Hybridization – The Best Approach to Decarbonization Using Electricity

All credible decarbonization pathways require significant levels of electrification.  In fact, most observers estimate that the electric grid will need to deliver between two and three times more energy than it does today.  This implies massive investments in generation (which will have to be low emissions), transmission (to the extent that new generation is not highly distributed) and distribution (because decarbonization implies that fossil fuel usage in homes and buildings will need to be displaced by electricity). 

Overall, assuming we have strong and successful electrification policies, it is unlikely that our electricity supply and distribution will keep up with the increasing demand for electrification.  We have become slower – not faster – in building large scale infrastructure.  It isn’t just a matter of the dollars required, but also the planning, approvals and even the ‘will’ to build out this scale of infrastructure in the time required.  

The challenge is that some of the key and most compelling opportunities for electrification will drive significant demands on the grid.   For example, most decarbonization experts are strongly supportive of air source heat pumps as the best way to decarbonize heating.  However, at scale, heat pumps would overwhelm the grid on cold days.  Because their efficiency drops with temperature, they are LEAST efficient on the coldest days, and if electric backup resistance heat is used (as many policies typically mandate), they will drive very high system peaks that will be impossible to meet without massive additional investments in infrastructure.  As an example, Fortis BC has recently estimated that if the entire city of Kelowna switched to heat pumps with electric backup (which is required to qualify for the available federal grants), they would need to invest an additional $3.2B in distribution infrastructure to meet the demand associated with cold weather peaks. 

Hybridization is the Solution

There is a better way.  Heat pumps do a great job of heating in shoulder seasons and are more efficient than air conditioners for cooling.   But we can avoid the significant grid challenges heat pumps pose on the coldest days by continuing to use natural gas for ‘peak heating’.  In fact, this is similar to how Ontario (quite successfully) runs its relatively low carbon intensity electric grid.  Well over 90% of the province’s electricity comes from non-emitting generation (nuclear, hydro, wind and solar), with the balance from natural gas to meet peaks.  The net result is a grid with very low emissions per kwh overall which can reliably meet its peaks.

Using natural gas for ‘peak heating’ largely does the same thing.  It takes advantage of the inherent storage in the natural gas system and avoids the new peaks that non-hybridized heat pumps would cause. 

There are several advantages to this approach:

• We can support many more heat pumps, faster, using existing grid infrastructure – driving higher levels of overall decarbonization, before requiring extensive grid upgrades
• Lowers overall emissions – because if the marginal electricity is from natural gas (it is in Ontario, as it is in many electricity systems), then supplying heat with a condensing boiler (@ ~90-95% efficiency) produces far less emissions than supplying that heat with electricity from a combined cycle gas plant (@ ~50-60% efficiency, at best)
• Drives lower operating costs for consumers by shifting to gas to supply heat during periods with lower heat pump efficiency (providing heat from natural gas is roughly 4x cheaper than from electricity during periods of low heat pump efficiency)

And the numbers are not close:  A typical heat pump in Ontario installed without gas backup, will drive peak demand of about 10-12kw and will consume ~13,500 kwh over the course of a year at a cost of about $1200 in a typical year.  If that heat pump were hybridized, it would drive a peak demand of just 3-4 kw and consume about 5800 kwh of electricity – and total heating costs would drop to about $870 per year.

The reduction in peak demand – from 10-12kw to 3-4kw – is really important.  It means that in a typical neighborhood most of the houses could switch to heat pumps without incurring substantial upgrade costs to the distribution system instead of just a third of the homeowners. 

Reducing peak demand and lowering cost to homeowners are good things to spur adoption – but the kicker is that using gas to meet heating peaks is actually better for decarbonization.  If the marginal resource in the electricity system is gas (as it is in many, if not most, electricity systems) then the GHG savings of the all-electric approach over an efficient furnace or boiler is about 28%.  That jumps to ~65% with the hybrid system. 

Embracing hybridization requires pragmatic policy, and it requires abandoning the principle that we must eliminate natural gas from building energy requirements.  Climate change represents an existential risk that requires fast action, and not necessarily perfection.   We are likely to be facing a period of extremely tight electricity supply, and it will be critical to optimize the use of it, while we continue to build the much bigger grid of the future.   We can still get emissions to zero – as our grid grows and as alternatives to hybridization evolve.  But hybridization makes sense if we want to move fast – and we must move fast.

Tell me what you think?

Ron is a founder, entrepreneur, venture capitalist and allocator of capital – who believes we have to prioritize speed over perfection in addressing climate change.  He is now leading IBET, a company creation platform focused on high impact climate opportunities – and intensely focused on solutions that can be adopted quickly.