Beneficial Electrification and Grid Opportunities
A digital report by the Active Efficiency Collaborative
Beneficial electrification – transitioning end-uses powered by fossil fuels to electricity in circumstances where certain benefits are achieved – is a major trend that is accelerating in energy markets across the world.
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What is Beneficial Electrification?
Beneficial electrification – transitioning end-uses powered directly by fossil fuels to electricity in circumstances where certain benefits are achieved – is accelerating in energy markets across the world. Efforts to electrify power grids are driven by multiple factors, ranging from technological innovations in end-use technologies, connectivity, and digitalization, to consumer interest and policy objectives such as cost savings, climate emissions reductions, and resilience.
Beneficial electrification is an example of an Active Efficiency approach. The Collaborative defines Active Efficiency as the combination of technologies and practices that “optimize the use of energy by integrating the benefits of traditional energy efficiency measures with the opportunities presented by digital technologies.” This mix of technologies and practices enables energy consumption to be more time-dependent and integrated with flexible sources, and yields numerous, diverse benefits. Beneficial electrification has a number of Active Efficiency benefits. For example, switching from fossil fuel-powered to electric devices is often accompanied by greater energy efficiency in the device’s performance. It also facilitates the digitalization of the device, enhancing the ability to modulate the timing of energy use to provide system-level benefits and enhance the reliability and resilience of the electric grid. This report describes these cross-system opportunities and suggests considerations for deploying beneficial electrification with an Active Efficiency mindset – focusing on impacts in the built environment as well as opportunities to achieve a more dynamic, efficient, and clean grid. Utilities and utility regulators , and state policymakers can dive deeper and the report also provides regional insights through the presentation of state-level data.
When is Electrification Beneficial?
Electrification is defined as the transition of end uses historically powered by fossil fuels to electricity. It is increasingly viewed as a critical element of decarbonization – providing opportunities to reduce greenhouse gases and other emissions, improve health outcomes, reduce costs, and improve grid management and resilience.
One example technology is heat pumps used in heating and cooling. Electric heat pumps are often more efficient than fossil fuel-powered HVAC technologies and can be used in both hot and cold climates . Because of their enhanced efficiency, they can save consumers money and reduce negative environmental impacts compared to their fossil fuel counterparts . When coupled with smart thermostats, their use can be modulated to enable better grid management, such as by preheating or precooling spaces during times of lower demand and reducing energy use during peak hours.
Not all electrification is beneficial: in some cases, the use of specific technologies or implementation strategies can reduce efficiency, increase emissions, or raise costs for consumers. Ambitious electrification goals – e.g., achieving 100% electrification – have proven more viable in new residential buildings and more challenging for commercial buildings . But the trend toward electrification continues, driven by policies, technological opportunities, and market trends. To focus attention on the constructive opportunities, the term “beneficial electrification” was defined by the Regulatory Assistance Project (RAP) as electrification in which one or more of the following conditions are met without adversely affecting the other(s):
Saves consumers money over the long run;
Enables better grid management; and
Reduces negative environmental impacts.
Recently, others have recommended the definition be amended to include a fourth condition: that beneficial electrification “improves product quality or consumer quality of life,” a reflection of the fact that many consumers are motivated by a product’s performance as well as its environmental impacts and costs. For example, many consumers switch from a gasoline to an electric vehicle not only to reduce greenhouse gas emissions and fueling costs, but because they enjoy the smoother ride, reduced maintenance, and special features like gamification and partial automation.
Many examples of electrification satisfy this definition. In addition to specific technologies, beneficial electrification can also include combinations of technologies across sectors. Residential electrification can include household equipment such as electric water heaters, space heaters (heat pumps), cooking equipment (including electric induction stoves), and household appliances like clothes dryers, lawn mowers, and leaf blowers. Commercial and industrial electrification opportunities include commercial building equipment (e.g., space heaters, water heaters, commercial cookers), forklifts, air compressors, and process electrification. Beneficial electrification of buildings is a key step in enabling the growth of grid-Interactive efficient buildings (GEBs), which use distributed energy resources (DERs) to optimize energy use for grid services, occupant needs and preferences, and cost reductions in a continuous and integrated way. For GEBs, beneficial electrification through space and water heating and electric vehicles can increase the portion of their load that can participate in demand flexibility. Transportation electrification includes light duty vehicles, vehicle fleets, commercial trucks, freight trucking, trucking refrigeration, mass transit (buses), school buses, and even micromobility (e.g., eScooters). Agricultural electrification opportunities include grain drying, lighting, grain handling, water heating, and more.
The acceleration of the electrification trend is increasingly viewed as inevitable . As many state and local governments seek to accelerate decarbonization, low-carbon electricity is increasingly viewed as the preferred fuel. This is accompanied by the rapid and significant decreases in the costs of clean electricity generation. According to Lazard , utility-scale solar and on-shore wind became competitive with fossil fuel counterparts several years ago: in the United States, the costs of utility-scale solar averages $31/MWh and onshore wind $26/MWh, compared to $41/MWh for coal and $28 for combined cycle gas generation. In addition, electric devices (e.g., electric vehicles, space and water heaters) are falling in cost at the same time that their efficiency is improving. Greater connectivity and advances in information technology, which allow more advanced use of energy management and demand flexibility, further facilitate greater beneficial electrification.
The acceleration of the electrification trend is increasingly viewed as inevitable. As many state and local governments seek to accelerate decarbonization, low-carbon electricity is increasingly viewed as the preferred fuel.
Benefits of Beneficial Electrification
Beneficial electrification has numerous potential benefits. Some examples include:
Emissions Reductions: Reduced pollutant emissions have both environmental and public health benefits. Reductions in greenhouse gas emissions can help utilities meet climate goals and targets, and reduced emissions of hazardous pollutants like nitrogen oxide, carbon monoxide, ultrafine particles, and formaldehydes improve health outcomes, e.g., by reducing likelihood of asthma and lung diseases. This is a direct effect in the case of electrifying transportation, which could lead to dramatic reductions in air particulate pollution, especially – but not only – when the electricity is sourced by clean power.
Energy Cost Savings: Broad scale electrification at the residential level, paired with energy efficiency improvements and the integration of DERS (e.g., solar rooftop PVs, community-scale solar, or distributed storage) can lead to significant bill savings for customers in the mid- to long-term. This is especially relevant for new construction, transitions away from propane or heating oil, customers replacing both furnaces and air conditioners at the same time, and customers also pursuing rooftop solar investments.
Jobs and Economic Development: Increased electrification is expected to drive economic development and create new job opportunities related to increased demand for all-electric appliances and energy efficiency upgrades. For instance, a UCLA study found that electrifying all of California’s existing and new buildings could create more than 100,000 jobs (e.g., construction, manufacturing, and electricity generation and distribution jobs), even after accounting for job losses in the gas industry.
Enabling Cleaner Power: With the help of smart technologies, beneficial electrification increases the scale of flexible loads that can be charged at times to optimize the use of renewable energy and reduce their curtailment. This eases the integration of renewables, and reduces the grid’s reliance on fossil-fuel peaking plants.
A Spotlight on Grid Impacts
Beneficial electrification can have significant and complex impacts on the grid, including some liabilities as well as numerous opportunities . Fundamentally, whether additional electrification produces benefits or costs depends on how well its deployment is coordinated with grid impacts. For example, replacing millions of gasoline-powered vehicles with electric vehicles would reduce emissions, save people money, and not stress grid reliability so long as the EVs are charged at off-peak times.
Conversely, charging these same vehicles during peak times of the day could cause transmission congestion issues, require expensive upgrades, and possibly involve higher-emissions generation. A “do no harm” mindset for grid impacts is required at a minimum to ensure electrification meets the “beneficial” definition. However, when viewed at the system level, beneficial electrification has the potential to be positive and transformational, accelerating a paradigm shift toward greater efficiency in grid operations.
Scaling Up Demand Flexibility Through Beneficial Electrification
Historically, electricity demand was considered inflexible – consumers used electricity as desired, while grid operators, usually vertically-integrated utilities, were required to meet that demand by any viable means (“follow the load”). During critical peak events, the cost of meeting this demand can be astronomical, requiring not only additional power generation but also ancillary grid services and maintenance of the permanent infrastructure to carry the elevated power flows. Meanwhile, many consumers – especially residential and smaller commercial consumers – paid for electricity with flat rates, insulating them from the immediate financial implications of their electricity use during peak demand periods. The result has been an inefficient system with poor or nonexistent market signals, in which consumers have little incentive or ability to moderate or shift their energy use, and power system operators build out costly infrastructure to meet demand during those brief peak periods, with capacity that is otherwise underutilized.
In recent decades, the overall framework for the utility system has evolved to different extents across the U.S., resulting from market restructuring as well as the greater use of demand response programs and other demand-side management innovations. But the high costs of critical peak events and the lack of price signals for residential and commercial electricity consumers are still common issues. Now, there is potential for even more dramatic changes to address them.
Developments in end-use technology and connectivity, together with changing grid characteristics (especially the integration of renewable resources that are clean, but less predictable and flexible), have enhanced the value proposition for demand-side management tools. New models around the U.S. demonstrate that resource planning and power production do not necessarily need to be performed centrally to “follow the load” – the load itself can also “follow the supply.” This presents an enormous opportunity to capitalize on a key characteristic of electricity: that the costs, impacts and benefits of using electricity change depending on the grid situation. When supply and demand can engage in a real-time system – especially where the value of responsive loads is known and there exists a fair mechanism to monetize it – a very different operating model is possible. And when greater quantities of load are connected and electrified, these opportunities can be scaled up.
The ability to modulate demand-side load can be described by the term demand flexibility (also “load flexibility”). When combined, beneficial electrification and demand flexibility can benefit the grid in multiple ways. Electrification creates a broader base of electric loads that can respond to the real-time operation of the grid; this ensures that electricity is used when it is abundant, affordable, and clean, and stored or conserved when it is scarce and expensive. The U.S. currently has a very large untapped potential to harness the flexibility of new and existing electrical loads. Demand flexibility is a high-value proposition; however, in many places it lacks a commensurate incentive that rewards customers for participating in flexible demand programs.