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Report: Building Electrification Would Mean Higher Bills for Remaining Gas Users

The trend toward electrifying buildings does not come without costs, according to a report by the National Bureau of Economic Research.

As concerns about climate change are rapidly evolving into actions to combat it, new policies and programs are emerging to accelerate that fight. A growing trend in deep decarbonization, the process of eliminating all carbon emissions from all energy sources, is the electrification of systems that have been historically reliant on fossil fuels. When applied to the built environment, one method to achieve such decarbonization is to phase out the use of natural gas for heating and appliances in buildings. However, the process of electrifying these systems cannot be achieved overnight, and time constraints would leave those unable to electrify rapidly with inflated utility bills, according to the study.

According to the study, a 15 percent reduction in residential natural gas customers would lead to a $30 average increase in utility bills for those still using natural gas annually. The costs rise exponentially as more residential customers electrify. If there were a 90 percent decrease in natural gas customers, the remaining 10 percent of natural gas customers could see a $1,500 increase in their natural gas utility bills annually.

The increases in utility bill costs are related to the costs of existing gas infrastructure, and the maintenance and administrative costs that are associated with every natural gas bill. Now, the solution to this seems simple: Reach 100 percent electrification for everyone, and those costs would no longer be an issue. Unfortunately, it is not that simple. The study suggests that there are certain populations, particularly low-income individuals and families, that do not have the financial means to electrify, nor could they afford a rising utility bill as others begin to electrify their own homes.

California has been the leader in this movement, earlier this year announcing plans to ban natural gas from all new construction in the state. However, this plan was later scrapped, with updated draft building codes revising the “standard design” for new building projects to prefer electric heating or heat pumps, but allow for natural gas appliances to be installed as well.

In a webinar about the paper, the co-authors further explained why different policy proposals for rapid electrification would be unpopular. Such proposals include subsidies for low-income households for electrification, fees for those who leave the natural gas utility system, or an incremental plan to electrify specific areas in succession gradually over time. According Catherine Hausman, co-author and associate professor at the University of Michigan’s Gerald R. Ford School of Public Policy, there are “a lot of competing issues” which can lead to “both equity issues and financial issues for utilities.” Lucas Davis, co-author and professor at University of California, Berkeley, said that the aforementioned policy ideas are “likely to be pretty unpopular”.

It is undeniable that electrification will be at the center of future efforts to decarbonize the world. It is important to consider all impacts associated with such development to ensure its sustainability for all people in the country.

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