Full Title: Space Heating with Heat Pumps: The Need for Alternative Rate Designs in Massachusetts
Author(s): Joshua R. Castigliego, Elisabeth Seliga, and Elisabeth A. Stanton
Publisher(s): Applied Economics Clinic
Publication Date: December 2, 2023
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This white paper was prepared on behalf of the Green Energy Consumers Alliance (GECA). It presents a preliminary assessment of costs to customers heating with air-source heat pumps (ASHPs), and discusses the need for alternative electric rate designs to make heating electrification cost effective in Massachusetts. An “operating cost gap” is a measure that can be used to determine whether switching from one heating system to another would be a cost-effective choice for a given household. The “cost gap” is the difference between current and expected future operating costs and can be used to compare different heating systems. A household looking to electrify its heating system by switching from a gas-fired furnace to electric heat pumps will include this operating cost gap in its decision-making.
Alternative rate designs have the potential to close the operating cost gap between heating technologies, which would make ASHPs a cost-effective heating option relative to fossil-fuel heating systems like gas-fired furnaces. By exploring and implementing alternative rate designs, Massachusetts would be able to make ASHPs more attractive to consumers, which would stimulate the widespread adoption of electric heat pumps and support its decarbonization efforts in the buildings sector.