The nature of the electricity grid is changing dramatically, as are our nation’s environmental goals, so our policy thinking needs to change profoundly, too. Mounting research suggests that aggressive electrification of energy end uses – such as space heating, water heating, and transportation – is needed if the United States and the world are to achieve ambitious emission reduction goals for carbon dioxide. This concept, the electrification of energy end uses that have been powered by fossil fuels (natural gas, propane, gasoline, diesel, or fuel oil) in order to reduce greenhouse gas emissions, is called “environmentally beneficial electrification.”¹

Achieving the greenhouse gas emissions reductions possible through environmentally beneficial electrification will require routinely revisiting and updating prevailing energy efficiency metrics and accounting methodologies in order to maximize gains. Specifically, it is timely to consider whether reduced electricity consumption (i.e., kWh) is the optimal compass with which to navigate the path to a low-carbon future when, in fact, substitution of electricity for fossil fuels may in some cases increase electricity consumption.

Policy goals are shifting from the simple energy conservation focus of yesteryear toward achieving greenhouse gas (GHG) reductions. Therefore, we need to assess the GHG emissions associated with various ways to power end uses, as opposed to simply the number of kilowatt-hours consumed. To that end, we submit that “emissions efficiency”² may be as or more important than “energy efficiency” moving forward.

Beyond ensuring that our efficiency metrics and policies promote positive environmental outcomes and produce less CO₂, it is also imperative that they not create disincentives to achieving GHG emissions reductions through the electrification of loads that are less carbon-intensive than existing practices. Replacing a fuel oil heating system in a single-family residence with electric heat pump technology, for example, would typically reduce emissions, improve comfort, and save the owner money. But such replacements may not be encouraged under the Clean Power Plan (CPP) due to the statutory constraints the U.S. Environmental Protection Agency (EPA) faces implementing it under section 111(d) of the federal Clean Air Act (CAA). This article expands upon environmentally beneficial electrification, introduces the concept of emissions efficiency, and considers how the design of the CPP could impede opportunities for environmentally beneficial electrification. Because environmentally beneficial electrification is necessary to achieve our nation’s GHG emission reduction goals, states must find ways to encourage it. Notwithstanding the uncertain judicial future of the CPP at this time, several steps to boost environmentally beneficial electrification reflect “no regrets” strategies that should be encouraged and implemented even in the absence of a clear regulatory regime.

2. Growing consensus for environmentally beneficial electrification

Consensus is growing that meeting aggressive GHG reduction goals will require electrification of end uses such as space heating, water heating, and transportation. A recent report by Environmental and Energy Economics (E3) states that “critical to the success of long-term GHG goals” is “fuel-switching away from fossil fuels in buildings and vehicles.”³Lawrence Berkeley National Laboratory similarly concludes that “widespread electrification of passenger vehicles, building heating, and industry heating” is essential for meeting California’s GHG reduction goals.⁴ Work at Stanford University also indicates that “one potential way to combat ongoing climate change, eliminate air pollution mortality, create jobs and stabilize energy prices involves converting the world’s entire energy infrastructure to run on clean, renewable energy.”⁵

The United Nations Sustainable Development Solutions Network’s Deep Decarbonization Pathways Project, the California Council of Science and Technology,⁶ the Acadia Center’s EnergyVision report,⁷ experts like Jeffrey Sachs of Columbia University,⁸ and even Bill Nye the Science Guy have all added to this chorus.⁹ Many other researchers around the globe are echoing the same conclusions. The consensus on environmentally beneficial electrification, it seems, is in.

3. What’s behind the trend toward environmentally beneficial electrification?

Our earlier article, Environmentally Beneficial Electrification: Electricity as the End-Use Option,¹⁰ outlined major trends in the electric power industry that are enhancing the opportunity to electrify end uses as a means to reduce GHG emissions. They are worth revisiting here.

First is the adoption and implementation of public policy goals to achieve GHG emissions reductions. In 2009, the U.S. established a national goal to reduce overall GHG emissions approximately 17% below 2005 levels by 2020. Many states have also adopted individual GHG reduction goals.¹¹ Minnesota and California, for example, have set an 80% GHG reduction goal by 2050. The nine states comprising the Regional Greenhouse Gas Initiative (RGGI) originally imposed a cap on GHG emissions from their electric generation units in January 2009, then further reduced that cap from 165 million short tons to 91 million tons in 2014 with an additional 2.5% annual reduction until 2020. These targets have significantly impacted the Northeast electricity grid, producing a lasting impact on that region’s GHG emissions profile.

The second trend is the lowering of GHG emissions rates of the U.S. electric sector overall due to technology advances and cost reductions of cleaner electric generation, as well as policy goals. Fig. 1 shows the actual and projected carbon intensity of U.S. electric generation from 2005 to 2030. The reduction shown is unprecedented in history. According to EIA, non-emitting renewable and nuclear sources provided about 33% of U.S. electricity production in 2015, the highest share on record.¹²

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Fig. 1. Carbon intensity of U.S. electric generation, 2005–2030.¹³

This trend has major implications: end uses that traditionally would have created more emissions if powered by electricity are at or near a tipping point where their electrification would create fewer emissions than if they were powered using fuel oil, natural gas, propane, or gasoline. Furthermore, the environmental performance of end-use electric equipment will improve over the lifetime of the product, assuming the trend shown in Fig. 1 continues. The same cannot be said for end-use products that directly burn fossil fuels; their emissions are constrained by the laws of thermodynamics, and will remain constant (or possibly worsen due to degradation) over their lifetime.

The third trend generating abundant opportunity for environmentally beneficial electrification is the significantly increased efficiency of end-use equipment itself. The availability and performance of heat pump technology, for instance, which is often 200% to 300% efficient at converting electricity into heat and hot water for homes and businesses,¹⁴ offers great opportunity for electrified loads to reduce emissions compared to fossil powered alternatives.

The fourth electrification trend is the growing need for “flexiwatts”¹⁵to enable greater integration of renewable energy into the electric grid. Historically, utilities created reliable electricity grid systems by building and operating supply-side resources (e.g., coal, nuclear, and natural gas) to match the energy demand consumers placed on the system. Grid operators exercise far less control, however, over renewable energy resources, specifically when wind and solar resources are available to the system. Because electricity cannot yet be economically stored at grid scale, variability of supply must be balanced with the ability to vary demand. It thus becomes far more important − and far more valuable − to control the load side of the equation by managing the operation of electric loads that possess energy storage capabilities (e.g., electric water heaters, electric vehicles).¹⁶ These “flexiwatt” loads can be called upon to “absorb” the power generated by renewable, non-emitting electricity when the sun is shining or the wind is blowing, and can be quickly shed when they are not. Optimization of demand-side resources will be crucial to keeping electricity reliable and affordable as large amounts of renewable generation are added to the grid. Thermal loads, such as space conditioning and water heating, are excellent candidates for storage (in the form of ice, chilled water, and hot water), allowing loads to operate when power is available, and still deliver end-use energy services when heating or cooling are desired.

4. Revisiting ‘energy efficiency’ as a metric to drive GHG emission reduction strategies

Whether a matter of policy or strategy, maximizing GHG emissions reductions hinges on the development of easy-to-use metrics that capture the cross-sector emission reductions associated with environmentally beneficial electrification.

Environmentally beneficial electrification is not only essential to meeting GHG reduction goals, it also provides a significant economic opportunity, and we need to consider pathways, policies, and actions to foster it. Of paramount importance initially is to identify how progress should be measured.

Consider the “energy efficiency” of an electric water heater in terms of gallons of hot water produced per kWh, or an electric vehicle in terms of miles driven per kWh. Typically their energy efficiency will not change significantly over their operating lifetimes: an electric vehicle produced today will operate with roughly the same miles-per-kWh in 10 years as it does now. Due to the declining carbon intensity of the grid as shown in Fig. 1, however, these devices will become more “emissions efficient” over time; the electric vehicle will emit less CO₂ per mile in 10 years than it does today. Moreover, both electric vehicles and electric water heaters can be flexibly managed to charge when low-cost or renewable energy is available, providing additional opportunity to secure economic and environmental benefits.

Traditionally, state and federal energy efficiency efforts for electricity have focused on reducing kWh consumed by electricity end-users, and separately, on reducing therms consumed by natural gas end-users and gallons consumed by petroleum end-users. Motivated largely by the oil shocks of the 1970s, early policies essentially sought to conserve primary energy, including shifting loads from electricity (typically produced from fossil fuels at less than 40% efficiency) to direct use of natural gas (at efficiencies of 60% to 80%). More recently, as climate threats have become evident, the goal of reducing GHG emissions has become as important as primary energy conservation. This change in focus − from seeking fewer kWh used to fewer tons of CO₂ emitted − has also been paralleled by increased natural gas generation (which emits about half as much CO₂ as coal) and greater penetration of renewable energy resources (which typically emit no greenhouse gases).

Despite this change in focus, kWh saved through energy efficiency is regularly applied as a proxy for GHG emission reductions because it’s the “way we have always done it.” This is another case where conventional wisdom lacks wisdom: energy efficiency is an inadequate metric to measure technology performance when it comes to GHG emissions.

Energy efficiency ratings of electric products have been based on the amount of kWh used per unit of service, such as amount of heat or hot water produced per kWh consumed. This is important, of course, but an equally important − and often overlooked − driver of emissions is what generation source produced those kWhs. Today, it matters less how muchelectricity is used than how that electricity is generated. Generation, in turn, depends heavily on when the electricity is used, because grid operators often dispatch higher-emitting generation resources to meet higher system loads.

In short, a kWh of energy savings reported by an energy efficiency program or consumed by an electric product might have been produced by a number of generation sources, be it wind, solar, nuclear, gas, hydro, or coal. These savings may be cost-effective and desirable, because all electricity has a cost, but the direct economic cost is only a part of the emiciencypicture. (“Emiciency” is a new proposed shorthand term for “emissions efficiency”). Kilowatt-hours from different sources have vastly different emissions profiles, ranging from as much as 2 pounds of CO₂¹⁷ to as little as no CO₂ at all. Because traditional “energy efficiency” metrics ignore this dramatic variability, it would seem that “emissions efficiency” is as materially relevant a metric as “energy efficiency” for managing GHG emissions.

Metrics matter. If policies like energy efficiency resource standards, appliance efficiency standards, rebates, and other incentives are measured simply with kWh consumption metrics, we may miss out on many cost-effective GHG emission reduction opportunities from fuel conversions. We stand on the verge of massive opportunities for environmentally beneficial electrification, but recognizing and realizing those opportunities will not be achieved through an indiscriminate focus on reducing kWh consumption.

5. Will the Clean Power Plan discourage environmentally beneficial electrification?

Renewable energy features prominently among the options available for states and sources to comply with the CPP. EPA has also indicated that energy efficiency can be used as a compliance option. It is not clear that environmentally beneficial electrification will enjoy similar standing, however, potentially risking one of the most consequential GHG emission reduction opportunities available. As noted earlier, achieving the GHG reductions necessary to address climate change will require that significant amounts of space heating, water heating, and transportation be electrified. Adding these electric loads to an increasingly clean grid will reduce overall emissions compared to their fossil-fuel-burning counterparts. Such additions could be discouraged, however, by the source-specific focus of CAA section 111(d) and, correspondingly, the CPP. Section 111(d) requires emissions reductions from electricity generating sources only, thus discouraging the addition of new electric loads even when overall GHG emissions drop. As a result, electrification measures may be discouraged that would create net emissions reductions from chimneys, flues, and vehicle tailpipes, but could increase power sector emissions marginally. This could happen, for instance, if natural gas generation were used to balance the system when renewable resources do not produce sufficient power at certain times or places.¹⁸

This example illustrates the complementary nature of traditional energy efficiency and environmentally beneficial electrification. Gas, propane, and natural gas water and space heating is switched to heat pump electric technology, which lowers direct emissions from combustion of fossil fuel and increases kWh consumption. Similarly, gasoline and diesel vehicles are switched to electric vehicles, which also lower direct emissions from combustion of fossil fuel while increasing kWh consumption. Electric resistance space in water heating is also switched to heat pump technology, which reduces kWh and lowers emissions. In this case the kWh consumption before and after the transformation are set equal for illustrative purposes, while GHG emissions are reduced 25% across the community. If additional gas- or diesel-powered vehicles were switched to electric vehicles or additional fossil-fuel-fired water heaters were switched to heat pump water heaters in this example, the kWh consumption would increase as would emission reductions.

Under this scenario, the service territory would not comply with the Clean Power Plan as a “rate-based” area, because its CO₂ emission rate per MWh would not change. Similarly, the territory would not comply as a “mass-based” area because tons of electric system CO₂emissions would also be unchanged. Yet the underlying climate objectives of the CPP would be well served by its 25% reduction in emissions. Further, the presence of new, controllable electric loads would help ensure that the grid system balance would remain equal or better than in the baseline case, there would be no incremental dispatch or reliability challenges, and the utilities would face no adverse revenue impact from the efficiency shifts introduced by the environmentally beneficial electrification scenario. Regardless of any changes to federal policy that might address this conundrum, states have substantial ability to incorporate economy-wide environmentally beneficial electrification in their plans to address future federal GHG emission limits.

6. Electric sector emissions and environmentally beneficial electrification

How we analyze and present emissions from the electric power sector is critical to understanding the role it will play in the broader landscape of a carbon-constrained world. Fig. 2 is a chart released by the U.S. Energy Information Administration (EIA) in May 2016 showing that total carbon dioxide emissions from the electric power sector returned to 1993 levels in 2015, the lowest they have been in more than two decades. Such graphs are often used to depict power sector emissions trends, in such documents as the U.S. Department of Energy’s (DOE) Quadrennial Energy Review (QER) briefing materials.²⁰

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Fig. 2. Total mass carbon dioxide emissions from the U.S. electric power sector, 1990–2015 (million metric tons).²¹

Unfortunately, like the rate-based chart in Fig. 1, this mass-based graphic also fails to recognize the impact of environmentally beneficial electrification. Fig. 1, which illustrates the declining carbon intensity of U.S. electricity generation, certainly provides a more encouraging picture of the electricity grid’s GHG emissions progress. But both figures omit any consideration or quantification of the benefits of environmentally beneficial electrification. Neither metric captures the amount of services provided by the electric sector nor the emissions impacts of electrifying those services instead of combusting oil, gasoline, propane, or natural gas to meet those energy needs.²²

The electric sector emissions data presented in Fig. 2 can be readily misinterpreted as suggesting that power sector emissions have not improved significantly since 1993. Yet, as NRDC notes in a May 2016 blog post, “since 1993—the last time power sector emissions were this low—U.S. GDP (real) has grown at a healthy clip of 2.5% [per year] on average.”²³According to EIA, the U.S. power sector produced 28% more electricity (or 890 billion more kWh) in 2015 than it did in 1993–with the same amount of emissions.²⁴

Our current emissions metrics do not provide a clear picture of either the impact of producing this much more electricity without increasing emissions or of the additional energy services that could be provided at the same level of emissions through environmentally beneficial electrification. To illustrate this point, if the U.S. power sector could replicate its past performance and produce yet another 890 billion kWh without increasing mass carbon emissions, it could electrify the 253 million vehicles currently powered by gasoline and diesel. This would trim about 1.3 billion short tons from U.S. CO₂ emissions,²⁵ more than 60% of the 2.1 billion short tons of CO₂ emissions released by the electric sector in 2015. In this hypothetical illustration, mass CO₂ emissions from the electric sector itself (as shown in Fig. 2) would not decline, but its emissions intensity would decrease roughly 18% (as reflected in Fig. 1). The annual carbon savings associated with this environmentally beneficial electrification would be well over 60%, however, and the “emissions efficiency” of the entire system (i.e., everything powered by the grid plus the amount of the transportation sector electrified) would increase dramatically.

7. The potential of environmentally beneficial electrification

According to EIA, “electric generating facilities expect to add more than 26 gigawatts (GW) of utility-scale generating capacity to the power grid during 2016. Most of these additions come from three resources: solar (9.5 GW), natural gas (8.0 GW), and wind (6.8 GW), which together make up 93% of total additions. If actual additions ultimately reflect these plans, 2016 will be the first year in which utility-scale solar additions exceed additions from any other single energy source”.²⁶

As estimated above, this new generation capacity could power over 26 million electric vehicles, reducing emissions from displaced gasoline and diesel use by roughly 137 million short tons of CO₂ emissions annually. Factoring in the 17.8 million short tons of increased emissions shown in Table 3, the net result would be an overall reduction in U.S. CO₂emissions of more than 119 million short tons per year. Using the mass-based metric (tons, as shown in Fig. 2), emissions from this new 2016 generation would increase power sector CO₂ emissions by approximately 0.8%. Applying the carbon intensity metric (emissions rate or CO₂-per-MWh, as shown in Fig. 1), it would decrease power sector CO₂ emissions intensity by 1.4%. Incorporating the impacts of the environmentally beneficial electrification of 26 million vehicles, however, would decrease overall U.S. mass CO₂ emissions by 5.6% of current electric sector emissions.²⁹ This again reinforces the importance of finding a way to capture the benefits of electrification as a matter of policy.

8. Implementing and accounting for environmentally beneficial electrification: a “no regrets” strategy

The Clean Power Plan has been criticized for potentially discouraging the pursuit of environmentally beneficial electrification. The U.S. Supreme Court’s stay of the CPP in February 2016 provided states and utilities with greater opportunity to identify, implement, and quantify GHG emissions reductions associated with environmentally beneficial electrification as part of an overall “no regrets” strategy. The following steps could be taken today to support implementation of environmentally beneficial electrification.

8.1. DOE and EPA should consider updating the “source” energy factor

9. Conclusion

Significant progress in reducing GHG emissions from the power sector is already underway,³⁴ but far greater progress is readily achievable − both economically and practically − by aligning public policies to reinforce this positive trend. Technological advances to reduce the number of kWh necessary to perform a service, for example, along with public outreach to increase uptake of such advances, are essential and certainly merit greater attention. The electricity thus freed up can be used to displace fossil energy use, further reducing GHG emissions.

Traditional energy efficiency metrics are increasingly obsolete, however. Staunch adherence to efficiency measured by energy savings alone (i.e., kWh saved), for instance, overlooks numerous opportunities to also reduce emissions through fuel conversions from fossil energy to efficient electric technologies powered by an increasing clean generation fleet (or from higher-emitting to lower-emitting fossil energy sources). The electric system is dynamic, and evaluating the impacts and benefits of electricity use is not a simple task. Metrics matter greatly, and it is important that they are effective and accurate. But no single metric can be pursued in isolation, whether it is energy efficiency, emissions efficiency, or any other individual metric. It is necessary to look at the system broadly, develop priorities (including safety, reliability, affordability, compliance environmental regulations, and economic development), and optimize the integrated system accordingly.

Without promptly addressing the challenges of finding appropriate metrics to measure emissions efficiency and environmentally beneficial electrification, we risk diminishing progress toward the very goals we seek. In order to simultaneously maximize cost savings and GHG emissions reductions, new metrics must incorporate not only energy-saving technologies − increasing the performance-per-kWh of devices − but also the processes, procedures, and policies governing how and when those devices use electricity and which of them currently powered by fossil fuel combustion might instead be electrified. There is at least as much promise in reducing emissions via the latter efforts as the former. Our economy and our climate demand that we use both, by pursuing optimal “emissions efficiency” strategies.