Report Compares Costs and Savings Between Gas- and Electric-Served Homes

Houses on a street in San Francisco
Published On
Mar 22, 2021

The “Cost and Other Implications of Electrification Policies on Residential Construction” report, commissioned by the National Association of Home Builders (NAHB), Washington, D.C., and written by Home Innovation Research Labs, Upper Marlboro, Md., discusses, among other things, the costs associated with whole-home electrification (versus natural gas) and the potential cost savings of such.

The report noted that, “Electrification is often presented as a strategy for reducing carbon emissions and can be complementary to policies focused on renewable energy generation and storage, electric vehicles, grid-interactive technologies, etc.”

Electrification options include heat pumps, heat pump water heaters and electric appliances for cooking and clothes drying. Other options can include electric vehicle (EV) charger circuits. On the higher end, costs can also include cold-climate heat pump upgrades, second EV charger circuits, second electrical panels (required for the second EV circuits) and induction cooktops.

The report looked at installation costs and estimated usage costs in four cities: one considered to have a “mixed climate” (Baltimore), one considered to have a warm climate (Houston), and two considered to have cold climates (Denver and Minneapolis).

The range of added construction costs of electrification relative to a baseline gas reference house ranged from $3,832 to $14,495 in Baltimore, $3,988 to $11,196 in Houston, $10,886 to $14,381 in Minneapolis and $11,430 to $15,100 in Denver.

According to the report, when compared to a gas house with high-efficiency gas equipment:

  • Consumers are faced with overall higher upfront construction costs and higher operating costs in Baltimore for electric compared to gas.

  • The annual energy costs range from an increase of $18 to a savings of $85 in Houston for electric compared to gas.

  • Consumers are faced with higher overall upfront construction costs and higher operating costs in Denver and Minneapolis for electric compared to gas.

However, the report also noted that, “The incremental costs for high-efficiency gas equipment options relative to a gas baseline are consistent across climates, ranging between $892 and $2,140.”

Overall, according to the report, the ratio of electricity prices to natural gas prices is a significant factor for comparing the impact of electrification between locations with similar climatic characteristics.

“The higher the electric-to-gas price ratio, the more expensive it will be to operate electric equipment versus gas equipment,” according to the report.

Despite the current situation that favors gas homes over electric homes from a strictly cost-based perspective in many parts of the nation, the NAHB noted that the trend toward electric homes is growing for reasons other than cost alone.

According to the report, “Electrification is a strategy for decarbonizing the economy by drawing down the use of fossil fuels in transportation, buildings, and electricity generation. With this type of transition, renewable energy sources are envisioned to continue their growth at utility and community levels, along with an increase in energy storage and expansion of demand management solutions.”

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