New York Heat Pump Transition

For over three years one of my particular concerns associated with the New York State Climate Leadership & Community Protection Act (Climate Act) net zero transition is residential electrification with an emphasis on home heating.  I have been meaning to do an update on this topic but have had other priorities.  Empire Center fellow James Hanley has prepared a new study that provides a great update: Cold Reality: The Cost and Challenge of Compulsory Home Electrification in New York (“Cold Reality”).  This post summarizes the study and my impressions of the analysis.

I have followed the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 350 articles about New York’s net-zero transition.  I have devoted a lot of time to the Climate Act because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good by increasing costs unacceptably, threatening electric system reliability, and causing significant cumulative environmental impacts.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other organization I have been associated with, these comments are mine alone.

Climate Act Background

The Climate Act established a New York “Net Zero” target (85% reduction and 15% offset of emissions) by 2050.  It includes an interim 2030 reduction target of a 40% reduction by 2030 and a requirement that all electricity generated be “zero-emissions” by 2040. The Climate Action Council is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible using zero-emissions electricity. The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies.  That material was used to develop the Draft Scoping Plan.  After a year-long review, the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation, utility rate cases, and legislation. 

I have written extensively about residential home heating strategies in the Scoping Plan. In Climate Act Draft Scoping Plan Building Sector Scenarios I compared the Draft Scoping Plan residential heating scenarios and concluded a feasibility study is needed to determine whether any of the recommendations can be implemented.  I submitted comments on the costs of residential heating electrification in the Draft Scoping Plan.  My comments showed that the Plan did not provide sufficient information to assess the potential costs of the electrification strategies proposed.  One of the key factors affecting cost and feasibility is the need to upgrade the building shell to ensure comfort during the coldest weather when using heat pumps.  I also did a post that documented the results of my home energy audit that consolidated all my concerns with heat pumps.  If you are interested in more home heating background information, an article describing my interview with Susan Arbetter at Capital Tonight gave an overview of heat pump technology and described building shells.  Like every other aspect of the Climate Act transition heating electrification is more complex and costly than the Scoping Plan admits.

NY’s Electric-Heat Push Faces Cold Reality

James Hanley’s Cold Reality is described as follows:

New York’s plan to steer homeowners and landlords toward electric heat could backfire due to high costs and practical concerns, according to a new study from the Empire Center for Public Policy.  

In Cold Reality: The Cost and Challenge of Compulsory Home Electrification in New York, Empire Center fellow James Hanley looks at the state’s plan to prohibit homeowners from replacing gas and oil furnaces after 2029 and for them to instead install heat pumps. Homeowners, he explains, face both higher equipment costs and potentially high weatherization costs to accommodate heat pumps, which can operate at lower monthly costs but require better insulation. 

Even with extensive state and federal subsidies, Hanley warns, the upfront price-tag of heat pumps and weatherization will likely push homeowners to instead buy low-cost but energy-hungry electric furnaces that will put considerably greater stress on the electric grid—making the state’s overall electrification goals harder to reach. 

“This is the fundamental problem at the heart of New York’s command-and-control attempt to restructure its economy to make what amount to barely detectable reductions in global emissions,” said Hanley. “Albany can ban things, but it can’t control how people replace them.”  

Hanley notes that the impact of this policy will be felt most in rural New York, where the median household income of owner-occupied homes is the lowest, and points out that the state could instead reduce emissions by setting clean fuel standards that encourage the use of biofuels. 

Annotated Executive Summary

I n this section I quote the Executive Summary and offer my comments.

The Scoping Plan recommends that the State pass legislation that prohibits fuel-fired home heating but has not addressed all the consequences:

In 2030, New York may begin a policy of forcing New York families to use electricity for home heating instead of fuels like heating oil, propane and natural gas. Homeowners whose furnaces fail in midwinter will face a choice between spending tens of thousands of dollars on heat pumps while waiting for weeks or more to have their homes weatherized or buying inexpensive but energy-hungry electric furnaces. Their choices have significant implications for household budgets, utility companies providing electricity, and policymakers who need to ensure a sufficient amount of electricity production to meet the public’s needs.

Hanley does a good job explaining some of the nuances to the electrification that are not addressed in the Scoping Plan.  For example, he points out that if a furnace breaks down in the winter, that there are limited options for replacement.  You might be able put in a replacement heat pump quickly but the insulation and weatherization required to make heat pumps work in the coldest weather take longer to install. 

The Climate Act is a political construct.  The goals set were never evaluated with respect to feasibility.  The Climate Action Council did not address the consequences of the schedule proposed:

New York’s 2019 Climate Leadership and Community Protection Act (CLCPA) calls for reducing statewide greenhouse gas emissions by 85 percent by 2050 (from a 1990 baseline). The Climate Action Council has proposed meeting that goal in part by electrifying 85 percent of the state’s buildings. But it also has recommended a prohibition on the replacement of fuel-burning furnaces as of 2030, which would push the mandate closer to 100 percent electrification as units reach their normal end of life.

Hanley breaks down residential building energy production:

Over six million residential units in New York use fuels for heating, with over five million also using them for hot-water heating, and over four million using them for cooking. While most of those homes use natural gas, more than 1.7 million New Yorkers use propane, heating oil or kerosene1 for heat, with over a million using those fuels for hot water as well.

The Scoping Plan did not address these differences.  There are reasons that each fuel is being used and there are ramifications that may make a one size fits all electrification mandate problematic.  The analysis addresses some of the complications of the electrification mandate.  While the Scoping Plan admits that there should be exceptions to the mandate, it is not clear how those would be incorporated.  As Hanley points out, heat pumps have issues:

The state’s compulsory electrification program— forcing consumers to replace end-of-life fuel-fired appliances with electric appliances—recommends that building owners, including homeowners, install heat pumps. Because heat pumps do not warm the air as much as fuel-fired furnaces, heat pump installation involves additional costs for home weatherization. In cold climate regions, air-source heat pump users may also need to pay for a supplemental heat source, and due to the risk of power outages, risk-averse electric heat users may also need to purchase backup power generators.

Cold Reality does a good job in the report explaining how the plan will disproportionately affect the rural poor.  He describes other issues as well:

The costs of heat pump installation and building shell weatherization are high and will place a substantial economic burden on many homeowners, even with state and federal subsidies, as shown by the following numbers:

• The cost of installing a heat pump and weatherizing a home: $14,600 – $46,200;
• Heat pump and weatherization’s share of the median household income of owner-occupied homes in lower-income counties: 20 percent to 70 percent; and
• How long it will take homeowners to recover costs through energy savings: 8 years to 19 years.

The Climate Act Scoping Plan emphasizes the climate justice aspect of implementation by focusing on Disadvantaged Communities.  I worry that emphasis will overlook the rural poor who will be disproportionately impacted by the electrification of heating costs described because rural poor may not be in a Disadvantaged Community.  If there is no hope that the electrification costs can be recovered by energy savings, then this is a serious problem.  Hanley points out that there are ramifications on the implementation strategy too:

State policy will likely drive homeowners to instead buy more energy-intensive electric resistance furnaces that have lower upfront costs but cost more to operate. Even with higher annual energy costs, it will take 18 to 60 years for total costs to equal the cost of a heat pump installation plus home weatherization.

I agree that the consequences of this choice have enormous implications:

Widespread adoption of electric resistance furnaces would further increase electricity demand, challenging utilities as they rebuild the state’s electric grid to deliver higher electric loads and policymakers as they struggle to close a sizable future gap in winter electricity production.

Whether homeowners choose heat pumps or electric resistance heaters, the future of oil and propane distribution firms appears dire. Based on their respective expected operational lives, propane furnaces may be eliminated between 2047 and 2050, while oil furnaces would be eliminated between 2056 and 2063.

One point not mentioned by Hanley is that propane is used more often for mobile homes.  Those residences cannot be insulated enough to enable the use of heat pumps so I expect that this would be another long-term use of propane in addition to those he describes:

Because there are a variety of out-of-home uses of propane, the propane industry will not completely disappear in New York, although it will dwindle and need to consolidate. With fewer alternative uses for heating oil, the heating oil delivery industry may be eliminated entirely.

Hanley correctly points out that the expected reductions in greenhouse gas emissions are inconsequential relative to global emissions.  However his description does not mention that the increase of global greenhouse gas emissions elsewhere means that the reductions will be supplanted by those increases in a matter of days:

The global effect of the costly compulsory electrification will be a reduction in greenhouse gas emissions of less than 5/100 of one percent. In choosing this approach, New York has closed the door on a more affordable means of reducing greenhouse gas emissions, clean fuel standards that promote biodiesel and renewable propane.

In that context, it is insane to not consider the affordable alternatives he describes.

Discussion

Cold Reality does an excellent job explaining issues associated with heat pumps in New York.  I want to make the point that Hanley addressed the major problems but could not address all the issues.  There are other problems that don’t have as much of an impact and are down in the weeds so far that trying to include them would detract from the report.

My post that documented the results of my home energy audit with a knowledgeable and experienced auditor raised some of the other issues.  I do not dispute that heat pump technology can work in New York State.  However, it is not simply a matter of swapping out a fossil-fired furnace for a heat pump because it is not just the furnace that has to be replaced.  Hanley explained that because the temperature of the air from a heat pump is lower than a fuel-fired furnace, the building shell needs to be upgraded to improve insulation and reduce air infiltration.  He did not point out that it may be necessary to change the duct work because a greater volume of air is needed to provide the necessary heat and that a heat exchanger might have to be added too.  Hanley described the trained tradesmen problem but I think it is not just a matter of installation workers it is also a matter of designers.  There simply will not be enough trained and experienced auditor/designers available because of the learning curve.  As a result, I fear many heat pump systems will not be designed properly.  That will exacerbate the load problems described in Cold Reality because the solution will be to add space heaters to stay warm.

Conclusion

There are many components of the Climate Act transition but very few will have as big an impact on individuals as the home heating electrification mandate.  Hanley’s Cold Reality is a great overview of the problems associated with the heat pump “solution” that have not been addressed by the Hochul Administration. He offers a solution to reduce impacts that I think makes sense.

In my opinion, however, there are even more problems than the problems Hanley describes in his conclusion:

New York’s proposed program of compulsory electrification could impose enormous costs on homeowners while making nearly unmeasurable gains in reducing global greenhouse gas emissions. As of 2030, homeowners will be faced with the choice of committing up to 70 percent of their annual incomes toward the purchase of heat pumps and upgrading their home’s shells or buying electric resistance heaters at just 3 percent to 10 percent of that cost.

The low rate of electric heating in many of the state’s more rural and lower-income counties means much of the choice will fall on homeowners who can least afford it.

And those who have unexpected equipment failures in midwinter may not be able to arrange contractors for their necessary shell upgrades in time to ensure comfort for the remainder of the season.

While the state’s Climate Action Council recommends heat pumps because they use less energy, the cost advantage of electric resistance heaters could lead to large numbers of homeowners choosing them.  This would increase the energy demands of the state beyond what has been predicted, challenging utilities as they rebuild the grid to deliver higher electric loads and challenging policymakers to close a predicted, and potentially growing, shortfall in future wintertime electricity production.