Challenge

Among residential energy uses, space and water heating account for approximately 60% of total energy use.¹ Yet across the U.S., only about one-third of households rely upon electricity for space heating² and roughly half of households use electricity for water heating.³ In 2020, only about one-quarter of households were fully electric.⁴ Among those reliant upon electricity for space heating, however, very low-income households, especially those living in multifamily housing, are most likely to have inefficient electric resistance (i.e. baseboard) heating and least likely to have heat pumps.⁵ Households using gas or other fossil fuels—such as fuel oil or propane—for heating are exposed to price volatility as well as in-home emissions of health-damaging air pollutants. Fossil fuels also emit carbon dioxide when combusted, and gas delivered to homes leaks methane from pipes and throughout gas system infrastructure, further contributing to climate impacts.⁶ Wealthier houses have more financial resources to electrify, posing a risk in the coming years that a shrinking customer base of primarily lower-income households will be saddled with the skyrocketing costs of maintaining aging methane gas infrastructure, driving up household bills for those who can least afford it.⁷

Policy Solution

Programs supporting efficient electrification upgrades can facilitate the equitable and affordable adoption of energy-efficient home electrification, reducing greenhouse gases and in-home emissions of health-damaging air pollutants. Efficient electrification replacing resistance heating, fuel oil and propane, and gas in places with high methane gas prices compared to electricity are likely to see bill savings;^,89 in places with high electricity prices compared to methane gas, additional measures such as discounted rates may be required to maintain low bills for electrification of low-income households—yet even in these cases, electrifying now will help protect these households from rising methane gas costs in the coming decades.

Model Policy Features

• Deep subsidies/point-of-sale rebates or zero- to low-interest loans to low- and moderate-income households, tiered by income level (e.g., 100% or 150% of Federal Poverty Level), for efficient electrified appliances such as heat pumps for space and water heating and induction stoves; may be part of a larger incentive program targeting households at all income levels.
• Minimum technology requirements, including for energy efficiency, cold-weather performance, and demand response capability, as appropriate for the technology and region.
• Mandatory enrollment in demand response programs for certain appliance types, such as heat pump water heaters, to minimize electrification impacts on peak demand and to provide ongoing demand response incentives to participating households.
• No-cost home energy assessments to estimate potential savings—or costs—of appliance electrification, and qualification for additional bill assistance or appliance-specific low-income rates in cases where electrification may increase bills.
• Combined with pre-electrification funding—or includes carve-outs for pre-electrification funding—to fund enabling technologies such as electric panel upgrades. 
• Optional pairing with solar+storage incentives, in particular for places with extreme cold/heat and/or frequent outages to ensure access to resilient heating and cooling systems. 
• Includes high road job and training or apprenticeship opportunities, including strategies to reach underemployed communities.
• Provides training and additional incentives for contractors to install efficient electric appliances.¹⁰
• Provides a searchable network of trained contractors.
• Stacking capability (i.e. assistance can be used with other funding mechanisms), paired with system navigation assistance for applicants, to take advantage of other federal, state, or local incentive programs.
• Incentives for multifamily affordable homes designed to provide benefits to both landlords and tenants, including variations to take into account who—tenant or landlord—currently pays for which methane gas, electric, or hot water bills.  
• Protections to ensure that any grid distribution investments required to enable appliance electrification and/or associated panel upgrades are not passed on to each individual household.
• Provisions to allow for deed restrictions that strike a balance between the needs and interests of low- and moderate-income households and the protection of public investments (i.e. preventing property flipping), such as agency discretion in application of deed restrictions, deed restriction duration, and other measures to maintain low-income housing stock. 
• Reduces participation barriers, such as language access, consolidation of existing programs and/or no-wrong-door approaches, categorical eligibility (whereby participation in other government assistance programs qualifies a household for eligibility in offered programs), plain language contracts, simplified applications, robust outreach, and bans on application/exit fees and credit score review.
• Includes tenant protections, such as prohibitions on landlord cost recovery through rent increases, eviction protections, displacement protections and/or assistance during renovations (e.g., alternative living spaces, assistance with moving or storage expenses), right to return without rescreening, grievance procedures, and anti-harassment provisions.¹¹
• Referrals to pre-weatherization and/or weatherization assistance, in particular for places with extreme cold/heat.
• Includes provisions for regular data reporting and public transparency (e.g., public-facing data dashboards, program evaluation, audits to ensure meaningful benefits reach intended populations).

Potential Policy Drawbacks and Pitfalls

• Risk of increased bills in places where electricity rates are much higher than gas rates, unless appropriate protections are put in place.
• Risk of increasing strain on the electric grid from newly electrified appliances without additional measures—such as demand response programs—to reduce peak demand.
• Households with old wiring or 100 amp electric panels may require additional upgrades before they are able to accommodate electric appliances, and panel upgrades may also trigger additional distribution grid upgrades. In some cases, utilities may try to pass these associated costs onto households.

Complementary Policies

Complementary policies that can enhance the functionality of efficient residential electrification policies include: 

• Electrification readiness to maximize the feasibility of implementing energy efficiency upgrades within the home.
• Pre-weatherization programs and weatherization to improve the overall energy efficiency of the home.
• Appliance standards to ensure that investments result in efficient electrification. 
• Residential solar+storage programs and community solar to facilitate the shift to clean energy sources.
• Residential building codes to codify electrification requirements and standards for new residential construction and remodels. 
• Comprehensive DER valuation to enable electrification to be paid for, in part, through compensation of any broader benefits provided to the grid, such as deferral of distribution upgrades or peak demand reduction. 

Additional supporting policies include contractor education and public housing energy efficiency improvements.