May 2, 2022 / By Alex Kent, Regulatory Affairs & Grid Infrastructure Manager

We are So Close to Affording Zero Carbon Electric Home Heating

The time is November 2021 and I hear a sound any Canadian dreads. With the first cold snap of the year my furnace announced, through many groans and rattles, that it was old and not up to the work it was being put to. The professional furnace inspector confirmed my anecdotal analysis. The furnace was 19, going on 20, years old and was at true end of life having admirably surpassed its original 15 year best before date.

The hunt was now on for a new heating system for my home and this journey I share here is a microcosm of the Canadian decarbonization conundrum faced by so many; how can I affordably decarbonize when it gets so bloody cold here?

This piece focuses on a single-family residential home in Ontario, but some of this information can be translated to other building classes as well. A Canadian homeowner has 4 heating options for their building1. The first is a natural gas, or propane furnace. The second is electric resistance heating via either an electric furnace or base board heaters. The third is an air source heat pump and the fourth is a ground source heat pump.

Natural gas furnaces are inexpensive both in equipment and fuel. On a pure cost comparison, natural gas at the current Ontario rate is only 1.375 cents/kWh2 equivalent compared to 11.3 cents kWh for electricity3. Electricity doesn’t lose the affordability contest outright because heat pumps can use electrical energy between 2 and 4 times more efficiently4 to heat a space more than direct combustion of natural gas. In heat pump systems, electricity is not used to create heat, but instead to move heat energy from one location to another. Heat pumps can be imagined as an air conditioner that works in both directions. Through the magic of modern refrigeration, a heat pump can make the inside cooler by pumping heat outside or it can make the inside warmer by pumping heat inside. The downside of heat pumps is that they are less effective at cold temperatures. For home heating this means that most heat pumps effectively stop working at temperatures between -5°C and -10 °C. Special cold weather heat pumps can continue working up to temperatures as cold as -20°C. And as we all know it gets a lot colder than that in Canada. Ground source heat pumps can escape this temperature problem by virtue of insulation from the soil but the underground portion of ground source heat pumps cost 10’s of thousands of dollars to install and may not even be installable due to space constraints from pesky things like the water main, the sewer main, and not being able to get equipment into the backyard without tearing down your garage, and not wanting to cut down beautiful trees. All of which apply to my home.

So, what is a person who wants to decarbonize home heating to do? Well, not much unless you want to pay a great deal. I received quotes of about $5,000 for a new high efficiency natural gas furnace and $20,000 for a suitably sized heat pump with backup electric furnace. Again, the backup is needed because it gets too cold to solely use a heat pump for heating5. And that $20,000 did not even include the necessary electrical panel upgrade from 100amp to 200amp that all electric system would require. A soft quote I received for that panel upgrade was anywhere between $3,000-$5,000.

All this means that for me, the homeowner, over the 15-year expected lifespan of both systems (natural vs. air source heat pump with electric furnace backup) the total cost of ownership of the electric system would have to be about $20K cheaper, or $1333 a year, $111/month, to be equivalent to the natural gas system. Given that natural gas as a fuel is much cheaper than electricity and that the electric equipment is more expensive it is not yet economically viable to switch to an all-electric home heating system, but that goal is tantalizingly close.

I say ‘close’ because the $111/month price differential is deceiving. The largest portion of the home heating bill are the connection and delivery fees, not the fuel charge6. When the connection and delivery fees are removed, by severing your gas connection, the needed savings becomes entirely fuel dependent. In this theoretical future, my electricity consumption would be a little more than double what it is today, but this would not be a doubling of my electrical bill because the connection charges are already being paid. To sever the gas connection would also require replacing a natural gas hot water tank with an electric one, but electric tanks are on average much cheaper than their carbon emitting counterparts. And interestingly $50 a tonne is the current carbon price.

As of 2018, the average Canadian generated 4.1 tonnes of greenhouse gases (GHG)7 a year and on average there are 2.47 people per Canadian household8. That means the average Canadian household currently emits about 10.13 tonnes of carbon a year. For which they currently pay $50/tonne and will pay an ever-escalating amount reaching $170/tonne by 2030. By 2030, this means that the average Canadian household will pay $1,722 a year in carbon taxes. Unless we are given the means to escape that hefty bill, I foresee this becoming a problem.

So, what would happen if the government, to allow people to avoid significant household carbon expenses, paid for the electrification of systems in homes today and recouped their costs via the carbon tax over the next 15 years? The math for this kind of system that I propose works. That is because while the average yearly household emissions are 4.1 tonnes, the average yearly per capita GHG emissions is 19.4 tonnes9. That means that under an expansive carbon tax, household emissions which are almost entirely heating, make up less than one quarter of Canada’s emissions. Canada will collect more in fees related to the carbon tax than it would pay to electrify home heating. And this analysis does not touch on the myriad of benefits of substantial, durable investment in the economy at the local level.

Or, to say it another way, what would happen if the government paid homeowners (and building owners too for those that live in multi-unit residential spaces) to not burn fossil fuels? Well, that would greatly accelerate home heating electrification and allow people to contribute to Canada’s Net Zero goals, protect the environment, and avoid a punitive tax bill.

The Government of Canada already does something very similar to what I’m proposing with its current Greener Homes grant10 but sadly, that program is too small and too narrow to meaningfully meet decarbonization goals. The current program is capped at $5,000 for equipment and equipment installation and does not cover electrical panel upgrades. The lack of panel upgrades in the program is particularly egregious because that upgrade would not only serve electrical heating but electric vehicle charging as well. My house right now could not support home charging for an EV because the electrical panel is undersized. Once a household has its heating done electrically and they drive an electric vehicle they have virtually eliminated all their GHG emissions11.

If the Government of Canada raised the amount payable by the Greener Homes grant, or similar programs, to $25,000 and expanded the program to include upgrading electrical panels to 200 amps then significant decarbonization would occur swiftly. Now $25,000 per household is a lot of money, but that amount will be paid back over time by the carbon tax that is already on the books. It is a massive expense but one with a pre-defined means of paying it back. Additionally, under this prioritized electrification of home heating the money that consumers spend on carbon fuels would flow to electricity producers giving those companies more ability to grow Canada’s net zero carbon energy fleet.

If the government wants to find a way to allow Canadians to accelerate decarbonization by supporting those who want to do their part to reduce emissions but cannot, due to the high upfront cost, then there should be significant improvements in its Greener Homes Grant program.

[1] There are actually 6 options if you count wood and diesel/oil but neither option is discussed further in this piece due to their extremely high cost and carbon emissions.

2 This result was calculated as follows given the current cost of natural gas in Ontario of 14.52 cents/m3: (14.52 cents/m3) * (1 m3/ 0.038 GJ) * (1 GJ / 277.778 kWh) = 1.375 cents/kWh

3 The Ontario mid-peak price of 11.3 cents/kWh is used here for the analysis. Source: retrieved on Jan 25, 2022.

4 Source NRCan: retrieved on March 23, 2022. Because the coefficient of performance depends on the ambient temperature this figure was calculated by dividing the NRCan stated range of heating seasonal performance factor (7.1-13.4) by 3.41 BTU/watt hours. to give an estimate of the heating season coefficient of performance.

5 The backup furnace is a significant portion of the cost because it has to be sized to heat the whole home on the coldest days when the heat pump is offline.

6 A typical bill I receive from my natural gas supplier is 1/3 fuel costs, 2/3 customer and delivery charges.

7 Source: retrieved on Jan 25, 2022. This figure does include fuel purchases for home heating as well as vehicles.

8 Source: retrieved on Jan 25, 2022

9 Source: Figure ES-4 retrieved on Jan 25, 2022

10 Source: retrieved on Jan 25, 2022

11 Because of how emissions are calculated the emissions savings would be greater than that household emissions average because fuel emissions would be transferred to the household via electric vehicle charging.