CEE's Building Decarbonization Vision
Minnesota Statute establishes a greenhouse gas emission reduction goal of net-zero emissions economy-wide by 2050. As our electric utilities decarbonize the state’s electric system by 2040 thanks to the Carbon Free Standard passed in 2023, converting homes to efficient electric appliances while making them more efficient offers huge potential for progress on statewide goals. To illustrate this opportunity, CEE is publishing a four-part blog series laying out key components of our vision for decarbonizing the residential building stock in Minnesota.
In Part One we talked about embracing the dual fuel pathway for residential space heating in Minnesota, heating homes with efficient air source heat pumps for much of the year while maintaining a backup source, like a natural gas furnace, for the coldest days.
In Part Two, we examined the increasing affordability of air source heat pumps, highlighting their efficiency and steadily decreasing costs.
Part Three focuses on the impact of electrifying space heating at scale on the electric system. Part Four will bring together the preceding parts to illustrate CEE’s policy vision for Minnesota. While there are many important tools, technologies, and approaches to decarbonizing our state’s building stock, this series focuses on the critical components of home weatherization and electrification of space heating.
Part Three: Managing the impact of electrified residential space heating
Transitioning Minnesota homes to high-efficient space heating technologies will significantly impact the electric system. Fortunately, a dual fuel approach and Minnesota’s robust planning processes give utilities and regulators the tools to manage the impacts of this transition while ensuring affordable and reliable service, even on the coldest days.
Minnesota’s cold climate makes space heating the primary driver of energy use for homes and businesses in the state’s winter months. For the nearly two-thirds of Minnesota homes that heat primarily with natural gas, space heating needs drive significant decisions and planning efforts for natural gas utilities. To plan for and ensure reliable service year-round, gas utilities design their distribution system and fuel supply to meet peak customer needs on an extremely cold day, typically called the design day. Electrifying residential space heating will carry that substantial winter peak impact over to the electric system. Managing that impact will be critical to ensure affordable and reliable delivery of space heating in the future.
Size of the impact
Several studies have assessed the impact of electrifying various portions of home and building energy use, including space heating, both in Minnesota and elsewhere.
- Modeling done by E3 in the July 2021 Decarbonizing Minnesota's Natural Gas End Uses report found that full electrification of residential and commercial building space and water heating would nearly double the statewide electric system peak in Minnesota by 2050 on the coldest day every two years.
- Similarly, modeling done by Synapse in the June 2024 Minnesota Building Decarbonization Analysis report found that full electrification of major end uses in residential and commercial buildings would nearly double the statewide electric system peak in Minnesota by 2050 based on winter peak loads. Space heating was by far the biggest portion of winter peak loads in the analysis.
- At the distribution level, the February 2023 report published by CEE for the City of Minneapolis found that fully electrifying residential space heating would increase local winter electric power loads by four to five times on average compared to existing summer air conditioning peak loads. This would affect local utility distribution infrastructure and timelines for upgrading that infrastructure.
- Similarly, the April 2022 Residential Cold Climate ASHP Building Electrification Study from Cadmus found that a sample of fully electrified homes had double the average demand for the entire home than homes with gas backup heating during a three-day cold snap in Massachusetts. The coldest temperature during this cold snap was 5°F.
- Finally, the modeling released in 2020 in Quebec, highlighted in Part One, found that the full electrification scenario for residential and commercial buildings required 2,070 MW of additional electric capacity in 2030, almost 32 times more than the 63 MW of additional electric capacity needed for a dual fuel scenario.
Each analysis used different models and assumptions to assess impacts to different aspects of the electric system, but together they underscore how an unmanaged transition to electrified space heating will require significant investments in the electric grid.
The value of dual fuel and load flexibility
As discussed in Part One and Part Two, dual fuel applications can achieve significant emission reductions while mitigating costs at the system level and for customers. Both the E3 and Synapse modeling described above found reductions in winter electric peak load impacts when portions of residential and commercial space heating loads were served by cold climate ASHPs with gas furnace backups.
The City of Minneapolis study, which analyzed electrification of several major residential end uses,
demonstrated that cold climate ASHPs with gas backup systems actually reduced the HVAC portion of local winter system peak impacts compared to existing conditions at the household level, as shown in the chart. In this case, the “Existing” HVAC scenario represents summer air conditioning loads with gas providing all heating needs, and the “Electrified” and “Electrified w/ Dual-Fuel” scenarios reflect the shift to winter electric peak loads.
Moreover, demand response and load flexibility programs give utilities significant opportunities to manage and avoid expensive and risky peak demands throughout the year. Typically, these have focused on summer peak demand events, systematic water heater cycling, and interruptible load efforts. There is a promising opportunity to mitigate costly winter peak demand by seamlessly switching a home from an ASHP to a gas furnace backup when the electric system is strained. This can be done based on a predetermined outdoor air temperature, such as the Quebec approach which automatically switches a customer’s heating system from the ASHP to gas backup at 10°F or 5°F depending on the climate zone.
CEE is exploring the potential for program design where the utility can signal when the switchover from an ASHP to the gas furnace would take place based on system constraint criteria, allowing the utility to reduce peak demand impacts without affecting the temperature or comfort of the customer’s home.
The power of planning
While the numbers above represent significant potential impacts to the electric system, Minnesota thankfully has a robust history of deliberate, intentional, and incremental system planning to ensure these impacts are planned for and managed with cost and reliability front-of-mind.
The state has conducted electric Integrated Resource Planning (IRP) for decades, which has evolved into comprehensive plans that directly guide utility resource needs and procurement to meet customer demand and implement state policy goals.
In recent years, Minnesota has started implementing Integrated Distribution Planning (IDP) that examines utilities’ projects and spending at the distribution level, assesses costs and benefits of distribution investments, and enables integration of distributed technologies to minimize total system costs through optimized utilization of electricity grid assets and resources.
On July 1, 2026, Xcel Energy will file the state’s first gas Integrated Resource Plan. Gas IRPs are a new tool for Minnesota to determine the mix of energy resources for gas utilities that best protects ratepayer and public interest, maintains safe, reliable, and affordable service, and advances state policy.
Lastly, the state’s Energy Conservation and Optimization (ECO) programs carry decades of experience in planning and implementing cost-effective portfolios across the state to improve the efficiency of Minnesota’s building stock.
These four planning and implementation pillars provide utilities and state regulators in Minnesota with tools to mindfully ensure that our electric generation system and electric and gas distribution systems can evolve and adapt to newly electrified customer end uses, including residential space heating. In doing so, we can modernize and future-proof our state’s energy use so that everyone benefits.
Related Links
Part One: Embracing the dual fuel pathway
Part Two: The increasing affordability of air source heat pumps
