Rhode Island Should Pursue an “All of the Above” Approach to Decarbonizing the Heating Sector to Meet State Goals, According to Brattle Economists

Too early to tell whether one solution is clearly best, but early progress can be made.

In a heating transformation study presented to Rhode Island Governor Gina Raimondo, economists at The Brattle Group examine potential solutions that can transform Rhode Island’s heating sector as part of the state’s commitment to economy-wide decarbonization. While it is not yet clear which specific pathway will best provide decarbonized heat, substantial progress can be made in the next decade to replace the fossil fuels – natural gas, heating oil, and propane – that the state currently uses for heating.

Prepared for the Rhode Island Division of Public Utilities and Carriers and the Rhode Island Office of Energy Resources, the study examines the relative economic attractiveness of several solutions for decarbonizing the heating sector. These solutions fall into three broad categories: improving building energy efficiency, replacing current fossil heating fuels with carbon-neutral renewable gas or oil, or replacing existing fossil-fueled boilers and furnaces with electric ground source or air source heat pumps (GSHP, ASHP) powered by carbon-free electricity.

The report finds that cost-effective energy efficiency retrofits will reduce both emissions and costs to consumers, but cannot eliminate the need for heat in hundreds of thousands of existing buildings in the state. Thus, some combination of the decarbonized heat alternatives – electrification with heat pumps or decarbonized fuels – will also need to be adopted in virtually all of Rhode Island’s buildings.

Annualized Cost of Space Heating in 2050, Representative Single-Family Home, Bookend Scenarios, 2018$

Based on the projected range of average annual heating costs in 2050 for a representative single-family home in Rhode Island, the study provides the following conclusions:

1. From today’s perspective, no single solution is clearly more cost-effective than the others. This is due to the high uncertainty about how the costs of all the decarbonized heating solutions will evolve over the coming decades. Building- and location-specific conditions, as well as consumer preferences, suggest that a mix of solutions is likely – though it is not yet clear what that mix will be.
2. For typical natural gas customers (the majority of heating customers in the state), most of the decarbonized heating solutions are likely to result in some increase in overall heating costs. Some customer groups may be more affected by decarbonizing heating than others, and policy must focus on avoiding undue burdens or unintended consequences, particularly for vulnerable customers.

The study’s findings indicate that policymakers will need to address each decarbonization solution’s unique adoption and implementation challenges to enable broad adoption over time.

“Policy support will be vital to ensuring that the transition to decarbonized heating happens fast enough to meet mid-century decarbonization targets,” noted Jürgen Weiss, a Brattle principal and study coauthor. “Over the next 10 years, policy to support the transformation of the heating sector should focus on ramping up and getting ready, all in the context of ensuring progress regardless of which mix of solutions customers choose.”

The Brattle study also provides a framework to guide early policy recommendations for decarbonizing the state’s heating sector. Rhode Island can promote this transformation through a range of policy options that focus on learning and informing – to help address inherent uncertainties – and by taking steps to enable and plan for the transformation. These steps will include creating incentives for customers to decarbonize, and coordinating the many organizations and consumers who will be involved in the transformation, while ensuring that the state protects vulnerable populations and avoids unintended consequences.

“Heating Sector Transformation in Rhode Island: Pathways to Decarbonization by 2050,” is authored by Brattle Principals Dean Murphy and Jürgen Weiss, with support from Senior Research Analyst Maria Castañer.

The “Heating Sector Transformation in Rhode Island: Technical Support Document,” can be found on the State of Rhode Island website.