How to Accelerate the Electrification of Buildings in the Midwest

Laura Sherman is president of the Michigan Energy Innovation
Business Council.

Building electrification is a potential game-changer for energy
efficiency, demand management, distributed energy and other
advanced energy industries, as well as for the broader task of
reducing emissions.

The goal of electrifying heating and other systems in all
buildings might seem very far off�but, like many other developments
in clean energy, a great deal of progress has been made only
recently. Already, more than 40 percent of new U.S. homes are built
with air-source heat pumps instead of fossil-fuel burning
systems.

The next hurdle is to start electrifying buildings in parts of
the country where it’s been difficult to eliminate fossil
fuel-burning building systems. In regions with mild winters, the
math has worked out in favor of going electric for some time. But
in the Midwest, with the harshest winters in the lower 48, it has
been cheaper to stick with natural gas as a heating source.

In Michigan, just over 10 percent of home heating is done using
electric sources, compared to Florida, where over 90 percent
is electric. But even in colder climates, the outlook is starting
to change.

Net-zero energy in below-zero winters

There are already electrification successes racking up in our
home state of Michigan.

The Detroit headquarters of the International Brotherhood of
Electric Workers Local 58 underwent a massive retrofit a few years
ago to become the state’s first net-zero-energy building. The
33,000-square-foot building now sports solar panels that drive
mechanical heat pumps, which work in tandem with a closed-loop
ground heat exchange system
to provide all-electric heating and
cooling. Previously, natural gas accounted for about 65 percent of
the building’s $65,000 annual energy costs. Those annual energy
costs have now been cut to almost zero.

This project sends a message that building electrification can
be achieved in places where it previously has not had much of a
presence. While a cold climate is a challenge for electrification,
the need to reduce the energy burden in economically disadvantaged
communities across the Midwest creates momentum for a new approach
to how buildings consume energy.

Walker-Miller Energy Services, a Detroit-based provider of
energy waste reduction services (and a member of our organization,
the Michigan Energy Innovation Business Council) has begun work on
an ambitious project to convert their new headquarters to be zero
net energy, including an all-electric heating system. The effort is
part of the company’s larger goal to bring energy efficiency to
Detroit, a city where high energy bills and high use of fossil
fuels for heating is a significant challenge.

Efficiency retrofits, including those that promote
electrification, are part of the difficult task of rebuilding
neighborhoods and communities.

For example, FEHAJ (For Every Home A Job), a development
partnership, is looking into converting several rowhouses it owns
in southwest Detroit to net zero energy by installing solar panels,
electric water heaters, and passive geothermal cooling, among other
systems. The project is designed to reduce the exorbitantly high
utility bills that weigh on the tenants of the rowhouses.

Low-income households already tend to spend much more of their
income on energy costs relative to higher-income households. Since
electrification helps alleviate this energy burden, retrofitting
can be a tool for economic development and poverty reduction.

What policymakers and regulators can do

Projects like these are becoming more feasible as the economics
of electrification continue to improve.

A 2018 Rocky Mountain Institute study modeled the costs of
electric space and water heating to those of natural gas-fueled
space and water heating, using assumptions based on four different
cities, Houston, Oakland, Providence and Chicago, two of which are
cold-winter cities. In all four, for new construction homes,
installing a standard heat pump was cheaper than going with natural
gas and a new air conditioning system on a 15-year net present
value basis.

Retrofitting existing buildings with electric systems is, of
course, a much bigger challenge. But changes to regulations can
help retrofit projects get over the initial capital cost
outlay.

Here are four areas where regulations and policy could make a
difference in Michigan. Other states can emulate these steps, as
well.

  1. The virtual power plant business
    model

Virtual power plant projects have been operating in places like

California
and
New England
 for some time, but such projects have been scarce
in many parts of the country, including the Midwest.

In Michigan, the Public Service Commission is currently deep
into its MI Power Grid initiative, which is investigating new
regulatory models that can help enable the growth of distributed
energy like rooftop solar and battery storage.

While still in their early stages, those regulatory changes
stand to boost the potential value of building electrification.
Buildings with all-electric systems can be aggregated together to
work as a massive demand response resource, which, especially when
working in concert with rooftop solar and storage, can replace
peaking power plants, enhance grid reliability and resiliency to
avoid blackouts and provide other services for the electric
grid.

These services represent potential revenue streams that can
attract financing for electrification projects.

  1. Energy efficiency
    incentives

Next, regulators and lawmakers need to address policy roadblocks
that could hold many consumers back from making the switch to
electric systems.

For example, through their utilities, consumers frequently can
get rebates to upgrade their gas-burning furnaces to more efficient
models. But that assistance typically is not available for less
conventional, but potentially more beneficial, upgrades like
converting from a gas-burning furnace to an electric air-source
heat pump.

Some of these hurdles are in place simply due to inertia from
the way people have heated their homes for over a century.

  1. Building codes

In 2021 Michigan has important decisions to make about
residential building codes. State regulators must update the energy
conservation code that applies to new buildings and sets standards
for lighting, mechanical systems, the building envelope that
separates conditioned air from the outside, and more.

There are different uniform codes to choose from, and some do
more to ease the transition to electrification than others. The
2021 version of the International Energy Conservation Code, as
voted on by members representing local governments, requires
electric circuits to be present so appliances can be converted to
electric equipment if desired.

This standard is a simple change that could pay off for many
years to come. It would ensure that new residential building stock
is not locked into less efficient ways to heat, cool space and run
appliances, and removes a potential hurdle to the electrification
transition. But the 2018 version of the IECC, which the state could
also adopt as the updated residential code, lacks this standard and
does not support a wide range of advanced energy technologies. 

Michigan needs to choose wisely for the state’s next
update.

  1. Baby steps toward
    electrification

Finally, the Midwest can get a quick jolt toward electrification
if it first deals with the type of home heating where the economics
are unambiguously in favor of electrification: propane.

Propane is used for residential heating in Michigan, as well as
the Midwest in general, more than in any other region of the U.S.
At over 367 million gallons used annually, Michigan is the top
state for propane use in the residential sector, followed by
Minnesota and Wisconsin,
according
to the Michigan Propane Gas Association.

While replacing high-efficiency natural gas furnaces with heat
pumps in existing buildings may not always be economic right now,
propane tends to be costlier than electric. The same goes for oil
heating. The Rocky Mountain Institute has described propane and oil
as the “low-hanging
fruit
†of the switch to electricity.

It is important for consumers to understand that heating bill
savings can make the switch from propane to electrification worth
the upfront costs for many Michigan households. Indeed, those
savings can be a basis for financing such retrofits.

It doesn’t need to be all or nothing. A shift from fossil
fuels to electricity for just one of a building’s systems or even
just part of a system is a step closer to electrification.

None of this will be an overnight change — far from it — but
gradually, with the right policies in place, electrified buildings
will be an essential component of the movement toward efficient
energy use, increasing renewable energy and the grid of the future,
including here in the Midwest.

Source: FS – GreenTech Media
How to Accelerate the Electrification of Buildings in the
Midwest