reform rates, we will be steering towards electrification with one hand while pulling customers away from it with the other. As Meredith and Severin recently explained, lowering the price per kilowatt-hour would reduce barriers to efficient electrification, reverse these patterns, and help decarbonize the state.
Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.
Suggested citation: Davis, Lucas. “Three Facts about Electric Heating in California” Energy Institute Blog, UC Berkeley, May 8, 2023, https://energyathaas.wordpress.com/2023/05/08/three-facts-about-electric-heating-in-california/
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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 a Faculty Affiliate at the Energy Institute at Haas, a coeditor at the American Economic Journal: Economic Policy, and a Research Associate at the National Bureau of Economic Research. He received a BA from Amherst College and a PhD in Economics from the University of Wisconsin. 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.
Energy Institute Blog 
What ever happened to deploying Solar Thermal systems for hot water, hydronic space heating in California and in the USA?
— 85% of Residential hot water in Israel is provided by the heat of the sun:
https://www.greenbiz.com/article/1980s-solar-water-heaters-took-israel-stalled-us-its-simple-fix
First, the influence to Title 24 plus state energy efficiency programs cannot be understated on the use of natural gas for heating and appliances. Starting in the 1970s the state decided to emphasize natural gas as an efficient gain over electricity generated from coal and oil. That built in a legacy infrastructure that is very difficult to change regardless of price incentives. Until 2019, it was not possible to get an energy efficiency rebate to switch from a natural gas furnace to a heat pump and the same for water heaters. (We faced that dilemma in 2017 and had to stick with gas.) That anti-fuel switching prohibition is a political barrier created by SoCalGas to protect its market share, not an economic outcome. The original intent of the building and appliance code was important, but it has been slow to be updated as both the electric system evolved and the important environmental issues changed.
Second, 72% of California homes have air conditioning, as Jim Lazar points out. All of those systems can be converted heat pumps at time of replacement at virtually no cost. The state should immediately ban the sale of AC-only units and require HP only. https://www.eia.gov/consumption/residential/data/2020/state/pdf/State%20Air%20Conditioning.pdf
For those who legacy gas appliances that may be costly to convert, we have to ask the more important question of whether the rest of us should subsidize their continued use. Natural gas use in buildings is large share of total emissions and one of the easiest sources to eliminate although it will take at least a couple decades. As gas is phased out, the cost of retail natural gas is will rise rapidly as the fixed system costs are spread over a smaller customer base. The legacy users will complain about rising prices, but we need to figure out how to create a viable exit plan for them as well so we don’t have leaky distribution systems that will be more difficult to maintain as customers depart.
As I noted in an earlier post, a heat pump water heater only saves energy if it can extract heat from the outside air. The ones I have seen so far in new Berkeley open houses were all in closets like normal water heaters. This is not going to save much energy and has the additional cost of increased complexity of the heat pump part of the water heater. It does have an advantage that in the summer it would help to cool the house.
What has happened to solar water heaters? Is that another option in California? A contractor I know was considering installing one in a Berkeley home, but the installation quote was over $20,000 making it uneconomical. This may also be the case with heatpump/AC systems in areas like the Bay Area where there is a shortage of the skilled trades and the cost of labor is very high.
I realize it is difficult, but electrification’s CO2 reduction should always be calculated to determine the most cost effective way of reducing CO2 emissions. For example, it is possible that just replacing the coal filed power plants left in the US with natural gas is more cost effective than putting a heat pump water heater in a closet.
We have a heat pump hot water heater. It steals heat from air in house provided by heat pumps which get their heat from outside our home. This is slightly inefficient. It would work better if the heat pump hot water heater were in the garage and it was hot here outside all year round. But it isn’t.
The oil furnace we very rarely use heats hot water directly but it is not a win over the heat pump hot water heater most of the time, even if that is indirect.
We’ve calculated it.
Well, we live in “ice cold” Massachusetts, have electric and pumps, admittedly “backed up” by oil. However we did not use oil once this Winter. That is getting more typical.
Our heating/cooling costs are lower than in the bad old days. That might be affected by our significant investment in Solar: 57 panels, each between 350W and 450W.
We also have two EVs
You also have the cost of 57 solar panels, very expensive. Your system probably depends on implicit subsidy from the power company if you sell and then buy back the power from that company, essentially using it as a backup generator and battery. Just trying to go off grid with solar is very expensive with large batteries and backup generator. Have you tried to calculate the cost per tonne of CO2 saved?
No, never occurred to us to calculate cost of CO2 saved. We are imposing on atmosphere and should properly pay something for each kg of CO2 we cause to be released. Point is to have zero emissions. Beyond needing to do that — and apart from comparing costs of solar and heat pumps per month — I/we don’t care about cost of CO2 saved.
By the way why shouldn’t we get paid something for kWh we generate and the utility uses. Ar least we can drive on it.
BTW panels will probably last 30 years. Not too bad. And they are useful to encourage other Westwood residents to try and encourage.
Of course we save by not paying for oil and gasoline.
I checked. We spent about $100,000 over 10 years on our entire system and related construction, excluding cost of EVs.
re: “Why? Why so little electric heating in California?”
Probably some historical explanation could be added. Why did CA and other states go the way of installing gas infrastructure? I believe it was because gas was in use before electricity. Cities were being lit in the 1870-80’s with gas lighting. Another possible reason why we want down this path was the price of gas vs electricity. Was it considered a byproduct of oil drilling and thus cheap with limited use at first? Once the structure was in place inertia took over? We need a historian.
Yeah, but isn’t regulation getting in the way of economic efficiency? Isn’t the cost of wind+solar per kWh from utilities cheaper than gas? It certainly is cheaper if consumer owns their own solar and wind generators.
This is why NEM 3.0 was instituted. To stop people from profiting on owning their own solar. Fortunately, one can own their own solar and not send it to the grid using transfer switches and off-grid inverters with batteries.
I think the installed base problem is a huge financial burden atop the cost of electricity.
My very efficient home on the Peninsula (600 kWh/month with a PHEV, 100/40 therms winter/summer) was remodeled in 2000 with extra insulation and optimal eaves for shading. In fact, a major focus of our remodel was to be energy efficient and avoid the need for AC by avoiding heat ingress and using natural ventilation. Solar PV has never penciled out with such a low load.
The electrification moves by our city council, BAAQMD, and CARB would be financially catastrophic. In our case, electrification of heat and hot water (might as well throw in the stove too) would require a major remodel involving virtually every trade — not just electricians. Stucco needs to be ripped off the siding to access wiring in order to install a new sub-panel, and wallboard needs to be cut-away to run new circuits. The attic mounted gas furnace would entail roof work for the condenser (and possibly to install the inside equipment. It wouldn’t make sense to NOT include AC capability, so a condensate drain would also be needed. The forced air ducting in crawlspace and under second floor would likely need to be replaced with larger cross-sectional area (if that is even possible).
So we would need electrical, HVAC/mechanical, plumbing, stucco, plasterer and interior/exterior painting. I don’t see this as less than a $200k job plus the new equipment. And what if a remodel of this extent triggers other building code upgrades like fire sprinklers or solarPV installation to cover the greatly increased electrical consumption?
Some will respond “Die, Boomer, Die” and that indeed is my preference — to not make any major changes while I am alive. Rather than electrify at this stage, I am more inclined to replace the water heater and furnace prematurely.
re: “The decision raises questions not only for Berkeley, but also for the other 70+ cities in California with similar policies.”
According to some sources the Berkeley ban legal strategy was not used by most other cities. It may be premature to write off these gas bans…
“A federal appeals court has tossed out Berkeley, California’s pioneering legislation to ban fossil gas hookups in new buildings. But the ruling, which came Monday, isn’t expected to affect most other policies adopted by U.S. cities and states to limit gas consumption in new homes, offices and commercial buildings, experts say.”
https://www.canarymedia.com/articles/policy-regulation/berkeleys-landmark-gas-ban-overturned-but-ripple-effects-may-be-limited?utm_id=95855&sfmc_id=1455700
Five off the cuff thoughts-
1) I agree that price is a likely component. Some 40 years ago, wasn’t Reddy Kilowatt telling us power would be “too cheap to meter?” A number of homes in Sacramento were built all electric to their detriment. Thankfully, Sacramento is no longer regulated by the CPUC and has rates that better meet the needs of its customers.
2) If rate reform is a zero sum game, then one has to ask if the proposal is really going to lower rates. My personal take is “not.” The same amount of money goes out either way. Actually lowering rates might help electrification uptake more than subsidies, especially if a ban is illegal.
3) California’s attempt to “steer the state towards electricity ” is more of a mandate. Rather than a gentle nudge to keep the cow headed to the milking stall, the state has chosen to hit it with a two by four and pretend that is leadership. Granted, there will be subsidies, but the existence of a subsidy is in itself a distortion with an uncertain outcome.
4) What were California’s GHG emissions from natural gas residential combustion last year? Is it a real issue or is it virtue signaling?
5) This blog is starting to sound like an echo chamber.
I woke up this morning in one of the rare electrically-heated homes in California. My friend has a guest apartment above his garage, near Santa Maria, and I’ve stopped here on a road trip. At PG&E rates, I’m putting up with a colder morning than I would prefer.
Once again, however, energy efficiency is a big part of the answer. For every electric water heater we convert to a heat pump water heater, we save enough electricity to convert one or two gas water heaters to heat pump. For every old inefficient air conditioner we replace with a high-efficiency modern heat pump, we save enough electricity on air conditioning (in the summer) to supply the winter heating needs of that hours via the heat pump (yes, there is a little seasonal storage issue to deal with). And if we improve the thermal efficiency of the home when we put in the heat pump, we will likely save even more than we use.
I’m sorry that this article did not highlight the very high penetration of air conditioning in California. Every new air conditioner should be a heat pump, from the lowliest little window unit to the larger central A/C. And with modern efficiencies, those savings on the A/C side of the equation in California will be huge. I found that three-quarters of homes in the West (RCS, 2020 data) have air conditioning, and that half of those systems are more than ten years old. That represents a huge opportunity for upgrading to high-efficiency heat pumps.
And electrification will be economical for every customer of a well-managed electric utility. I exclude PG&E and SDG&E from this category. Nearly all of the other electric utilities in California (LADWP, SMUD, Burbank, Glendale, Pasadena, Anaheim, Surprise Valley, Pacific Power, etc) have average residential rates of $.11/kWh to $.20/kWh, prices that are highly competitive with gas prices for use in heat pumps (and under $2.50/gallon of gasoline equivalent) when used in EVs.
I’m really surprised that the Haas team has not looked more closely at WHY the PG&E and SDG&E rates are so much higher than other California utilities. It certainly is not because they provide superior service.
I expect that the immediate effect if the income-based fixed charges are put into effect will be a flurry of municipalization among upper-middle-class communities that will be adversely affected. It should have happened long ago; this may be the proverbial straw that breaks the camel’s back.
“Of the 3.7 million California households with electric heating, only 800,000 have heat pumps. To put this in context, there are more heat pumps in South Carolina (900,000) than in California, despite California’s population being 6 times larger. ” It could also be the price of electricity in California is 3 times higher than in South Carolina. For heating, Natural Gas has been far cheaper than electricity in California, up until last year,when natural gas prices doubled sending wintertime heating bills skyrocketing to most homes. Only homes with rooftop solar panels are willing to switch to heat pumps for heating and cooling because the electricity from rooftop solar is one third the cost of utility electricity in California to produce and use under NEM 2.0. NEM 3.0 will shift the costs so that Natural Gas will become the less expensive source of heat since the summertime bank of extra electrical credits will be cut by 75% making the buyback electricity 4 times more expensive.