In addition to the climate and grid reliability benefits of building electrification, Californians stand to see lower energy costs.

As local governments across California pass building codes in support of new all-electric buildings, and the state prepares to launch incentive programs for electric space and water heating, some may wonder: Can the grid handle all the new demand for clean electricity? The answer is yes. California’s grid is primed to support the transition of buildings from using gas to employing clean electricity. In fact, these new electric loads can put downward pressure on utility bills for all Californians.

Like a garden hose, California’s grid is built to accommodate a certain rate of flow. In this case, the flow consists of electrons, which supply power to our homes and businesses. The size of the hose, or the transmission and distribution system “capacity,” is determined by the grid’s peak demand—those moments when electricity needs are at their highest. In California, this means the grid is built to accommodate the peak electricity demand driven by the need for air conditioning on hot summer days. In all other moments besides peak demand, there is significant spare capacity on the grid for increased electricity use.

Research by consulting firms E3 and Synapse Energy Economics demonstrates that California’s grid is generally well-equipped to absorb the increase in electricity demand that will result from efficient building electrification, which mainly entails transitioning from fossil fuel-powered space and water heating appliances, to electricity-powered ones.

Electrification of space and water heating will primarily increase California’s winter demand for electricity, as residential and commercial buildings begin to transition to efficient heat pump space and water heaters. With little need for space heating in the summer when the grid is more capacity-constrained, summertime electricity demand increases will be minor, and largely attributable to water heating and electric stoves (air conditioning is already powered by electricity).

A 2018 Synapse study modeled the impacts of building electrification scenarios on the grid in the winter and summer, and confirmed that California’s electricity infrastructure is primed for electrification. In the scenario that assumes 50 percent of buildings electrify all end uses (even assuming no efficiency improvements), the new winter demand from space and water heating needs would remain far below the summer peak demand.

Projected electricity demand in a 50 percent electrification scenario

Synapse Energy Economics (2018)

While there is spare capacity for new electric loads from buildings on California’s grid in most locations, there may be areas with low demand for summer air conditioning (like San Francisco) that will be more impacted by growing winter demand. In these cooler, winter-peaking areas, it will be important to leverage the grid-friendly benefits of electric space and water heating technologies (as described below) to minimize the need for grid upgrades to handle higher electricity demand.

Grid-Friendly Electric Water and Space Heating Technologies

When deployed strategically, electric heat pump water heaters—and to some extent, space heaters—can use electricity primarily during off-peak periods, smoothing the demand curve overall and reducing costs to utility customers. Heat pump water heaters can act as thermal energy storage, preheating water when demand is low and renewable generation is abundant, then delivering hot water when demand is high, without drawing additional electricity from a capacity-constrained grid. Water heaters can keep the water hot for twelve hours or longer. When used in this manner, they shift demand from the higher-peaking evening hours, to the low-demand early afternoon hours.

Potential load-shifting capacity for electric heat pump water heaters

Synapse Energy Economics (2018)

Heat pump space heaters also have some potential to smooth the electricity demand curve. They can pre-heat homes during periods of low use (such as at night) to reduce the demand peak in the morning when people wake up. Meanwhile, efficient buildings with good insulation and properly sealed windows, walls, and roofs retain heat well, flattening the amount of electricity needed to heat them.

Building Electrification’s Downward Pressure on Bills

In addition to the climate and grid reliability benefits of building electrification, Californians stand to see lower energy costs. Electricity rates are designed to recover the cost of delivering power, as well as the costs of construction, operation, and maintenance of utilities’ capital-intensive infrastructure. When the infrastructure is used more fully—for example, by adding building electrification (and vehicle electrification) loads that do not require increasing the grid’s size or capacity—the infrastructure costs are spread over more units of electricity, putting downward pressure on rates. This is a crucial benefit underscoring the economic case for building electrification for all customers.

NRDC recently published a study in Electricity Journal demonstrating that strategic electrification will produce substantial cost savings for California’s residential electricity customers. According to historical trends in electricity prices, plus projections of the added wildfires-related costs that utilities have incurred, the average California electricity customer could pay as much as $210 per month by 2030. This is the “business-as-usual” case. However, spreading utilities’ grid infrastructure costs over broader demand for electricity (a combination of building and transportation electrification) would result in an average monthly bill of only $175 per month in 2030, 16 percent less than business-as-usual. This cost-saving potential could be magnified through concerted energy efficiency efforts.

California Is Ready for Electrification

Building electrification is a feasible and natural next step for California policymakers to pursue in our effort to decarbonize the economy. With the right policies, regulations, and market development, building electrification can improve the Golden State’s grid reliability and affordability, and facilitate the transition to a 100-percent clean electric grid.

Authors: Reem Rayef, graduate student intern from UC Berkeley, is the primary author of this blog. Merrian Borgeson is Senior Scientist, Climate & Clean Energy Program, NRDC.