The recent report of the Commonwealth’s Climate Chief does an important service by raising the issue of funding, calling for:
an economic analysis of the investment needed to achieve the greenhouse gas emissions reductions required by the [Commonwealth’s Clean Energy and Climate Plan], including the 2050 Net Zero mandate, and recommendations for necessary funding mechanismsRECOMMENDATIONS OF THE CLIMATE CHIEF, Page 25
While climate change is an existential threat and “there is no Planet B,” it is possible that some aspects of our stated mitigation plans are simply beyond our reach. The sooner we can think clearly and talk honestly about costs and funding, the sooner we will be able come together around the measures that are actually achievable.
Focusing just on the challenge of decarbonizing buildings, our existing Decarbonization Roadmap radically underestimates costs. There are two basic strategies for cutting fossil emissions from buildings: (1) electrification of fossil heating systems; (2) improved efficiency of the building envelope to reduce heat loss and the need for heating. Improved efficiency cuts fossil fuel use directly and also supports electrification by reducing the need for grid upgrades to meet the anticipated new winter peak in electrical power demand.
As to electrification, the technical report underlying the Decarbonization Roadmap estimated a cost of only $7,500 for a single-family heat pump conversion fully eliminating fossil heat. Most whole-home heat pump installations raise unique challenges and they vary widely in costs. Currently, the installed average appears to be over $20,000 with a large share of those costs being labor costs that are unlikely to decline with increased scale. Many older homes are difficult to serve with heat pumps and owners turn away after getting high initial quotes, running into the high five figures in some cases — these cases are not reflected in the market averages.
The Decarbonization Roadmap also assumed that in most instances, homeowners would have a net cost of zero for heat pump conversion because electrification would occur at the time of heating system failure and would not cost more than a burner update. In fact, updating the fossil system is often cheaper. More importantly, at the time of a system failure, most homeowners have no choice but to update their fossil system, because heat pump conversions take too long to plan and implement in an emergency. Most heat-pump conversions occur as optional replacements of functioning systems. Instead of seeing a net cost of zero, homeowners have to make a decision to shoulder the full costs (net of available incentives).
As to building efficiency, the emissions reductions available through basic weatherization are well under 7% of state-wide total residential emissions. In order for building efficiency to make a material difference in statewide emissions, we would need go beyond basic weatherization and undertake “deep energy retrofits” in a large number of buildings. DERs involve rebuilding the building envelope to add insulation: for example, by removing siding, placing layers of foam against the building sheathing, and re-siding over the foam.
The Decarbonization Roadmap underestimates the costs of DERs. It assumes that the incremental DER cost would be be $20,000 because DERs would be done as part of necessary maintenance. The Roadmap estimates were published at the end of 2020. However, the average incremental DER costs in a Massachusetts’ DER pilot were $120,000 and that was in 2010. Further, the pilot found that retrofits were only viable in homes that were undergoing renovations that involved much greater cost — complete envelope renovations that do not ever occur for many homes. Nationwide, the experience with deep energy retrofits has been that they are boutique projects. See more discussion of weatherization and DERs here.
Yet, the Decarbonization Roadmap, based on its hopeful cost assumptions, assumes that they will be done in 2/3 of buildings to control electrical power demand and minimize the costs of grid upgrades. If 2/3 of our 3 million existing homes got deep energy retrofits at an incremental cost of $120,000 a piece, the cost would be approximately $240 billion, and that incremental DER spending would have to be supported by additional major renovation activity on the same scale or greater — altogether perhaps over $20 billion per year between now and 2050. And we are omitting the costs for commercial and industrial buildings, which by anecdotal account are harder to retrofit.
Putting aside questions of where the money and political will to spend it would come from, we have to ask where the people to do the work would come from. For a sense of scale, the annual $20 billion we would need to spend on retrofits is almost much as we are spending on all construction in the state: The total income of all people working in all types of construction and specialty construction trades in Massachusetts in 2022 was $26 billion. To achieve deep energy retrofits at scale while continuing road maintenance, new housing construction, and public transportation improvement, we would need to very roughly double the size of the construction industry. We are simultaneously trying to fill new construction jobs to strengthen the electrical grid and build wind farms. And of course, we are struggling to fill jobs in many occupations, from bus drivers to nurses.
Cost estimates are notoriously unreliable for huge projects. Decarbonizing all of our buildings is a vastly larger project than the Commonwealth has ever undertaken — think dozens of Big Digs. Also, retrofit projects are harder to accurately price than new construction projects, because one never knows what one is going to find behind the walls, up in the attic, under the floors, and in the ducts — each building is unique. And we have a few million owner-decision-makers to work with.
While every long-term cost projection is challenging, I am hopeful that the Climate Chief’s call for an economic analysis of our net zero plans will lead to a thorough, candid, and credible reassessment of the funding and labor force required to achieve our building decarbonization goals. We should not flinch from the possibility that an honest reassessment of the required resources may leave us no choice but to reassess our goals for retrofit of existing buildings, making it all the more important that we set high standards for new construction.