Analysis of Enbridge Gas’s Proposed Low Carbon Transition Program for Cost Effectiveness and Climate Alignment
Proposal for a Low Carbon Transition Market Transformation Program
Enbridge Gas has proposed a Low Carbon Transition market transformation program to support the adoption of hybrid heating systems and gas heat pumps in residential buildings; and gas heat pumps in commercial buildings (EB-2021-0002 Exhibit E). To be most effective, this program should support technologies that are likely to be widely adopted in the future and be cost effective in a low carbon society: they should be cost effective and climate aligned.
Our research shows that the prevailing recommendation for achieving a low carbon society involves large scale electrification of building systems that rely on heat pumps for space and water heating. We therefore examined the cost effectiveness and climate alignment of these fully electrified heat pump systems relative to conventional gas heating systems, hybrid heating systems and gas heat pumps for low rise residential buildings and commercial buildings in Ontario.
Our research shows that the prevailing recommendation for achieving a low carbon society involves large scale electrification of building systems that rely on heat pumps for space and water heating. We therefore examined the cost effectiveness and climate alignment of these fully electrified heat pump systems relative to conventional gas heating systems, hybrid heating systems and gas heat pumps for low rise residential buildings and commercial buildings in Ontario.
Fully Electric Heat Pumps for the Win
Fully electric heat pumps are the option most aligned with a net-zero future. They are also the most cost effective for new construction in some residential developments and for existing communities that are not already connected to the gas supply. This is because they avoid the cost of adding gas infrastructure. These electrified systems use cold climate air source heat pumps (ccASHPs) and heat pump water heaters (HPWHs).
Furthermore, this electrified option reduces the potential for stranded gas infrastructure investments arising from the shrinking dependence on fossil fuels in a low carbon society. Electric heat pumps (ccASHPs) are also operationally more cost effective than conventional gas systems in homes with an existing gas connection and will likely be fully cost-effective on a lifetime net present value basis if improvements in heat pump
price and efficiency continue to rise and as carbon costs rise.
Furthermore, this electrified option reduces the potential for stranded gas infrastructure investments arising from the shrinking dependence on fossil fuels in a low carbon society. Electric heat pumps (ccASHPs) are also operationally more cost effective than conventional gas systems in homes with an existing gas connection and will likely be fully cost-effective on a lifetime net present value basis if improvements in heat pump
price and efficiency continue to rise and as carbon costs rise.
Hybrid Heat Pumps Are The Most Cost-Effective for Homes
Hybrid heating systems with smart controls are currently the most cost effective heat pump system for homes that are already connected to the gas supply. They could play a role during the net zero transition period because they reduce the energy requirements and emissions from heating. They could also help develop the market for fully electrified heating if programs are designed with that goal in mind. In the long term, however, this hybrid heating technology is unlikely to be consistent with plans for a net zero emission society because low carbon alternatives to fossil gas are expensive and have limited availability.
Gas Heat Pumps Are The Least Cost-Effective for Residential Buildings
Gas heat pumps are the least cost effective option for residential buildings. Gas heat pumps are also not climate aligned for residential and commercial buildings as they are unlikely to support the carbon free operation of buildings required of a net zero emissions future.
Enbridge Excludes Fully Electrified Heat Pumps
Enbridge’s decision to exclude fully electrified heat pumps from its proposed program and to subsidize gas heat pump systems does not appear to be justified by the relative cost effectiveness of the systems or a forward-looking need to develop a market. Electric ccASHPs would benefit from a market transformation program aimed at overcoming low consumer and installer awareness of the technology, and misconceptions about their performance and overall cost.
Conclusions
- Electric heat pumps are the best option for a net zero transition for buildings.
- Electric heat pumps are the most cost effective option for homes where major investments are required to add gas infrastructure.
- For other homes, electric heat pumps will likely become more cost effective than conventional gas systems if improvements in price and efficiency continue and as carbon costs rise.
- For existing homes with gas service, hybrid heating systems are currently the most cost effective. In the short term, hybrid heating systems can help in the low carbon transition, but these are unlikely to play a major role in a net zero emissions future.
- Gas heat pumps are the least cost effective and climate aligned option for homes and the least climate aligned option for commercial buildings.