Davis, Lucas “What Matters for Electrification? Evidence from 70 Years of U.S. Home Heating Choices (Revised May 2022) | WP-309R | Blog

Abstract:
The percentage of U.S. homes heated with electricity has increased steadily from 1% in 1950, to 8% in 1970, to 26% in 1990, to 40% in 2020. This paper investigates the key determinants of this increase in electrification using data on heating choices from millions of U.S. households over a 70-year period. Energy prices, geography, climate, housing characteristics, and household income are shown to collectively explain 90% of the increase, with changing energy prices by far the most important single factor. This framework is then used to calculate the economic cost of an electrification mandate for new homes. Households in warm states tend to prefer electricity anyway, so would be made worse off by less than $350 annually on average. Households in cold states, however, tend to strongly prefer natural gas so would be made worse off by more than $1000 annually. These findings are directly relevant to a growing number of policies aimed at reducing carbon dioxide emissions through electrification, and underscore the importance of pricing energy efficiently.