The Home Electrification Market Rises as Technological Barriers Fall: Part 1

Historically, technology enabling all-electric homes have been constrained by technological limitations and policy barriers. Cheap, natural gas has remained the main energy source for residential cooking, space heating, and water heating. However, an energy shift for these applications is underway. The transformation is driven by a convergence of improved electric heat pump technology and favorable policy for all-electric homes. It is the beginning of the residential sector’s electrification.

Market Demand Causes the Shift

The transition is evident in demand trends. One in four US homes is all-electric. From 2005 to 2015, the share of US homes using a heat pump increased from 8% to 12%, according to the US Energy Information Administration.

All-Electric Homes by Census Region (2005, 2009, 2015)

(Source: US Energy Information Administration)

While small in gross terms, this 50% increase is a result of electrified technologies improving performance and cost-effectiveness in comparison to fossil fuel end-uses.

Technology Is Rapidly Improving

Compared to fossil fuels, electrified technology is fast gaining ground in cooking, space heating, and water heating. This is possible through the following technological improvements and market dynamics: 

• Heat pumps for HVAC: Already 3 times as efficient as gas furnaces at site level (not taking into account losses from electricity generation, transmission and distribution) heat pumps are seeing increased adoption, particularly in new construction. New performance improvements and installation variations (e.g., ground source, mini-split heat pumps) are also enabling penetration into previously less viable northern climate zones and applications. New heat pump refrigerants, such as R-32, may further improve efficiency and reduce greenhouse gas emissions. 

• Heat pump/electric water heaters (HPWH): Water heaters account for an average of 18% of residential energy use, according to energy.gov. HPWHs in new construction are highly cost effective, particularly in multifamily construction. This is because multiple units can share electric/HPWH capacity and save thousands of dollars per square foot in gas line installation and commissioning costs. 

• Induction cooking: Induction technology, which heats cookware through electric resistance, is also gaining market share. Induction cooking represents 8% of cooktops and ranges, according to Forbes. This technology boils water significantly faster (around 50%) than natural gas. It is also safe to touch, offers precision temperature control, has minimal detail to clean, and avoids indoor pollutants generated by natural gas stovetops.

Demand is growing in markets where electrified end-uses can compete with natural gas in efficiency and price. All-electric homes have the potential to generate more long-term cost savings to homeowners compared to a combined system, (electricity and natural gas). The baseline economics in new construction increasingly favor electrified systems, though installation costs, builder preferences, and other variables may change individual scenarios. 

For additional exploration of opportunities and variables influencing the home electrification market, keep an eye out for part 2 of this blog series.