Fuel Switching: An Essential Step Towards A Decarbonized Future

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By Indradeep Ghosh, PhD
Cupertino, CA

About 80% of the world’s greenhouse gas (GHG) emissions are a direct or indirect result of extraction and burning of fossil fuels – a process that needs to stop to put the brakes on global climate change. The concept of fuel switching is simply the process of replacing dirty, non-renewable fossil fuels with clean, renewable fuels. Since most of the renewable fuel growth is happening in the electricity generation sector, it is obvious that the future clean fuel of the earth will be mostly electricity. There are mainly 4 major sectors which will undergo fuel switching to electricity in the coming years – transportation, industrial processes, commercial buildings, and residences.

In the transportation sector, this will mainly manifest in the adoption of electric vehicles (EVs) powered by renewable electricity and a maybe a small percentage of fuel-cell-based heavy vehicles powered by renewable hydrogen. The superior economics and driving dynamics of EVs as opposed to gasoline cars have been discussed on this site in numerous articles. In places like California, where I live, even with higher-than-average electricity prices, EVs make solid economic sense currently to fuel and maintain over their gasoline-powered cousins. Moreover, most utilities in the USA offer low time-of-use (TOU) EV charging rates which the owners can use to fuel their vehicles cheaply during the middle of the night when electricity demand on the grid is low. Due to these facts, fuel switching to EVs is almost a no-brainer even under currently low gasoline prices.

Other than for transportation, fossil fuels are directly used by consumers for generating heat. This article takes a closer look at the economics and hurdles of fuel switching in heating applications in the residential sector.

As fossil fuel and electricity prices vary all over, the world the analysis here is done assuming California prices in the Bay Area. Similar analysis can be done at any place once the cost of the prevailing fossil fuel and its replacement electricity is known. In the residential sector, the dominant heating applications are water heating, space heating, cooking, and clothes drying. Currently, in the Bay Area, more than 90% of households use natural gas to perform these functions. Though there are electrical replacements readily available in the market for each of these applications, it is quite difficult to make the economics work under current fuel prices.

There are two major hurdles for switching out these appliances in the residential sector. First, the operating costs of these electric appliances are often higher than their corresponding natural gas counterparts. Second, there can be considerable initial costs to replace existing gas appliances with newer electric ones because of upgrades required to the electrical wiring infrastructure of the house.

To investigate the operating costs hurdle, I collected energy efficiency data from the federal Energy Star site. I assumed that the most energy efficient gas and electric appliance will be used in the house irrespective of initial costs. This means that, for water heating, the popular gas storage water heater of maximum efficiency will be switched with a current maximum efficiency electric heat pump water heater. For space heating, a current maximum efficiency gas furnace will be switched to a maximum efficiency air source heat pump. Note that ground source heat pumps are purposefully ignored here due to the huge initial investments needed in installing these systems in urban settings. Also the milder weather in the Bay Area reduces most of the efficiency advantages of a ground source heat pump. For cooking, a gas cooktop is switched to an efficient electric induction cooktop. And finally, for drying, an efficient gas dryer is switched with an efficient electric heat pump dryer.

Over here, it is important to understand the concept of Energy Factor while comparing energy efficiency. It is the amount of energy obtained for heating purposes as opposed to the amount of energy spent in the appliance. In the case of gas appliances, this usually equates to efficiency and a value between 0 and 1. However, in the case of heat pumps, as they do not produce any heat but just move heat from one place to another, the amount of heating energy obtained is almost always higher than the electrical energy spent in the system leading to energy factors greater than 1. The findings are shown in the table below.

appliance efficiency
In the table, the cost of natural gas is assumed to be $1.2 per therm, and since each therm is equivalent to 29.3 kWh, it yields a per kWh energy cost of about 4¢/kWh.

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It is evident from the table that, even though electric appliances are much more efficient than their corresponding gas counterparts, achieving operational cost parity is still a big challenge in the Bay Area, where the cheapest electricity rates from PG&E (Pacific Gas and Electric Company) run around 18¢/kWh for the flat-rate pricing. In fact, in the flat E1 rate offered by PG&E, none of the electric appliances can compete in operating costs with their corresponding gas counterparts. However, PG&E also offers some TOU rate schedules where rates can go as low at 11¢/kWh. If such rates are used, it is possible to make the economics work for space and water heating. Though it is conceivable to use TOU rates for water heating and store the heated water when electricity rates are low, it is quite difficult to do that for space heating. Also, the economics for switching cooking and drying are still quite bad, even though clothes drying can possibly take advantage of TOU rates.

One option for making the economics work is to pair the electric appliances with a net-metered solar system. Currently, in the Bay Area, solar PV systems can be installed for about $2/watt after federal tax credits, which translates to a levelized electricity cost of about 8¢/kWh. If this scheme is used, then electric water heating, space heating, and cooking immediately become economically viable in terms of operating costs. Even though drying is still costlier to run in electric mode, drying constitutes only a small percentage of the overall energy use if the other three applications are taken into account. So, the savings made by running the other appliances with electricity as well as the savings obtained by eliminating the gas meter connection fee make an all-electric home with solar completely financially viable in the Bay Area in terms of operating costs.

Other than the operating costs, there are the initial capital costs of switching these natural gas–based appliances to electricity, which can run into thousands of dollars. First of all, these high-efficiency electric appliances are similar in cost to top-of-the-line, high-end gas appliances. Even if the consumer elects to switch out the gas appliances at their end of life, there is an added burden of wiring infrastructure. Most of the older homes in the Bay Area are serviced by a 100 ampere main panel, which would be inadequate to service an all-electric home. The main electrical service panel needs to be switched to a 200 ampere panel at a minimum. (Note that this not an issue for the newer homes that come with a 200 ampere panel standard.) Also, multiple 240V lines need to be drawn from the panel to these appliances, further adding to the infrastructure costs.

The state and federal government can help in this process by providing energy-upgrade rebates to consumers who are willing to make the switch. PG&E can provide special rate schedules to all-electric homes to make the switch viable even for people without rooftop solar. Also, a carbon tax on the price of natural gas, which is at historic lows, will help in making the economics work better for consumers. The California Energy Commission (CEC), which has historically advocated for efficient natural gas based appliances, is currently looking into the issue of electrification of residential appliances – mainly the use of heat pumps. These findings should be reflected in the new Title 24 building code recommendations which are due to come out in 2019. It is well known that California is serious about reducing GHG emissions and the governor has set an aggressive goal for the state to reduce its carbon footprint by 2030. Ways and means to accelerate fuel switching should be an essential part of the plan.

(From the editor) Another story by Indradeep Ghosh I highly recommend: What It Takes To Create An Off-Grid Household In The Bay Area (California) Using Rooftop Solar & Battery Storage Only (Exclusive)

Indradeep Photo thumbAbout the Author: Indradeep Ghosh is a clean energy and sustainability advocate residing in the Bay Area, California. His life’s ultimate goal is to rid the world of fossil fuels and ensure a sustainable future in an Earth rich in biodiversity. He is a strong believer in technological solutions and the innovative power of humans to solve complex problems. He publishes his findings and experiences from time to time in CleanTechnica.

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