Electric heat pumps will be the cheapest clean option to heat most US homes by 2030: ACEEE

The shift to heat pumps will have a big effect on the electric grid in many regions that use a lot of electricity in the summer.

Electric heat pumps will be the cheapest way to heat most single-family homes using clean energy in the U.S. by 2030, according to a study released Wednesday by the American Council for an Energy-Efficient Economy. In some areas with extreme cold temperatures, the report concludes heat pumps alongside an “alternative fuel backup” for temperatures below 5 degrees Fahrenheit will “generally” minimize costs. However, electric heat pumps minimize costs in all climates for water heating, the analysis found.

The study assumes that in the next decade, the electric grid and heating fuels will be largely decarbonized. Experts say that electrifying building heating loads will be essential to meeting state and federal decarbonization goals. However, there are concerns about the costs versus gas furnaces or other systems. ACEEE's research concludes that electric heat pumps "generally minimize average life-cycle equipment and energy costs for heating and cooling in places ... south of Detroit."

The study found that the cost of electric air-source heat pumps varies greatly, with prices ranging from $6,800 to $12,700. The study also found that the cost of gas furnaces varies widely, with prices ranging from less than $4,000 to more than $9,000.

Almost 80% of the homes in the study by ACEEE had lower life-cycle costs for electric heat pumps than condensing gas furnaces. The research focused on 3,000 homes and apartments in the U.S. Energy Information Administration’s 2015 Residential Energy Consumption Survey that used gas, propane, or fuel oil furnaces or boilers and modeled life-cycle costs of decarbonized heating options like gas or electric heat pumps, or gas furnaces, using biogas or synthetic natural gas made from green hydrogen.

The EIA predicts that by 2020, 26% of American households will only use electricity for energy. Lyla Fadali, a senior researcher at ACEEE, says that this transition to electrification will happen slowly as long as people have access to affordable fossil fuels.

The cost of fuel and electricity is an important factor to consider when studying this issue. The study looked at the prices of electricity and fuel for homes in a dataset. They adjusted the prices using estimates from the national Energy Information Administration. For gas, they used projections from the EIA for fossil gas. They also considered how much it will cost to produce biogas and hydrogen from green sources, as well as higher distribution rates to account for customers switching to electricity.

Nadel said that, in our medium case, the alternative gas, counting both the fuel and the distribution charges, is nearly $40/MMBtu. He said that this is more than three times the present price of gas. According to the American Gas Association, which represents gas utilities, the residential price of natural gas is projected to be about half to a third the price of propane, oil and electricity on an MMBtu-basis through 2050.

The American Gas Association (AGA) published a study in February, "Net-Zero Emissions Opportunities for Gas Utilities," that says that using natural gas and the existing utility delivery infrastructure can help increase the chance of reaching net-zero targets while minimizing price impacts. In order to speed up the transition to carbon-free heating, ACEEE's report calls for more research and development into heat pumps, incentives and grants to support installation, minimum efficiency standards for heating equipment, restructured electricity rates, and a price on carbon.

Grid operators say that the widespread use of heat pumps will have a big effect on the electric grid in many areas. The New York ISO says that their state will become a winter-peaking system in about 2030. The ISO New England group says that electricity use in their area will grow by 1.1% each year for the next ten years. They also say that "beyond the current 10-year planning horizon, the increased electrification needed will likely cause the region to become a winter-peaking system."

Josh Quinnell, a senior research engineer at the Center for Energy and Environment, also spoke on the ACEEE webinar. He said that the results of the report seem "reasonable" and that they provide reasons for optimism. "It's really a very timely report," Quinnell said. "Right now, a lot of us researchers and implementers are grappling with the cost and performance and capacity limits of air source heat pumps in cold climates, and what that means for relatively aggressive decarbonization goals."

ACEEE's study showed that there are some things that make it difficult to use electric heat pumps in cold climates. But it is encouraging to see that carbon neutral, synthetic fuels can be just as affordable as renewable electricity for heating homes in cold climates. Quinnell said this shows that we will need to be flexible in order to achieve carbon-free space heating within the necessary timeframes. He added that not everyone working in this space currently understands the importance of this flexibility.

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