The following is an article written by Abigail Anthony, Commissioner of the Rhode Island Public Utilities Commission.
Electrify everything! This rallying cry has recently made its way to the forefront of the national climate debate, as advocates, businesses and even the president himself tout the climate benefits of electrification. Replacing an oil or natural gas heating system or gasoline vehicle with an electric alternative is a simple way to reduce greenhouse gas emissions.
When customers power these new products using increasingly cleaner electricity, they will reduce climate pollution compared to the status quo. And, in case you haven’t noticed, the pilot testing of these products is long overdue. For the sake of the planet, it’s time to scale up.
The challenge is how to expand consumer adoption and accelerate the transition to electric cars and efficient electric heating systems. There is a lot of room for error in creating policies and programs to electrify, such as how to motivate consumers to buy electric vehicles and heating systems and how to reliably deliver increasingly affordable clean electricity. . The wrong approach will send the wrong price signals to consumers.
Two things must be true to motivate consumers to switch to cleaner electric fuel. First, electric vehicles and heating systems must be affordable at the point of purchase. Second, clean electricity should be as cheap as possible, and cheap compared to transportation and heating fuels. At first these conditions are effectively independent and the design of the program may not matter, but on a large scale they can collide.
Today, in my state of Rhode Island, a consumer may need more than $ 10,000 in rebate for their purchase of an efficient heat pump to make economic sense compared to an oil heating system. . This is money worth collecting because it will be well spent. We could, as others have done, increase the kickback funds by adding a program fee to the electricity bill. This approach could jumpstart the transition, but on a scale that will actually mitigate climate change – in other words, by raising tens of millions of dollars a year in Rhode Island alone – the approach is counterproductive because Program fees increase the price of electricity relative to transportation. and heating fuels. Raising the price of electricity is a bad way to convince consumers to consume more.
The next challenge is to supply these products with clean electricity. Electricity customers are already paying for policies to reduce carbon pollution resulting from the current use of electricity. In a future where most vehicles and heating systems will be plugged into a clean electricity system, we will need to replace existing fossil-fueled power plants, build cleaner energy sources, and expand transmission and distribution systems. These new investments will provide clean and reliable energy for transport and heating, but if only electricity customers bear the cost of decarbonizing energy use, electricity prices will struggle to compete with electricity prices. oil and gas and electrification will not be very attractive to consumers.
Better approaches to motivate customers to buy electric vehicles and efficient heating systems increase the money for products and fuels that cause climate pollution. This design can provide funds to help purchase new equipment and increase the cost of polluting fuels compared to clean fuels, so that all fuels compete on an equal footing. If this approach is not possible, we may get the funds from the company in other ways that reflect how we all benefit by avoiding climate change. Either way, raising the funds needed to accelerate electrification away from utility bills will be a more productive approach than adding charges to utility bills. Congress and state governments can implement these preferable approaches; utility regulators like me are much more limited.
If we want everyone to benefit from electrification – not just those who can afford electric vehicles and new heating systems – electric utilities will need to control the cost of providing clean electricity. To avoid overloading the power system and sending the wrong price signals for electrification, regulators should focus utilities on investing in the most profitable options to meet new needs instead of expanding their business. investment in capital-intensive network infrastructure.
The key role of electric utilities will be to invest just enough to meet the demand for clean energy, no more and no less. Success will mean that electricity prices will remain low enough to attract transport and heating consumers. The priority of utilities should be to deliver clean, reliable energy as efficiently as possible, so as a regulator I’m skeptical when utilities propose that their role be to promote electrification with their taxpayers’ money.
The challenges of climate change are high and the time remaining to electrify the country’s vehicles and buildings is shortening. We can be confident that electrification is a big bet for the climate. The wrong approach will cost electricity as a climate solution, but if we take care to send the right price signals, electrification will develop quickly, efficiently and sustainably.