I took electrification math 101 and here’s what I learned

We’re not even close to making it affordable

Rewiring America, A Guide to Comfy, Healthy, Carbon-Free Living

I recently found myself in a situation I’ve spent much of my professional life studying: an unexpected equipment failure.

Emergency equipment replacements — in my case a furnace failure occasioned by a broken inducer motor, are critical moments in the climate fight and one of the best (and cheapest) opportunities to influence the purchase of electric technologies.

As their name suggests, the timeline for making emergency decisions is short. Their urgency works against electrification because replacing “like with like” is nearly always the simplest option. But the fact that equipment has failed means the single greatest barrier to electrification has already been overcome: a purchase must be made. There is no need to fight to get to the top of the decision-maker’s home improvement priority list.

The sudden failure of the furnace in my rental home presented me with three clear choices: repair the natural gas furnace, already at the end of its expected useful life; replace it with a new gas furnace; or replace it with an electric heat pump.

There are few people for whom the decision to electrify should have been easier. I’ve spent twenty years researching, writing, and designing strategies to entice people to make climate-friendly decisions. I have the resources to pay for unexpected equipment failures. I prioritize electrification in my own home and had already decided to electrify my rental home as equipment began to fail.

So the fact that I chose not to electrify, but to instead repair and continue operating my natural gas furnace left me frustrated, angry, and feeling more than a little hypocritical. I was frustrated at the high cost of the heat pump and angry at the pitiably small size of the incentives and the exclusion of rental homes from the largest of them (the IRA tax credit).

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Before the bids were in I knew I was willing to pay more to electrify. Taking the repair option off the table, an incremental cost of 30–50% over the price of a new gas furnace seemed reasonable given that a heat pump would have important non-energy benefits for renters (improved indoor air quality, air conditioning) and for me (longer expected life, reduced GhG emissions).

But when the cost of the heat pump came in at $17,000 and a new natural gas furnace at $8,000, there was really no decision to be made. All the research I’ve done on other people’s willingness to pay for energy efficiency turns out to be true for me, too. When buying smaller, less costly appliances like clothes washers, nearly everyone will choose the more efficient option when the relative price is the same, or nearly the same. But once the added cost for efficiency climbs to 20%, only half of buyers will choose the efficient option. How many people will choose to electrify when the added cost is 100% or more? My guess is nearly none.

I do not consider the decision to repair my existing furnace an investment in natural gas. Rather what I’ve bought is time, in the hope that when the furnace fails again the electrification math will work out differently.

It would take only modest changes to any number of variables to dramatically alter the outcome of decisions like mine. Actions that would lower the added cost of electrification, especially for rental property owners include:

• Allow single-family rental property owners to claim residential tax credits. The Inflation Reduction Act tax credit of up to $2,000 was the largest incentive available in my area but “the credits are never available for improvements made to homes that you don’t use as a residence.” This single provision excludes nearly one-fifth of the U.S. single-family housing stock from the benefits of this historic climate legislation. (The latest report from the Joint Center for Housing Studies at Harvard shows there are now 14.3 million rented single-family homes, out of the total 82 million U.S. single-family homes.)
• Increase the amount of local utility rebates, allow less efficient electrical equipment to qualify for rebates, and make rebates available to everyone, especially rental property owners. A utility rebate of $650, administered in my state by Energy Trust of Oregon, was available for heat pumps installed in rental homes. However, the rebate was only offered on the most energy efficient (and most expensive) model, and covered only 8% of the added cost of the heat pump.
• Offer 0% financing. My local rebate administrator offers on-bill financing but only to homeowners with limited incomes. A regional non-profit community development organization offers on-bill home energy loans for homeowners, but at a 6.8% APR. The only financing I could find for equipment in a rental home was not from an efficiency-focused organization but from my contractor, who offered 0% for 48 months.
• Set price caps for qualifying equipment. When the IRA capped the MSRP of vehicles qualified for the EV tax credit, manufacturers like Tesla lowered prices. I have yet to see price caps for other incentivized equipment, and the rapid increase in the cost of heat pumps suggests we need such a cap to encourage manufacturers to design affordable equipment and limit profit-taking all along the supply chain.
• Stop using efficiency funding to promote natural gas equipment. My local utility rebate on a new natural gas furnace was more than 50% larger than the heat pump rebate ($1,000 vs. $650) and my local rebate administrator’s “heating solutions” webpage listed the natural gas furnace rebate first. Although our existing energy efficiency infrastructure grew up to promote electric and natural gas technologies equally, this situation is not immutable. Forward-looking legislation in places like Washington State shows a path forward. An unsuccessful 2022 bill for a statewide rebate navigator directed that the new entity “may not provide any financial or technical assistance for any projects that include installation of new natural gas or other fossil fuel appliances.”