Residential Building Electrification in California Consumer economics, greenhouse gases and grid impacts April 2019 Residential Building Electrification in California Consumer economics, greenhouse gases and grid impacts April 2019 © 2019 Copyright. All Rights Reserved. Energy and Environmental Economics, Inc. 44 Montgomery Street, Suite 1500 San Francisco, CA 94104 415.391.5100 www.ethree.com Project Team: Amber Mahone Charles Li Zack Subin Michael Sontag Gabe Mantegna Alexis Karolides (Point Energy Innovations) Alea German (Frontier Energy) Peter Morris (AECOM) © 2019 Energy and Environmental Economics, Inc. Table of Contents Abstract ........................................................................................................................ ii ES Executive Summary and Recommendations ................................................. i 1 Introduction ......................................................................................................... 1 1.1 Study motivation ................................................................................................. 1 1.2 Building electrification market overview ......................................................... 7 1.3 Report contents ................................................................................................. 10 2 Modeling Approach .......................................................................................... 11 2.1 Methods Overview ............................................................................................ 11 2.2 California Housing Stock and Market Potential .......................................... 12 2.3 Building Simulations and End Use Technologies ...................................... 18 2.4 Upfront equipment costs and efficiencies .................................................... 23 2.5 Customer Costs and Savings ......................................................................... 36 2.6 Greenhouse Gas Emissions ........................................................................... 41 2.7 Grid Impacts ...................................................................................................... 45 3 Results ................................................................................................................ 47 3.1 Greenhouse gas emissions ............................................................................ 47 3.2 Capital Cost Comparisons .............................................................................. 49 3.3 Consumer bill impacts ..................................................................................... 56 3.4 Lifecycle costs and savings ............................................................................ 69 3.5 Grid Impacts ...................................................................................................... 81 4 Discussion ......................................................................................................... 86 4.1 Building Electrification Consumer Economics for Individual Appliances and Electrification Packages .......................................................................... 86 4.2 Understanding Drivers of Differences in Consumer Economics ............. 89 4.3 Market adoption barriers ................................................................................. 90 4.4 Further Research Needs ................................................................................. 91 5 References ......................................................................................................... 93 6 Appendix A: Technology Characterization and Screening ........................ 98 6.2 Overview of Technology Selection and Efficiencies ................................ 106 7 Appendix B: Building Simulation Descriptions ......................................... 113 Thermostat Schedules as Modeled ....................................................................... 113 8 Appendix C: Additional Methods Detail ...................................................... 122 8.1 Fossil emissions from electricity .................................................................. 122 8.2 Methodology for methane and refrigerant leakage calculations ............ 124 9 Appendix D: Market Adoption Barriers and Potential Solutions ............. 126 10 Appendix E: Additional Results .................................................................... 131 10.1 Electricity load shapes for individual homes simulated ........................... 131 10.2 Site energy savings ........................................................................................ 132 © 2019 Energy and Environmental Economics, Inc. Acknowledgements The authors of this study would like to acknowledge the contributions of the staff of Southern California Edison, Sacramento Municipal Utility District and Los Angeles Department of Water and Power who have helped to inform and shape the study assumptions. Any errors or omissions are the authors’ own. Conventions All costs reported in this study are reported in real 2018 dollars. All references to quantities of greenhouse gas emissions are reported using units of metric tons (or tonnes), using a carbon dioxide equivalent metric with a 100-year global warming potential. © 2019 Energy and Environmental Economics, Inc. Abstract This study evaluates the consumer economics, greenhouse gas savings and grid impacts of electrification in residential low-rise buildings across six representative homes type in six climate zones in California. Consumer economics are evaluated in three ways, by comparing: 1) upfront installed capital costs, 2) energy bills, and 3) lifecycle savings between gas-fired and electric technologies. Prior research has suggested that electrification of buildings is likely to be a lower-cost greenhouse gas (GHG) mitigation strategy over the long-term than a heavy reliance on renewable natural gas. This study takes a closer look at the near-term consumer economics of building electrification than prior work, considering both commonly available and best-in-class electric equipment options, as well as expected near-term increases in electric and natural gas. We confirm that the electrification of buildings represents an important opportunity to reduce greenhouse gas emissions from buildings both in the near term and long term, and can lead to consumer capital cost savings, bills savings, and lifecycle savings in many circumstances. The most promising near-term opportunities for consumer cost savings among low-rise residential building electrification options can be found in all-electric new construction, and high efficiency air source heat pumps in homes where air conditioning can be replaced with heat pumps. However, for electrification retrofits to succeed at scale, the market for building electrification technologies should be further developed in California. Ensuring contractors understand best-practices during scoping and installation of heat pump equipment will be critical to the long-term success of an electrification market in California. Likewise, international markets in Europe and Japan offer a wider range of high-efficiency electric technologies to choose from than are available in the United States. Finally, California should encourage the development of “retrofit ready” heat pump water heaters and HVAC systems to provide consumers with more low-cost and high efficiency electric choices. This report is available to download at: https://www.ethree.com/wp- content/uploads/2019/04/E3_Residential_Building_Electrification_in_California_April_2019.pdf Acronyms AEO Annual Energy Outlook AFUE Annual Fuel Utilization Efficiency AHRI Air-Conditioning, Heating, and Refrigeration Institute ASHP Air-Source Heat Pump CAISO California Independent System Operator CARB California Air Resources Board CCA Community Choice Aggregator CEC California Energy Commission CFC Chlorofluorocarbon CO2 Carbon Dioxide CO2eq Carbon Dioxide Equivalent COP Coefficient of Performance CPUC California Public Utilities Commission DHW Domestic Hot Water DOE Department of Energy DOF Department of Finance DSHP Ducted Split Heat Pump EE Energy Efficiency EER Energy Efficiency Ratio EF Energy Factor GHG Greenhouse Gas GRC General Rate Case GWh Gigawatt-hour GWP Global Warming Potential HCFC Hydrochlorofluorocarbon HFC Hydrofluorocarbon HPWH Heat Pump Water Heater © 2019 Energy and Environmental Economics, Inc. HRMF High-Rise Multifamily HSPF Heating Seasonal Performance Factor HVAC Heating, Ventilation, and Air Conditioning IOU Investor-Owned Utility kWh Kilowatt hour LADWP Los Angeles Department of Water and Power LPG Liquefied Petroleum Gas LRMF Low-Rise Multifamily LSE Load Serving Entity MMBtu Million BTU MSHP Mini Split Heat Pump NGO Non-Governmental Organization NREL National Renewable Energy Laboratory PG&E Pacific Gas and Electric PTHP Packaged Terminal Heat Pump RASS Residential Appliance Saturation Survey RNG Renewable Natural Gas RPS Renewable Portfolio Standard SB Senate Bill SCE Southern California Edison SCG Southern California Gas Company SEER Seasonal Energy Efficiency Ratio SF Single Family SMUD Sacramento Municipal Utility District TOU Time-Of-Use UEF Uniform Energy Factor VRF Variable Refrigerant Flow ZEV Zero-Emissions Vehicle © 2019 Energy and Environmental Economics, Inc. Executive Summary and Recommendations ES Executive Summary and Recommendations Study Overview Greenhouse gas (GHG) emissions attributable to buildings in California currently represent about a