How Improving Minnesota’s Buildings Lowers Costs and Emissions, Boosts the Clean Energy Industries

According to the Environmental and Energy Study Institute, residential and commercial buildings account for 40% of the energy use and emissions in the United States. As policymakers and businesses aim to improve sustainability and quality of life (for example, hundreds of cities are signed up for the Minnesota Green Steps Program) it is clear that to achieve important goals, the United States needs to drastically reduce its reliance on fossil fuels in homes and commercial buildings. Increasing the focus on energy use in buildings leads to a new focus – on electrifying buildings. Building electrification can help lower emissions, costs, and unleash innovation economy-wide.

What is building electrification?

Building electrification is a fancy way of describing the switch from natural gas to electric to save consumers money and reduce carbon emissions. Many existing homes use both electric and gas appliances today, so the goal is to build new homes with all-electric appliances and to switch existing gas appliances (like water heaters and stoves) to electric.

Is building electrification possible in Minnesota and other cold climates?

The Rocky Mountain Institute recently released an update of their 2018 study, The Economics of Electrifying Buildings, that looked into building electrification in Minneapolis. Not only is electrifying buildings good for the environment and health of occupants, but it is also good for the economy.

• In every city analyzed in the new study, a new all-electric, single-family home is less expensive than a new mixed-fuel home.

• In Minneapolis, the annual utility bill of an all-electric home is up to 9 percent lower than a mixed-fuel home.

• In Minneapolis, the all-electric home saves $1,900 in net present costs and 28 tons of CO2 emissions over a 15-year period.

Because of Minnesota’s cold climate, houses here require a higher capacity heat pump, which makes the up-front costs for the all-electric and mixed-fuel homes roughly equivalent. However, annual energy savings on an all-electric new build are significant.

What are the barriers to building electrification?

One of the main barriers to building electrification is education. Education is critically important to alert contractors, consumers, and developers about the health, economic, and climate benefits of switching to an all-electric model. There are many misconceptions about the costs and effectiveness of electric heat pumps and stoves that need to be widely clarified before we will see a wide adoption of these technologies.

Another barrier is the regulatory space in each state. Minnesota’s strongest energy efficiency policy, the Conservation Improvement Program, or CIP, generally does not allow efficient fuel switching. This means no utility can offer incentives or rebates to switch to or from alternative fuels- for example from propane gas to electric. We know that all-electric new-builds are less expensive than mixed-fuel, but it can be costly to convert existing homes to all-electric, especially without any rebates or incentives. During the 2020 legislative session, CEEM supported the Energy Conservation and Improvement (ECO) Act, which included provisions to ensure fuel-switching is available to Minnesota’s homes and businesses where that switching is cost effective for ratepayers.

If we achieve economy-wide electrification (including transportation) U.S. electricity consumption could increase by up to 38 percent by 2050, according to the National Renewable Energy Laboratory. Overall energy use could actually reduce by about 21% according to this study, because of how efficient most electric appliances are compared to their fossil-fuel counterparts. This will place a larger burden on the energy grid, which will require adjustments itself and more developments in energy storage to handle the higher load.

The Role of Policy

It is important for Minnesota’s policymakers to expand the availability and use of building energy efficiency. Energy efficiency programs reduce energy waste, save businesses and consumers money, and improve the productivity of Minnesota’s economy. Energy efficiency is our cheapest and cleanest energy resource. Expanding the state’s Conservation Improvement Program (CIP) creates certainty for building efficiency investments, and drives local jobs and clean energy benefits. Additionally, modernizing building codes is a policy opportunity that helps drive greater efficiency and saves money for Minnesota homes and businesses. Providing additional energy efficiency options is a smart economic decision and one that benefits all Minnesotans – creating jobs and driving down emissions.

The opportunity for clean energy businesses

Electrifying and driving efficiency into Minnesota’s homes and businesses is not only good policy, it is driving economic growth. The primary work of electrification will come from the building efficiency sector – which is big business. Prior to the COVID-19 pandemic, Minnesota was home to more than 41,000 energy efficiency jobs. According to the 2019 analysis by Advanced Energy Economy, the building efficiency sector revenue more than doubled from 2011 to 2018, and was an $83.8 billion domestic industry. As policymakers and businesses continue to commit to cleaner energy options, building efficiency business will likely be booming for years to come.

The Future of Building Electrification

Whether the goal is lowering emissions or lowering costs, Minnesota’s buildings are critical to achieving those goals. By creating certainty through policy and removing barriers, Minnesota can improve energy waste reduction, lower emissions, and drive economic growth. Building electrification policy is an exciting opportunity, and one we at CEEM will be watching closely.