People in the climate community and in the state administration have done a huge amount of great work to map out a path toward the 2050 net-zero goal based on our legislation. I feel that they may have put us on the best path, emphasizing electrification of heating, but I also feel that there are huge challenges and it may not be possible or wise to move along that path anywhere near as fast as we would like to.
New Construction vs. Retrofits
I am optimistic about the electrification of new construction. While we have not yet legislated a state-wide building requirement for the electrification of new construction, that may become politically achievable within the next few years. Many developers are already choosing all-electric HVAC systems. With hotter summers, builders increasingly recognize the need for air conditioning. Using heat pumps, builders can cost-effectively provide both heating and cooling with a single device.
More challenging is the retrofit of existing structures. Eighty percent of the housing that will likely be here in 2050 is already here and much of it was built without modern insulation. Many older heating systems use water, circulated through radiators or baseboards, to distribute heat from a central oil or gas burner. Currently available air-source heat pump technology cannot reuse existing water-based distribution systems. In many homes, the only feasible approach to heat-pump conversion is to install ductless mini-split heat pumps in multiple rooms — an approach that is not always efficient and not always comfortable.
The problem of heat pump refrigerant leakage has emerged as a real concern. EPA is forcing changes in heat pump refrigerants which will take effect in January 2025. Consumers should consider carefully whether they will be using their heat pump enough in winter to justify the possibility of leakage of harmful refrigerants. Heat pumps that are primarily used to expand summer comfort through air conditioning can have net negative environmental effects. As a public policy matter, our cost-benefit analysis for particular incentive programs should include the likely impact of refrigerant leaks — this will likely steer us towards an emphasis on whole home conversions in Mass Save.
While achieving our 2050 goals for building retrofits may not be possible without more evolution of technology, I do believe we can make meaningful progress toward those goals with existing technology. The financial and practical challenges to fully electrifying an existing home can be daunting, but many homeowners are both financially able and deeply motivated to reduce carbon emissions.
Medium term policy priorities
The principal drag on the pace of electrification retrofits appears to continue to be labor and equipment shortages, not a lack of homeowner demand. The need for work force development is well-recognized — Mass Save and the MassCEC are already investing in workforce development. Workforce development figures prominently in our 2050 Clean Energy and Climate Plan.
Additionally, to attract resources to the electrification industry, we need to make sure that our existing incentive structure is credible for the long term: We want people who are considering entry into the electrification business to be able to look forward with confidence to a couple of decades worth of lucrative work to motivate their investment. Incentives need to be somewhat flexible — we should not fix them in statute. But we need a durable legislative foundation for the incentives.
I believe that we have already built a durable legislative foundation for heat pump progress in the aggressive emissions reduction goals we have set together with the powerful regulatory authority that we have granted to the Secretary of Energy and Environmental Affairs to support those goals. We have empowered the Secretary to set emissions reduction goals for the Mass Save program and Mass Save has responded with aggressive heat pump incentives.
However, there may be several areas where adjustments could be made (most of these measures are elaborated by the report of the Commission on Clean Heat):
- Lower electric rates by shifting the funding source for electrification incentives from electric ratepayers to fossil fuel heat users — natural gas, heating oil, and propane customers. I think I prefer doing that in a simple rate or tax-based way instead of through a complicated “Clean Heat Standard” that may have the same effect, but with much more complex bureaucracy. However, I will be interested to see about the Clean Heat Standard proposal shapes up.
- Allow homeowners in municipal light districts to benefit from the incentives Mass Save offers. Municipal light districts often offer lower electric rates, improving the economics of heat pump conversions. Yet homes with propane, oil, or electric heat in municipal light districts are ineligible for Mass Save incentives. (In municipal light districts, the only homes that are eligible for Mass Save incentives are those that heat with natural gas, generally the homes with the worst economics for heat pumps.) This suggestion goes together with the previous suggestion.
- Streamline the incentive bureaucracy so that both consumers and contractors can navigate it with certainty and ease. Overall, I believe Mass Save is a very effective organization, but there are some areas where Mass Save has struggled to provide crisp service. Much of the Mass Save process is outsourced to regional or national contractors. On the one hand, that means we have less direct control over quality; on the other hand, it may make it easier to scale up and reduce delays.
- Support consumers with better coaching so that they can make their way through the complex choices involved in heat pump installations — for most consumers, changing their HVAC system is a once-in-a-lifetime experience. Like the previous item, this is both a workforce challenge and a management challenge.
- Some have urged increasing borrowing limits and simplification of the borrowing process for homeowners seeking to make larger efficiency or electrification investments, possibly making additional capital available through a “green bank.” I am personally queasy about this from a consumer financial perspective — consumers with tight budgets should not leverage themselves for projects unless the projects are going to be economically beneficial for them; many heat pump projects do not save consumers money.
- Develop a building energy rating scheme to recognize and honor the progress that consumers make through insulation and electrification. This may involve direct building audits or it may be driven by energy use measurements. If building ratings were published, independent researchers could deepen public policy analysis of the installed home base. Additionally, both Mass Save and individual contractors could better target marketing efforts.
- Through the previous suggestion or through other measures, find ways to better target outreach to the most promising homes for heat pump conversions.
This agenda will likely take several years to accomplish and it will not result in a dramatic acceleration in heat pump conversions — the economic and practical challenges in conversion are likely to remain daunting.
Longer term challenges
Funding the harder conversions
Although demand now seems strong as compared to supply, there are clear indicators that demand is finite:
- Capital costs of heat pump installation are substantial and the operating cost impacts are hard to predict because they depend on both energy market variables and installation-driven performance variables.
- Most homeowners are cost-sensitive, and even many of those who are carbon-motivated may be daunted by the costs of a whole-home conversion or even a substantial partial conversion. See survey results.
- Industry models of heat-pump installation project fairly low adoption rates.
- We are likely going to need to install relatively larger heat pumps to achieve whole conversions, because deep energy retrofits that would allow reliance on smaller pumps are not likely to be achievable at scale.
Right now, installers are busy picking up the low-hanging fruit — the affluent and highly motivated homeowners, and among them, those with the easiest conversions — but eventually, we are going to have to reach the more challenging conversions and the homeowners with less desire or capability to pay a large share of the installation costs. The necessary incentive levels for installation may need to rise substantially. The necessary public investment may require federal assistance on a scale well beyond the Inflation Reduction Act.
Handling increased peak winter electric grid loads
Since heat pumps draw several-fold more power on a very cold day than air conditioners on a very hot day, we will eventually face new winter power peaks that will substantially exceed today’s summer power peaks. These new peaks may require additional regional generating capacity and challenge both the regional transmission system and local street distribution systems. Winter reliability of generating capacity is also a concern. These issues are well recognized and receiving a lot of attention.
There are two additional major strategies for lowering the winter peak loads:
- Simply do not do as many whole home conversions — do partial conversions instead. Partially converted homes, homes that still have fossil-fuel systems along with their heat pumps, could rely on those fossil-fuel systems during winter peaks and so take load off the grid. However, the extent of emissions reductions in a partial conversion depends on the percentage of the heating load that is served by the legacy fossil system — hard to project or fully control. Uncertainty of emissions reductions aside, a large installed base of partial conversions will require continued use of fossil fuel heating; even if use is rare, we will need to preserve our natural gas pipes in the streets or switch many homes to use of a stored fuel like oil or propane (or some biofuel) — not an attractive prospect. On the other hand, the practical and financial challenges of whole home conversions may force us to this strategy.
- Reduce heat pump power needs by switching from air-source heat pumps to efficient networked ground-source heat pumps — an intriguing concept that is very early in the vetting process as a possible strategy to implement at scale.
Narrowing the customer base supporting natural gas infrastructure
Pursuant to a legislative mandate to reduce leaks, gas companies are engaged in an ongoing investment program to repair or replace old pipes. Many advocates are asking whether this investment makes sense if we are hoping to fully electrify all homes — especially since as more homes leave the gas system, the per-home cost of the investment will rise.
Some are hoping that coordination between gas repair plans and electrification plans could reduce unnecessary gas replacement investment: Utilities and communities could work together to target neighborhoods for full electrification along particular branches of the gas distribution tree. This would allow the gas utilities to forego infrastructure upgrades on those branches. Coordination may be hard to implement in practice, but it’s certainly worth discussing and utility coordination is among the recommendations of the Commission on Clean Heat.
Equity in Electrification
Through the years ahead, we need to sustain a focus on equity. Since doing heat pump conversions from oil or gas does not necessarily save operating costs, a low rate of low-income heat pump conversions does not necessarily disadvantage low-income people. An important exception is heat-pump conversions from electric resistance heating which is expensive for renters to run, but cheap for landlords to install. Low-income electric resistance conversions should be a high program priority. Additionally, home weatherization, even without electrification is a high priority both economically and for better comfort; several Mass Save programs speak directly to this priority.
The real equity issue in the building sector may be air conditioning: As temperatures rise, air conditioning is going to become as much a necessity as heating and we need to make sure that all our residents have access to it. From that perspective, it may become more attractive, even mandatory, to do a lot of partial conversions, installing heat pumps primarily for air conditioning and hoping for heating benefits as a secondary priority.
The Carbon Tax Alternative
We should remain open to the possibility of a carbon tax, although the politics are challenging. As one looks at the complexity, the bureaucratic snafus, and the questionable outcomes that characterize our electrification programs today, one appreciates why economists usually prefer broad-based market incentives created through taxation rather than project subsidies policed by a bureaucracy. Politically, it’s difficult for one state to impose a substantial carbon tax on its own. We’d need a national carbon tax, but that is hard to imagine in our current national political climate.
We’ll continue do the best we can with the tools we have. We’ll go as far as we can go. One thing to hope for is an improvement in heat pump technology; what would really change the dynamics is an air source heat pump that could heat water sufficiently to directly support water-based heat distribution, so allowing retrofits making continued use of radiators.