How utilities can make the most of the coming building electrification boom

Utilities across the United States have been preparing—and in many cases pushing—for their customers to start a wave of building decarbonization through several measures including electrification and energy efficiency. With President Biden signing the Inflation Reduction Act (IRA) in August, the coming building decarbonization wave looks more like a tsunami.

The new law includes billions in rebates and tax credits to incentivize the purchase of electric home energy appliances, such as heat pumps, HVAC systems, water heaters, and more. That’s not to mention the new and used EV tax credit expansions that will spur more EV charging load to homes and businesses.

While the final rules and guidelines are yet to be ironed out by federal and state agencies, it’s likely that utilities will play a large role in helping customers take advantage of the incentives to decarbonize and electrify their homes and businesses. With the law setting a 10-year horizon for most of its incentives, utilities can expect building electrification to keep them busy for some time. But how can they make the most of the opportunity while they’re in customers’ homes?

When customers come asking for IRA-incentivized building electrification, take a ‘while we’re at it’ approach

It’s early days, but the IRA is likely to spawn a proliferation and scaling up of utility programs and pilots to help customers take advantage of its electrification incentives.

According to a 2022 American Council for an Energy Efficient Economy (ACEE) report on building electrification, utility programs are frequently “stacked” with other measures, such as weatherization to maximize efficiency. ACEEE reports that 24% of programs including building electrification measures require weatherization work to qualify while an additional 50% encourage weatherization work.

We recommend this stacked approach with building electrification programs, given the complexity of work that must be done to electrify heating and cooling. Home electrification efforts often involve costs of $10,000 or more per project and significant disruption to a home or business. When customers give a utility entry into their home or businesses for such invasive projects, utilities should be prepared to offer and deliver additional demand-side work such as energy efficiency or weatherization upgrades while the customer is engaged.

Mind the peak!

All the building electrification on the horizon comes with a warning: Mind the peak! Building electrification can be beneficial across all metrics, provided the effort to electrify heating doesn’t create a new peak that drives the need for costly new utility infrastructure.

Meeting high heating demand with electricity in winter would create massive new systemwide peaks in many utility service territories. Those new system peaks would potentially trigger hundreds of billions of dollars of aggregate grid and generating infrastructure investments. Building electrification program planning and implementation should be designed to electrify heating loads that fit within the system’s grid and generating limits.

Learn more about utility efforts around building and other forms of electrification in our paper, “Buildings, forklifts, and automobiles: Insights on utility electrification efforts and opportunities.”