The Great American Electrification

Consumer demand for all-electric homes, the quickly evolving regulatory environment and incentives provided by the Inflation Reduction Act are opening the door for massive transformation in the built environment. But challenges persist—how much will they impede progress?

Consumer interest in all-electric homes is mushrooming. According to a recent survey of homeowners across the U.S. conducted by COGNITION Smart Data, Green Builder Media’s market intelligence division, nearly 55% of respondents indicated that they are interested in purchasing an all-electric home.

Would you buy an all-electric home?

The survey revealed that respondents want an all-electric home to reduce their environmental impact (68%), to have a healthier home (49%) and to have a higher performance home (42%), and they’re willing to invest in heat pump technology, solar, smart thermostats, induction cooktops, and energy management systems.

Which of the following would you invest in to make your home all-electric?

Electrification of America

Given that buildings in the U.S. consume 70% of the nation’s total electricity and generate 40% of the nation’s total emissions, it more important than ever to transition to a net zero (energy, water, and carbon), all-electric, resilient built environment.

According to the EPA, approximately 70 million American homes burn natural gas, oil or propane onsite to heat interior space and water, generating 560 million tons of CO2 each year.

Fortunately, the electrification of America is happening, with jurisdictions from California to New York implementing mandates and rebates for all-electric new construction and retrofits.

Evolving codes are encouraging the phaseout of natural gas infrastructure. Some municipalities are completely banning natural gas hookups, while others are offering incentives, like density bonuses, to builders and developers who electrify their communities.

Arguably, the biggest boost to electrification came earlier this week when President Biden signed the Inflation Reduction Act of 2022. The bill, which represents the single largest infusion of federal cash aimed at tackling the climate threat in U.S. history, allocates $369 billion to reduce domestic emissions by approximately 40 percent below 2005 levels by 2030.

The bill encourages homeowners to electrify their homes by offering up to $14,000 to install advanced technologies and make energy efficiency improvements. Incentives include:

• Up to $8,000 in rebates and up to $2,000 in tax credits for heat pump technology for space heating and cooling.
• Up to $4,000 in rebates for smart electric panels.
• Up to $2,500 in rebates for updated electrical rewiring.
• Up to $1,750 in rebates for all-electric water heaters.
• Up to $1,600 in rebates for insulation, air sealing and ventilation upgrades.
• Up to $1,200 in tax credits for energy efficient windows and doors upgrades.
• Up to $840 in rebates for electric stoves and electric heat pump clothes dryers.

Some homeowners won’t qualify for the tax credit or rebates depending on annual tax bills and household income. For example, rebates are not available to households earning over 150% of an area’s median income (AMI).

The bill extends certain tax credits for homes, including $2,500 for homes that meet the eligibility standards of the EPA’s ENERGY STAR Single Family New Homes Program, and $5,000 for homes that are certified to meet the DOE’s Zero Energy Ready Home program.

The legislation also extends the federal Solar Investment Tax Credit (ITC), now called the Clean Energy Credit. It increases the tax credit amount up to 30% of the total cost of a home solar panel system or battery storage system if the installation occurs between January 2022 and the end of 2032.

$1 billion in grants has been allocated to make affordable housing more energy efficient (unfortunately, when you do the math, this averages out to less than $200 per home since there are more than 5 million federally-assisted housing units across the country, but every negawatt counts!)

To address labor issues that are plaguing the building industry, the bill allocates money for states to create programs to train contractors on products and processes that make homes and buildings net zero, electric, and resilient.

The bill invests in solar, wind, battery storage, geothermal, hydrogen, and other renewables, and provides federal funding in the form of grants and loans to expedite the development of new grid infrastructure and transmission lines to deliver clean power to customers.

Billions of dollars in tax credits will also be offered for domestic manufacturing of photovoltaics, batteries, wind turbines, electric vehicles, and critical minerals, and the creation of clean jobs will be prioritized in fossil fuel producing markets.

And, the bill aims to make electric vehicles more accessible by offering $7,500 rebates for new EVs and $4,000 for used vehicles.

Obstacles Ahead

Certainly, consumer demand, evolving codes, and the impending infusion of federal funding are driving the electrification of the built environment. But there are some fundamental challenges that may slow the pace of transformation.

First and foremost, major investments are needed to update grid infrastructure, transformers, conductors, service panels, and equipment to handle the increased demand that will result from the electrification of homes and buildings. Few utilities are currently prepared to incur these costs, and it’s unclear whether they will allocate funding for these equipment upgrades or if they’ll try to pass the cost along to home and building owners.

Furthermore, it’s much easier to electrify new structures than to retrofit existing ones. While the Inflation Reduction Act will provide incentives for home and building owners to make certain efficiency and electrification upgrades, the reality of retrofitting is complex at best and daunting at worst—especially in today’s zany building market.

And then there are the pervasive labor challenges. Steve Easley, internationally esteemed building scientist and owner of the ReVISION House Scottsdale, says, “It’s hard to find subcontractors that are willing to even consider, much less apply, best practice building techniques and install advanced technologies to electrify homes. Many times during the course of our project, we have heard ‘we don’t do it that way,’ or ‘we only use materials that we are familiar with.’ With the building boom, the subs have no problem walking away from work that requires them to do anything different from what they are used to. Because of the massive unmet demand for housing, I don’t see this issue going away anytime soon.”

Easley continues with some helpful advice: “Fortunately, I was able to obtain subcontractors for the ReVISION House Scottsdale that were willing to do most of what I wanted, but it added quite a bit of time to the project. If you’re building homes, be sure to factor in the additional time it takes to find cooperative subs.”

Despite these challenges, electrification technologies are rapidly becoming more cost effective and reliable than fossil fuel systems in most markets and climate zones across the country. 

Venture capital and private investment funds are playing a key role in scaling innovative electrification solutions, helping to spur development, accelerate adoption, increase output, and decrease production costs, and the market growth for electrification technologies is expected to skyrocket from $2.4 billion in 2020 to $12.9 billion in 2029.

We’re way overdue to get to a net zero, electrified built environment, but the good news is that we have proven, market-ready strategies, building science techniques, products, systems, and technologies to get us there.