Beneficial electrification (or strategic electrification) is a term for replacing direct fossil fuel use (e.g., propane, heating oil, gasoline) with electricity in a way that reduces overall emissions and energy costs. There are many opportunities across the residential and commercial sectors. This can include switching to an electric vehicle or an electric heating system – as long as the end-user and the environment both benefit.
Beneficial Electrification – A Win-Win for Utilities, the Environment, and Electricity Users
The power sector is currently undergoing a period of unprecedented transformation. Energy efficiency and demand-response technologies are reducing power demand, while cheap renewable power and coal plant retirements are reducing the carbon intensity of the electric grid. As a result, electricity is becoming more climate-friendly in many places.
At the same time, electric utilities are looking for new ways to reverse declining electricity sales. Tying these objectives together – increasing electricity sales and decreasing carbon emissions in a cost-effective way for customers – can create new “win-win-win” propositions for electric utilities, the environment, and individuals. Beneficial electrification would increase the sale of electricity while simultaneously greening the grid – linking the electric utility business model to a clean energy future.
The scale and impact of such a transformation would be huge. Full electrification of the U.S. transportation, commercial and residential sectors would double electricity use by 2050 and reduce greenhouse gases by 70 percent. The goal of beneficial electrification is to strategically target the most practical and valuable fuel switching opportunities given current technology, electricity fuel mix, and energy costs. However, these variables are fluid, and what is most “beneficial” to the environment and individuals may change in just a few years. Therefore, the challenge for the utility planners is to anticipate these changes and determine the value of electrification over the lifetime of a particular investment.
A Paradigm Shift
Most vehicles and homes rely on the direct burning of energy-dense liquid fuels to produce on-demand, localized power and heat, respectively. Conventional wisdom dictates that on-site fossil fuel use is more efficient in these applications, as a great deal of energy is lost during the conversion and transmission of electricity.
However, several changes are converging to make the increased electrification of various sectors an increasingly attractive option from both an environmental and utility perspective. These include:
- Rapid growth in low-cost, zero-emissions power,
- Volatility in fossil fuel prices and availability (especially propane and heating oil),
- Increasing efficiency and performance of electric-powered appliances and vehicles,
- Growing need for electricity load management, and
- Emission reduction goals
These fundamental changes will require a paradigm shift in business as usual from utilities, policymakers, and other stakeholders. Currently, state policies largely treat the power, heating and transportation sectors as separate entities. Additionally, emission reduction and efficiency targets – where they exist — are set individually for utilities. Therefore, an electric utility is largely disincentivized from growing its market share, even if it could be done in an environmentally beneficial manner.
Beneficial electrification is a new approach to the energy sector that looks at energy consumption across the economy. For example, an electric vehicle should not be judged on how much electricity it consumes, but rather the lifecycle energy savings it offers over a gas-powered vehicle. Current efficiency policies should be modified to capture such a holistic approach to the energy sector.