Brattle Economists Analyze the Economics of Residential Water Heating in a New Report
Prepared for The Beneficial Electrification League
When developing policies, programs, and other initiatives to promote the decarbonization of water heating, which is a significant source of residential energy use and emissions in the US, the full range of electric water heating technologies should be considered. In a new report prepared for the Beneficial Electrification League (BEL), Brattle economists analyze the total societal cost of key water heating technologies across various housing types to determine the most cost-effective and applicable options.
Key findings from the report include:
- The economically optimal heating option varies by building type, number of occupants, market dynamics, and policy factors. Heat pumps, electric resistance, and gas water heaters each could be the most economic option depending on these factors.
- Heat pump water heaters (HPWHs) are more economical for larger homes since their high upfront costs are offset by higher annual energy savings.
- Grid interactivity enhances the value of standard electric resistance water heaters, but the benefits are market-specific.
- Propane water heating consistently results in the highest total costs compared to conventional gas and electric water heaters.
- Tankless water heaters – which have modest upfront costs and competitive efficiency – could be attractive options in smaller dwellings with lower hot water needs and/or space limitations, though they have high instantaneous electricity demand.
- Water heating economics are different from the customer’s perspective, highlighting a misalignment between retail energy prices and the actual system costs of operating water heaters.
“Water Heating Economics in a Dynamic Energy Landscape” was authored by Brattle Principal Ryan Hledik, Senior Associate Dr. Long Lam, and former Senior Research Analyst Shreeansh Agrawal. The full report is available below.
The Brattle team will join the BEL Electric Water Heater Summit on Thursday, May 4. Learn more here.
