Filling in Home Electrification Gaps – Energy Institute Blog - Energy Institute at Haas

Filling in Home Electrification Gaps - Energy Institute Blog

Filling in Home Electrification Gaps

Federal funding for home electrification can have a bigger impact if states address other barriers.

The Inflation Reduction Act commits the federal government to spend billions on home electrification. The law includes tax credits covering up to 30% of the cost of a heat pump space or water heater and creates a new $4 billion Department of Energy-administered Home Electrification and Appliance Rebate program. The tax credits came into effect on January 1, 2023, and money from the rebate program is expected to start flowing in 2024.

In California, this new funding comes on top of pre-existing state and local subsidies for home electrification. Most of the funding – federal, state, local – allows homeowners to recoup some of the costs they incur when electrifying. (If you live in California, go to The Switch Is On to find incentives near you.) However, based on my latest experience with home electrification, cost is just one barrier, and may not even be the biggest barrier. With the federal government now addressing cost, I see an opportunity for state and local policy to reorient to address the other barriers.

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It Takes a Village to Replace a Range

I previously blogged about our project to upgrade our duplex’s electrical service to prepare for home electrification in the future. It was an expensive and time-consuming project, but we felt it was prudent given where energy policy is moving. Sure enough, several months later a tenant let us know that their gas oven was failing. They expressed interest in getting an induction range to replace it.

At this point I expected a simple project. I also found a $750 rebate from a regional energy efficiency organization that would cover over half of the cost of the range. (This rebate was reduced to $250 on July 1.) Electrically, all that was needed was to add a 240 volt circuit from the kitchen to the new, nearby electrical panel.

From my prior project, I should have known this would also be expensive and hard. We were quoted $1,200 by the electrician, comparable to the $1,400 cost of the induction range itself. Then we had to get onto the electrician’s schedule. Adding to the complexity and cost, the organization providing the rebate told us we needed to cap the gas line to the old gas range and send them a photo. Capping a gas line is good safety practice to prevent leaks. It also would make it more expensive if we ever wanted to switch back to gas. I paid a plumber $225 for this work.

All of this meant I had to coordinate an electrician, a plumber and the appliance delivery team, working with the tenant along the way to ensure access. We got it done, and the tenants are happy, but given my experience, I worry that mass-market home electrification will be a tough slog. Policymakers, however, could make the process easier.

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Expanding the Labor Force

The electrification of buildings and transportation will require many more electricians. We experienced the electrician shortage when several declined to bid for our service upgrade project last year, preferring easier projects.

The electrician we used said he cannot find enough trained electricians. Why aren’t contractors training more electricians themselves? Labor economics research has pointed out employers tend to underinvest in skills that employees can easily take with them to other employers. This is referred to as the “poaching externality”. Electrical expertise is a prime example of a skill that can easily be taken to a different employer in the highly fragmented industry, which discourages any employer from investing that heavily in training. In these labor sectors, training programs play an important and effective role, but there are too few training programs today.

States, such as California, could address this bottleneck by establishing and expanding electrician training. However, even with additional training opportunities, electrician wages still may need to rise to attract workers and compensate them for the time and money they commit to the training process.

Workforce Development at The Pitt Community College Workforce Development Program“. SOURCE: Rawpixel.

Coordinating the Complexity

As we found, an electrification project can require multiple contractors and, if a panel upgrade is required, the electric utility. This takes time and can stretch out the process. Replacing an existing natural gas appliance with a new natural gas appliance, on the other hand, is very straightforward. State government should look for innovative ways to reduce the complexity of electrification for homeowners to help make it a competitive choice.

For example, the state could fund programs to aggregate multiple home electrification projects in an area then bid out the work to a single contractor. Local governments have done this with sidewalk repair programs. Housing is more variable than sidewalks, but through experimentation, policymakers and contractors can see whether economies-of-scale can be achieved. This approach could also streamline the local electric utility’s review of whether their distribution system needs to be upgraded, a process that can add months to a project timeline. Better to do the utility review once for multiple projects on the same distribution circuit, than to have to do a separate study for each individual service upgrade.

Again, the federal funding for electrician project costs could free up state funding to support innovative coordination efforts.

Preparing for Electrification

An appliance retailer can deliver a new appliance in days, but electrical or other contractor work takes weeks, or even months. Our tenants had to go several weeks without a properly operating oven as they waited for all the steps to be completed to install the new induction range. If we had not already upgraded the panel, they would have faced eight months of delay. They were willing to wait a few weeks because they felt an induction range was superior to a gas range.

If a homeowner’s or tenant’s natural gas water heater or furnace fails, will they be willing to wait weeks or months for an electrical upgrade? I doubt it. To get owners to electrify in these scenarios, electric upgrades need to be completed in advance of an urgent equipment failure.

But today’s subsidies only cover electrical upgrades as part of a specific appliance upgrade, not ones done well in advance of a home electrification project. States could recognize this gap and develop subsidies that address this need.

The Inflation Reduction Act has changed the policy landscape for home electrification. Leading states like California can complement this new funding by tackling barriers that federal policies miss. The Inflation Reduction Act means California can tackle more problems than it could before the funding arrived to accelerate consumers’ embrace of electric homes. I look forward to policy innovation in the coming years.

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Suggested citation: Campbell, Andrew. “Filling in Home Electrification Gaps” Energy Institute Blog, UC Berkeley, October 23, 2023, https://energyathaas.wordpress.com/2023/10/23/filling-in-home-electrifi…

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Andrew G Campbell View All

Andrew Campbell is the Executive Director of the Energy Institute at Haas at the University of California, Berkeley. At the Energy Institute, Campbell serves as a bridge between the research community, and business and policy leaders on energy economics and policy.