Short term pain for long term gain — that's a conundrum that often bedevils us, in all manner of ways, including the push for electrification.
The U.S. is in the early stages of such a push, ultimately aimed at lower carbon intensity, emissions and costs, while also making gains on energy efficiency. Now experts want to help consumers get over the reluctance to pay now and save later, which can get in the way of mass adoption.
"In most cases — not all — but in most cases, you pay a little bit more in terms of up front costs, but you realize lower operating costs in terms of fuel use and maintenance," said EPRI Technical Executive Geoffrey Blanford. "Customers have to see their way through that tradeoff, but if you frame it in standard economic terms ... then it looks like a good tradeoff."
A new electrification assessment from EPRI includes four core scenarios examining opportunities and challenges of electrification, with different environmental policies and technological drivers for each.
In addition to a reference case and one assessing slower growth in electrification, researchers included scenarios with a carbon tax: one where carbon is valued at $15/ton CO2 starting in 2020; and a "transformation" scenario in which the carbon value starts at $50/ton CO2. Under each of the scenarios, the report showed broad electrification and technology advances that included efficiency gains along with lower emissions and energy use.
In the past 70 years, electricity has grown from 3% of final energy in the United States — how energy is ultimately consumed — to 21% today. But electric utilities have struggled with stagnant or declining load growth for years, limiting sales and their ability to spread around new costs. They're turning to electric vehicles as a way to increase load, which is the most high-profile electrification shift happening. But there are a range of technologies that could be shifted across the economy, including heat pumps for space and water heating, electric technologies in industry, and heavy transportation.
EPRI's report illustrates that electricity’s role continues to grow, projecting a range from 32% to 47% of final energy in 2050.
Older conventional wisdom held that using electricity for some applications like heating was more expensive, but that has changed in some cases.
Approximately 43% of homes currently use electricity for water heating, EPRI notes, although only a small number of those homes use heat pump water heaters, which are much more efficient but also more expensive than conventional electric resistance water heaters. EPRI's research indicates that as the cost of heat pump water heaters declines over time, more than half of residential customers will adopt them — possibly up to 60% in the transformative scenario.
Without efficient electrification, EPRI concludes that electric loads will decline, driven by efficiency gains. But if the country undertakes an effort to grow electricity's share of final energy, the study projects cumulative load growth of 24% to 52% by 2050.
Importantly, EPRI's assessment also shows demand for natural gas increases in each of the four scenarios, with carbon capture and storage technology becoming essential in scenarios that assume a future carbon price.
Natural gas use continues to grow "based on its operational flexibility," EPRI's assessment concludes, though this is based on an assumed ongoing cost of $4/MMBtu, which researchers pulled from one scenario in the 2017 U.S. Energy Information Administration's Annual Energy Outlook.
Gas could remain around that modest price, but commodity prices could also rise as more gas goes to power generation and is available for export from the United States' bourgeoning liquefied natural gas industry. EPRI also did sensitivity analyses that assumed gas prices rise to $6/MMBtu by 2050, and concludes "natural gas use still increases in all four scenarios."
"Certainly there are other ways the generation mix could evolve under different scenarios," Blanford said. But if gas remains around historically low prices, "in that kind of world, gas certainly looks good."
While the EPRI assessment made a choice not to model factors like demand flexibility and other grid benefits of electrification, their availability will mean a range of options are on the table for generation, Sheryl Carter, power director of the Natural Resources Defense Council, told Utility Dive.
"There are many effective alternatives to natural gas that can help balance and integrate renewables," Carter said. NRDC's own 2050 analysis found similar potential for efficient electrification, she added.
"By maximizing energy efficiency across the economy and including the grid flexibility benefits of electrification, we found we could incorporate much higher levels of solar and wind and dramatically reduce natural gas use as opposed to increasing it," Carter said.
The economics of electrification
The benefits of electrification are relatively simple: greater efficiency and lower emissions. EPRI concludes the environmental benefits will be significant, across all of its scenarios. Without a carbon policy, projected CO2 emissions decline 20% by 2050. In EPRI's transformative scenario, emissions could fall nearly 70% below 2015 levels.
"Policies that provide an active signal to cut emissions ... lead to even greater environmental improvements —notably through a more rapid shift to electricity," the report finds.
But what will really drive adoption are the financial benefits, Blanford said. While that is true for many shifts into electrification, Blanford said the scale would most easily be seen in terms of electric vehicles.
The trade-off of short term costs vs. long term benefits is a good one "and that's what drives the adoption in the model," according to Blanford.
As for the cost of electrification, Blanford said the assessment categorizes it more as an asset than expense, as the net costs of services can go down when a service is moved to electric. "In most cases, we view it as an economic benefit," Blanford said. "EVs cost a little bit more. There is that hurdle, but in the long run, it's worth it —and it doesn't have to be that long of a run."
The price of electric vehicles is declining, Blanford said, and an EV can be thousands of dollars cheaper to operate each year.
Shifting the peak
One curious result of electrification could be a permanent shifting in utility peak demand. Most regions peak during the summer, but EPRI's analysis shows electrification could shift peak loads to winter by 2050 across the country, if efforts are not made to actively manage the loads.
"At the same time, these new electric loads provide significant opportunities for more flexible and responsive demand response, as well as storage," the report finds. "Realizing such benefits is contingent on investment in a flexible, resilient, and integrated grid and clear electricity market signals."
Overall, the demand-side changes, combined with advances on the supply side, will "create an array of challenges and opportunities for system planners and operators."
"Some systems have seen that already," Blanford said. Florida and the Pacific Northwest are both winter peaking regions, and the Southeast is moving that way. The fundamental shift comes with opportunity, but will also bring challenges.
"It changes when you schedule maintenance; it changes a few key system implications; it changes how you view gas pipeline contracts," Blanford said. And ultimately it could change the value of renewable energy if utilities can move demand to times when there is excess renewable energy generated.
A new action plan to accelerate electrification in the Northeast, released by Northeast Energy Efficiency Partnerships, came to similar conclusions, noting that if electrification is successful "there are potential impacts that may cause longer-term challenges." Even with moderate efficiency, the group projects that winter heating months "may require twice as much electricity in 2050 relative to current requirements."
The plan notes that a "handful of mass-market advanced electric technologies will account for the bulk of strategic electrification," including electric vehicles and heat pumps for either water heaters or heating in residential and commercial buildings. According to NEEP, the trio "will likely form the backbone of most program and policy efforts to replace direct use of fossil fuels with renewable electricity."
A role for distributed resources?
NEEP's analysis looks to distributed energy resources to play a significant role, while EPRI's assessment places less emphasis on them.
"Strategic electrification will be most effective when paired with increased grid modernization, flexible generation assets, and distributed energy resources," NEEP said, specifying solar electric installations, storage, combined heat and power and micro grids.
Time-of-use rates and two-way grid communications can be used to ensure the new load does not overwhelm the system. "Flexibility, storage capacity, and controllability can be a great asset to grid management as well as resiliency," NEEP concluded.
EPRI also notes the need to focus on integration of the new loads, saying that grid investment "must enable the dynamic matching of variable generation with demand, while supporting new models for customer choice and control. Investments are needed also to maintain reliability and enhance resiliency," EPRI said.
But Blanford also conceded the EPRI work "didn't focus on distributed generation as much." A key assumption in the assessment is that current rate structures hold constant, which he said would continue to drive adoption of DERs, particularly rooftop solar.
The report finds that "while some of this load growth will be customer-supplied, utilities in most cases will supply capacity to ensure reliability. Even as rooftop solar grows, it still will not mount to 5% of total U.S. generation, he said.
"It is possible for distributed generation to grow a lot and still not be a huge share," Blanford said.
EPRI's national assessment is not a projection so much as a roadmap. "It's one of the first looks at the economic potential of electrification," Blanford said. "Utilities are not taking away a forecast, but a better understanding of how these trends could impact load shapes and growth overall."
The analysis shows "how the whole system could evolve," he said.
But despite national trends, electrification will play out in local utility service territories. And utilities will need far more specific information and planning in order to be prepared. EPRI is working on a more detailed analysis that will focus on electrification at the local and regional levels — those efforts are being coordinated with certain utilities in specific states.
Seven states have already partnered with about 10 utilities, said Blanford, and "there are more in the pipeline." Utilities will be able to use the results of the study to inform rate cases and make the arguments for electrification investments to regulators. And the local analysis will be more specific and operationally useful.
"We will be looking carefully at the assumptions driving adoption in those states," Blanford said.
NRDC's Carter said once the results of the statewide analysis are in, the conversation will become more specific with regard to energy supply and demand, "which will likely yield a different mix of resources."