How to electrify an economy: Guide for utility and public sector leaders
As nations step up their greenhouse gas emissions commitments and move toward carbon neutrality by 2050, the pressure is rising on local and regional governments to take aggressive actions to reduce energy-related emissions. In response, decarbonization has become a central element of every electric utility’s strategic planning.
Building electrification is emerging among the core tactics to achieve climate goals among the utility executives tasked with drawing up decarbonization plans. To electrify or not to electrify is not the question, however. The questions are how much, how fast, and where building electrification should be used as a lever to decarbonize. The pros and cons to building electrification vary widely based on a matrix of hyper-local considerations, and those local considerations should have a significant impact on decision-makers’ answers to the key planning questions about electrification.
Building electrification decisions can set utilities down a path that is hard to reverse, meaning poor decisions can result in running into more cons and fewer pros. To incorporate building electrification into decarbonization plans, ICF Senior Fellow Val Jensen advises decision-makers to start with “no regrets actions”—those that careful analysis show are beneficial within the local context, regardless of how technologies or policies might change.
In this Q&A, Val explains why building electrification is essential to decarbonization and how utility decision-makers can make sure their plans pursue no regrets actions.
Where does building electrification fit in the context of a utility's broader strategic goals?
If decarbonization is central to utility strategy, as it is to virtually every utility today, electrification powered by clean energy is an essential part of an action plan. Transportation electrification gets a lot of the attention, but buildings account for around a quarter of global carbon emissions through energy uses such as natural gas for space and water heating. Even if clean natural gas comes onto the market at scale, some amount of building electrification will make economic sense and simply will be necessary to get to net zero. In every case, there also will be a local context to which utilities must be sensitive.
Most large cities, similarly, have pledged to support decarbonization. Every city-based climate plan I’ve seen envisions some role for building electrification, and every utility CEO operating in a region with these cities wants to be a partner to the mayors, civic institutions, and other businesses to provide solutions. The bottom line is that decarbonization no longer is one among many issues or tasks to manage—it is something that resets strategic direction and requires that all aspects of the business be reassessed in the new light.
Why are you confident building electrification must be at least some part of every jurisdiction's path to decarbonization?
It’s just arithmetic. If one looks at where greenhouse gas emissions come from, one will see that a significant share comes from the combustion of fossil fuels—mostly natural gas—to heat water and space in buildings. Unless today’s natural gas can be replaced by a fuel with similar performance characteristics but without the associated greenhouse gas emissions, at least some significant portion of those building end uses need to be served by electricity.
Electrifying America’s vast building stock is a job that is hard to get your head around. But the arithmetic says that if we don’t increase electrification within a significant share of buildings, we need to find some other carbon-free alternative to natural gas or oil.
What challenges do utilities face in this area? How can they move to action and investment and avoid analysis paralysis?
If you approach the problem with a picture of the Manhattan or Chicago skyline in your mind, you will find yourself quickly overwhelmed by the vastness and expense of the problem of converting the energy use of thousands of huge buildings from oil or natural gas to electricity. Add to that the fact that technology, economics, the demographics of cities, and much more will change in unpredictable ways over the time period required to convert these buildings. What looks like the best option today most likely will not be the best option ten years from now. So don’t approach the problem that way.
Start with actions that make sense under any set of circumstances. Most likely that means starting by making these buildings as energy efficient as economically justified as soon as possible. Efficiency upgrades can reduce associated emissions at a profit.
Next, avoid building new buildings that will perpetuate the problem. Building codes and zoning ordinances are very powerful tools for changing the course of the built environment. Utilities can play a big role helping the design community migrate away from buildings that require a lot of fossil energy.
Taking the time to boost the efficiency of existing buildings and changing codes so that we’re no longer deliberately constructing big and long-lived emitters now will allow time for other decarbonization pathways, such as clean gas, to open.
As they work to identify steps to take now, what should utility leaders bear in mind? Any words of caution or advice?
There is going to be a tendency, which we are already seeing in some cases, to say that the climate change issue is so important that we need to do whatever it takes, right now. In the history of big initiatives, what this usually means is that we gently put aside issues of fairness and affordability in favor of getting the big job done. I am hopeful that we don’t do that with decarbonization, which would create a green divide to go along with all the other divides we need to bridge.
I'm seeing encouraging signals from leaders. In effect, acknowledging that how we do this is as important as getting it done—and that those we typically work with to address consequences will instead help us do this without triggering those same consequences.
This is not your typical “no regrets” strategy. Avoiding a green divide and ensuring those traditionally disadvantaged by energy policies help design and benefit from decarbonization solutions will take a lot of creativity and resolve. While this might not have been part of the conventional decision set of a utility CEO in the past, it now is among leaders who realize the futures of their companies depend on the strength of the communities they serve.
Building decarbonization is a binary decision to reach new climate goals; building electrification is a lever. When, where, how, and how much building electrification a territory pursues matters. To take action in the short term that sets up the best outcomes in the long term, learn the key questions and decision criteria planners should consider first in ICF’s new white paper: Building electrification: Steps to start now amid an uncertain future.
