Electricity a Smarter Choice than Low-Carbon Gas in CA Homes

Electric heat is the clear winner over low-carbon gas as a climate solution for buildings in California, according to a new study released by the state. Using clean electricity to heat buildings and hot water is cheaper, less risky, and improves air quality. Even with higher electricity rates projected due to wildfires, electricity will cost significantly less than over the life of the equipment than “low-carbon” gas such as biogas or synthetic gas piped to buildings.

The California Energy Commission (CEC) study by Energy+Environmental Economics (E3) and University of California Irvine (UCI) explores the options for reducing emissions from “natural” (fossil) gas used in buildings, as well as the cost and air quality impacts of these options. About two-thirds of the climate pollution from California's buildings comes from burning gas inside them, primarily for heating and hot water, as about 90 percent of California's furnaces and water heaters currently run on gas or propane.  

We covered some of the early study findings in a previous blog, where we highlighted that California needs a strategy to transition from gas for heating, cooking, and drying clothing to shield Californians from sharply higher heating bills, protect workers, and meet the state’s climate targets. In this blog, we walk through the other core findings and the answers to some controversial questions addressed by the study.

Switching to electric heat vs. low-carbon gas in buildings

This study compares two scenarios for cutting emissions from buildings dramatically by 2050. The “high building electrification” scenario switches heating, hot water use, and cooking from fossil gas to electricity. The “no building electrification” scenario relies heavily on replacing fossil gas with “low-carbon” gas like biogas, primarily methane produced from organic sources such as food scraps or animal waste, and synthetic gas, which relies on electrical power to create methane or hydrogen.  

On every key metric examined by the study—cost, risk, air quality, and ability to meet the state’s climate goals—using electricity in California buildings is by far the best option.

Electric heat is lower cost

Electrifying buildings using efficient electric heat pumps for space and water heating results in lower energy bills for Californians, as compared to the use of biogas and synthetic gas. By 2050, the building electrification pathway costs $5 billion to $20 billion LESS per year (in 2018 dollars). The graphic below shows that even with extremely optimistic assumptions about reducing the cost of synthetic gas, switching to electricity is by far the more economic option.

At the household level, the analysis shows that in 2050 the monthly operating cost of a heat pump would range from $34 to $53 per month, while a gas furnace would cost from $160 to $263 per month to operate. The high cost to operate gas appliances is both due to the expense of biogas and synthetic gas, as well as the cost to maintain the same gas infrastructure with declining gas sales, which would occur even in the “no building electrification” scenario due to energy efficiency and reduced use of gas power plants.

Electric heat is lower risk

The study points out that the technologies needed to cut building emissions through electrification, such as heat pumps and electricity from renewable resources like wind and solar, are already commercially available and relatively affordable. However, the availability of low-carbon gas is minimal today, and the ability to achieve significant cost reductions is much less certain. More than 50 percent of California’s electricity came from carbon-free sources in 2019, while gas burned in buildings was more than 99 percent fossil. The researchers also point out that if the low-carbon gas “cost reductions do not materialize, then it will be difficult to recover from delays in building electrification and it may prove difficult to reduce emissions at reasonable cost.”

Electric heat is better for breathing

This study shows that building electrification would improve air quality, and therefore public health outcomes. This is especially true in the winter in regions like the Central Valley, when nitrogen oxide emissions from burning fuel lead to fine particulate matter (PM 2.5) pollution. This finding is also true for other sectors—electrification of transportation and industry result in dramatic improvements in air quality.

Electric heat will enable CA to meet our 2045 carbon-neutrality target

While all the scenarios examined meet the goal of reducing emissions 80 percent by 2050, the low-carbon gas scenario achieves it by leaving more fossil fuel emissions in the building sector and requiring other sectors (like transportation) to do more of the pollution-reduction work. This strategy of leaving fossil emissions in the building sector limits the ability of California to achieve the state’s 2045 carbon-neutrality goal because these fossil emissions also would either need to be avoided or captured.

Won’t wildfire risks make electrifying buildings crazy expensive?

This study also addresses issues that came up during the review process. Chief among them was the potential higher electric rates to compensate for wildfire cost liabilities and the associated need to harden the grid—wouldn’t this make building electrification more expensive than biogas and synthetic gas?

The researchers point out that wildfire adaptation costs are not expected to vary by scenario, so customers will still pay for these costs through their bills in the “no building electrification” scenario. And in fact, this study finds that “the addition of new electric loads, in the form of electric vehicles and building electrification, helps mute these cost impacts on electric rates.” NRDC also recently published a study demonstrating that strategic electrification helps keep electricity affordable. However, gas costs would increase sharply even absent electrification, due to the high cost of low-carbon gas and the declining gas use modeled in every scenario.

This study makes it clear that California must move quickly and strategically toward clean electricity as the primary fuel in buildings—it is the smart option to avoid a major affordability crisis down the road, while also being the best choice for our health and the climate. Now is the time for state policymakers to encourage a move away from gas in buildings through incentives, the building code, and other policy tools. The time is also ripe to take seriously a gas planning process that avoids putting new pipe in the ground, and identifies opportunities to strategically shrink the gas system.