Electrification, Energy Efficiency, and Peak Demand

Posted by Jenny Edwards  |  Date October 16, 2020

CEE research staff modeled cold-climate heat pump performance across a typical Minnesota winter and summer to understand their impacts on energy use and the electricity grid. This post explores some of the key takeaways of that research—read to the end for a summary of methods and assumptions. 
 

Heat pumps save significant energy over their electric counterparts.

Heat pumps are first and foremost an energy efficiency opportunity. A household will save energy when it switches to a heat pump from traditional electric heating and cooling. For a typical Minnesota home, a heat pump will reduce electricity use by 55%, mostly in heating. Coupled with deep energy retrofits to the house shell (see the assumptions section below), electricity use drops by more than 75%.

Heat pumps will lower summer peak demand.

Electricity demand in Minnesota is the highest during summer heat waves, driven by cooling loads. More efficient heat pumps replacing central air conditioners will lower the energy demand per household by approximately 10%. Combining a heat pump with deep energy retrofits lowers peak demand by more than half. 



In Minnesota, 70% of households have central air conditioning. Replacing those ACs with a heat pump in single-family households (to correspond with the energy use shown above) would lower the summer peak by 520 Megawatts (MW). 

 

Heat pumps will increase energy demand in the winter — but they’re still a win for energy efficiency. 

Unlike propane or natural gas, electricity cannot be stored inexpensively, which creates additional concern around demand occurring during a system peak. In Minnesota, 78% of homes are heated with natural gas, oil, or propane, so a transition to electricity as the primary heating fuel will inevitably increase winter electricity demand. 

However, certain dynamics will moderate those winter peaks. On typical, moderate climate days, heat pumps will reduce peak demand from electric resistance heat by over 60%. Given the high load of electric resistance heat, this can save approximately 4 kilowatts (kW) per home. In other words, heat pumps reduce winter peaks of traditional electric technologies approximately 10 times more than they reduce summer peaks. It also means that for every electric resistance home converted to a heat pump, two fossil fuel homes (e.g., natural gas or propane) can convert to a heat pump with no net effect on peak demand. 



In Minnesota, 8% of single-family households heat with electricity. Replacing all these homes’ electric systems with heat pumps would lower demand on moderate days by 570 MW.
 
It is important to plan for cold snaps — days with temperatures falling below -10°F, when some utilities experience peak demand on their system. However, most of today’s heat pumps require backup systems to operate on such cold days. If a home has electric resistance heat as a backup, the demand will be the same whether the home has a heat pump or not. However, nonelectric backup systems can moderate this effect and increase a household’s resilience in withstanding cold weather days.  


**Note that this demand will generally occur at night or during the early mornings when temperatures are lowest. 
 
Capturing the energy efficiency potential of this transition will allow us to plan for and accommodate those winter peaks. Aside from the efficiency conversations, the increase in winter load on low to moderate temperature days for just the single-family housing stock will be an estimated 2,700 MW. But the peak reductions from converting electric resistance heat, coupled with deep energy retrofits, can reduce this by more than 50%, bringing the net increase to just 1,000 MW.

Deep energy retrofits are essential for managing customer costs and grid reliability.

In every case above, deep energy retrofits save customers money and reduce peak electricity demand. A well-insulated home can further mitigate that demand through load management, since it can adjust energy use without compromising occupant comfort, unlike homes with air leaks.
 
A well-insulated home will also moderate the operational costs of switching from a gas furnace or boiler to an electric air source heat pump. At current prices, a natural gas furnace and typical central air conditioner still operate at half the annual cost of a heat pump. However, insulating the home to a deep retrofit level decreases annual costs so that they are on par with the fossil fuel option, not including potential savings from peak management in the summer or winter. 


 
Typical energy efficiency programs do not insulate homes to deep retrofit levels, but this needs to change to avoid some future cost impacts. Identifying and planning for future costs will make these actions more beneficial today. 

 

Methods and Assumptions

• Modeling was done with CEE’s proprietary heat transfer model, calibrated to Minnesota home performance based on technology field studies.

• These results are based on a stand-alone single-family home of size 2,000 ft2 built to 1970 construction standards. This is approximately the median-performing home in the state. 

• These model runs used 2018 weather data using St. Cloud as a weather station (8,930 heating degree days; 795 cooling degree days).

• Deep energy retrofits include adding R-16 exterior shell insulation and double pane windows of u-factor 0.30 on top of existing weatherization measures.

• Data sources for market size of residential space heating and cooling are from the Minnesota Energy Efficiency Potential Study (2019), which was funded by the Minnesota Department of Commerce.

• Cost assumptions were as follows: $0.70/therm for natural gas; $0.12/kWh for electricity.