PROPOSED RULES FOR REPLACEMENT OF GAS-HEAT AND WATER HEATERS UNDERSTATE EXPENSE AND IMPOSITION
The Bay Area Air Quality Management District (BAAQMD) is proposing Rules[1] that would require any household replacing its gas powered space heater or even water heater with an electric powered heat pump device.
Supposedly the purpose is to reduce emissions of Nitrogen Oxcides (NOx) a respiratory irritant, though greenhouse gas reduction is also obviously a good purpose.
In fact, a couple of years ago, wanting to do my small bit reducing methane and CO2, I hired a contractor to tell me the cost of converting a smaller part of my duplex to all electric. The small unit now serves as an office, but it has its own gas heat and electric supply, kitchen and bathroom. It is 110 mostly non-grounded, knob and tube wiring that would not support an induction electric stove top of more than one burner. The contractor said I would need a new service panel. But the new service panel would have to be bigger. But I could not enlarge the panel because it would then be too close to a window. So I would have to rebuild that part of the house. To do any of it I would need a city permit. I would be looking at far more than $14,000 before even considering buying the new electric heater, stove, and water heater.
This last October at an environmental law conference I first learned of the proposal to enforce all-electric on homeowners replacing broken equipment, or in another proposal to require this whenever property changes hands, The proponents proudly described their success converting homes in generally poor sections of the central valley. I questioned about the burden they were prepared to impose in places such as the east and south bay, dense with older housing wired for pre-1970 demands. They did not seem to have considered the economic burdens seriously. In the central valley communities, the owners hadn’t minded the change, substantially because they did not have to pay for it, the heat pump systems would also be used to provide air conditioning, and often the service being replaced was propane.
BAAQMD published a report by Applied Development Economics, an Oregon entity headquartered in Walnut Creek, that does not appear to have a working website, entitled: “Socioeconomic Impact Analysis of Proposed Amendments to Regulation 9, Rule 4: Residential Central Furnaces; and Regulation 9, Rule 6, Natural Gas-Fired Boilers and Water Heaters”.
The most concise, if not accurate statement they make is:
“This combined cost of equipment to comply with both Rule 9-4 and 9-6 is estimated at $10,851 of which $8,027 is for space heating and $2,824 is for water heating. This is about $3,783 more expensive than equivalent gas powered appliances. In addition, older homes would need to upgrade their electric service, at a cost of $4,256 for single family units and $2,744 for multi-family units. “
So one gas to electric conversion is $15,100 in yesterday’s dollars. That is if you don’t have to modify the structure of the dwelling, if you don’t count the permit fees that the local government will charge, if your taxes don’t get reassessed, and if you don’t have to move out while the work is being done. Moreover, it assumes the market for installers and equipment will not rise when these suppliers discover they have a market forced by law to make the purchases to keep their dwelling habitable.
Also, if I am reading the AEM report correctly, the $2824 water heater cost was from a Lawrence Berkeley Laboratory study that for some reason included in its calculation the much less costly replacing at least some existing heat pump equipped electric water heaters. So the real average figure will be higher.
In addition, the study predicts that “distributers and construction trades will see an increase in the cost of doing business for higher priced appliances, but this will be offset by higher prices to the customers for the equipment.” It does not mention that for many such customers the replacement will be an emergency necessary to keep a home habitable. Careful shopping will not be an option.
Yet more: “In addition, the appliance costs can vary considerably depending on the performance characteristics of the particular model chosen by the consumer…In general, electric heat pumps operate with a lower heating capacity than comparatively priced gas-fired furnaces.” In other words, you will get what you pay for, but it will buy less warmth and comfort.
The offsetting savings are exaggerated. The report paraphrases a study by a San Francisco consultancy Energy Environmental Economics “E3”, that a heat pump user who now uses air conditioners would save $600 per year in utility bills. That however is for houses served by the Sacramento Municipal Utility District where air conditioning is going to be used most of the summer. For the Bay Area, the prediction is an annual savings of $100 to $400 for a single family home, and only $10 to $90 for multi-unit dwellings. The costs net out to a loss.
The Report suggests that landlords will simply pass their net increased costs onto their tenants. The report doesn’t mention how this will work in rent control jurisdictions.
The report mentions that the proposal will probably increase the cost to users of gas appliances as the user base for gas decreases. Increasing the supply of electricity will also cost: “The CA Independent System Operator (CAOSO) is planning $11 billion in transmission capacity projects over the next 20 years, which covers 80 percent of the entire state service area, and PG&E is planning to spend $400 million per year on distribution projects.” It opines that solar generation capacity would need to be added along with battery storage at a combined cost of $1.95 billion. “It is possible that these investments will result in some future rate increases, which would reduce the cost savings to households from converting to all electric appliances.”
“It is possible”?. Well really it is certain, if you will notice that PG&E always seeks to translate any increase in capital or operating costs into higher rates. The paragraph adds: “Air District staff may report on rate changes as part of its Implementation Working Group and interim reporting process to the Board of Directors.” Translation: After this mandate is imposed, we “may” ask for a report on what it really costs the people on whom we have imposed the requirement to replace your water heater or furnace.
Much of the remaining economic analysis in the report is based on a theory that water heaters must be replaced every seven years, and furnaces every 18 years, and so if you smear out these costs over these time periods they don’t look so bad, especially given the purported, if unlikely, savings in utility costs. But the report’s data suggests that 44.5 percent of Bay Area households make less than $100,000, and so a one time expenditure of more than $15,000 is a profound hit, particularly at the lower income levels.
A more benign approach would require studying how codes, permits, and electrical service itself might be modernized to make service upgrades quicker and less expensive. A cost benefit analysis should be applied to put some reasonable balance on the scale as to whether this substantial non-progressive “tax” on unlucky building owners and their tenants, is really the best health and environmental benefit for the dollars involved.
Finally, BAAQMD should build in flexibility for changing technology. Around fourteen years ago my wife and I installed a new bathroom. The light fixtures required by the city demanded use of a particular compact florescent bulb with two prongs for the unique socket. This was, I presume, environmentally friendly, but the technology immediately became obsolete, and the compact fluorescent bulbs are now considered energy-wasting hazardous waste. LED bulbs are better in every respect and use regular screw-in sockets. I hate to think how many City of Berkeley person-hours would be needed to legally change the socket to screw in a different lightbulb.
It is predictable that 17 years from now, in 2040, our 2023 cutting edge technology will be obsolete. The bureaucracy now making expensive and intrusive demands on Bay Area households, should be prepared to alter course as soon as appropriate.
