Sunday, October 22, 2023

Consuming Our Way to Clean Energy

            “Electrifying everything” has emerged as one of the most viable strategies to decarbonize the energy system. Through this approach, renewables, and perhaps some new nuclear power, will replace fossil-fuel electricity generation; electric vehicles, appliances, and other equipment will replace their fossil-fueled counterparts; and storage technology will be integrated throughout the energy system. While some equipment in hard-to-electrify industries may be powered with biofuels and zero-emitting “green” hydrogen, the vast majority of the U.S. energy system will become all-electric. Unlike other decarbonization approaches that have focused on using efficiency and conservation measures to reduce fossil fuel consumption, electrifying everything treats demand-side equipment replacement as seriously as it treats decarbonization of energy supplies. This fuel-switching approach would accelerate the transition away from fossil fuels and create an energy system that could be more reliable, resilient, flexible, efficient, and affordable.

            Electrifying everything, however, hinges not only on changing modes of consumption, but likely on increasing consumption of the devices necessary to enable our all-electric future. According to one analysis, electrifying everything will require Americans to replace within the next 20-25 years more than a billion pieces of equipment that currently use fossil fuels or inefficient electric technology with modern electric equipment. These billion machines include approximately 275 million electric vehicles, 275 million vehicle chargers, 98 million heat pumps, and 49 million stoves and ovens. While each piece of equipment could, in concept, be replaced at the end of its useful life, the drive to electrify everything will almost certainly motivate some consumers to retire fossil fuel equipment early. This may in fact be optimal, as equipment turnover rates will likely need to accelerate to meet U.S. climate goals. The more electric vehicles and heat pumps we install today, the fewer fossil fuels we will consume now and in the future.

            The fact that energy decarbonization hinges so much on consumer choices makes electrifying everything both highly attractive and challenging. It is attractive in part because it makes the transition appear quite simple: to save the planet from climate change’s worst impacts, a person simply needs to buy modern electric equipment. Much as Americans responded to the call to “go shopping” to show their resilience after the attacks of September 11, 2001, now we’re being asked to use our shopping muscles again in the name of climate change. We can surely do that. Even better, the electrify everything movement has helped deflect criticism that climate mitigation requires untenable levels of sacrifice and deprivation. Electrifying everything offers a viable, positive, and simple way for people to do good by purchasing well.

            But, of course, it’s not so easy. Electrifying everything has potential downsides that must be resolved. The first, perhaps most obvious, downside involves the inequities that will almost certainly result from a consumer-driven equipment replacement approach. Wealthier households are much more likely to have the economic resources to purchase electric vehicles and new electric heat pumps (and the associated charging systems and upgraded electric panels). While the Inflation Reduction Act offers up to $14,000 in rebates for low- and moderate-income (LMI) households to install heat pumps and other efficient electric equipment, the equipment and installation costs for a heat pump alone might swallow the total available rebates available to LMI households on a lifetime basis. Households in urgent need of other energy system upgrades may therefore use the rebates for other improvements that may, or may not, advance the electrification of everything. If wealthier households do pursue electrification at a faster clip than other households, this could shift a higher share of the costs for natural gas utility service on lower-income households, perhaps precipitating a utility death spiral[1] that would exact an even greater toll on the lowest-income gas customers who have been unable to afford electrification. It is possible that costs will decline as deployment increases, but the incremental nature of end-use electrification makes it likely that the “soft costs” of building electrification will stay high, as they have with rooftop solar deployment.

            The consumption-oriented approach inherent in electrifying everything also does little to address the problem of overconsumption that has pushed the Earth past many of its planetary boundaries. While some clean electric technologies, like electric heat pumps, will negate the need for households to use separate heating and cooling appliances and will reduce overall energy consumption, the electrifying everything approach assumes that Americans will maintain the same levels of equipment consumption—especially vehicle consumption—as today. Although electric vehicles are environmentally superior to gasoline-fueled ones, and will be more so as the electric system decarbonizes, they are not environmentally or socially benign. Why must every household have an average of two vehicles, each with batteries designed to travel hundreds of miles, when most Americans travel, on average, 40 miles per day?  The short answer is because that is what consumers expect. Electrifying everything can deliver on those expectations, but it likely will not do more.

            This means that electrifying everything should be part of other, ongoing efforts to craft the society that we want. To reduce consumers’ desires for more than one car per household, communities will need to revive pre-pandemic efforts to increase the efficacy of public transit to make it more useful to a larger swath of people, and they should advocate to retain and expand walkable/bikeable/car-free streets that were created during the height of the Covid crisis. To ensure that all households have access to clean electric equipment, communities and governments at all levels must increase economic and technical support and streamline deployment. Those efforts, however, must operate in tandem with ongoing efforts to electrify everything. The exigency of climate change means that the pursuit of more holistic strategies to mitigate climate change, protect natural resources, and develop livable communities should not serve as excuses to delay the transition to clean energy. But nor should electrifying everything justify inequitable or profligate consumption. We will have to figure out how to strike the right balance as we consume our way to clean energy.

--Melissa Powers


[1] According to some analyses, natural gas utilities could enter a death spiral if they are unable to recover their sunk fixed costs due to declining sales and a shrinking customer base. As regulated utilities, gas companies have a duty to serve all customers within their service territories. To fulfill this duty to serve, gas companies have invested in large amounts of gas infrastructure, such as gas distribution pipelines and related equipment, to meet forecasted energy demand. Gas companies typically recover the costs of these investments, as well as profits, through amortized rates charged to their customer base. As the movement toward electrification has grown, wealthier users of gas have begun to replace gas appliances and furnaces with electric ones and have thus begun to exit the gas system. When these customers depart, gas companies will seek to raise rates for the customers who continue to use the gas system. As gas rates increase, more gas customers may opt for electric appliances, leaving fewer customers to pay for the gas system. Eventually, a death spiral could form in which each rate increase results in more customer departures, ultimately leaving the utility with unrecoverable sunk costs and lower-income customers who can neither afford to exit nor to pay increased rates for gas. See here for a description of the gas death spiral and links to analyses.

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