All-Electric Forcing in the “Inflation Reduction Act” (up to $14,000 per home)

By Mark Krebs -- August 9, 2022

“It seems that the only people who could claim a $14,000 [home electrification] rebate have well above average income.  If so, like $7,500 electric vehicles (EV’s) rebates, this is an incentive that primarily will benefit the already well-to-do; except nearly twice as much as EV’s.”

“Without gas utilities to serve heating demand, electric utilities will become winter peaking, requiring massive investments of generating capacity and/or battery storage.”  

Searchable text of Inflation Reduction Act is here.

The American public has been sold out in energy and climate just when the opposite seemed to be at hand. This bill is about bigger government, more spending, greater deficits, and more monetary inflation (federal counterfeiting) to make it all work (see Concerned Economists letter).

Hidden in the Bill are innumerable special-interest government interventions, one of which is very anti-consumer that no one is talking about. That provision would eliminate competition to electricity in the residential sector under the guise of reducing carbon. Specifically, the provision is Sec. 50122 titled “HIGH-EFFICIENCY ELECTRIC HOME REBATE PROGRAM.” 

This article is my attempt to shed some light on this travesty. Correcting that massive oversight. Sec. 50122 starts at page 583. The following italicized text are excerpts from page 587 that show rebate amounts:

(A) APPLIANCE UPGRADES.—The amount of a rebate provided under a high-efficiency electric home rebate program for the purchase of an appliance under a qualified electrification project shall be—

(i) not more than $1,750 for a heat pump water heater;

(ii) not more than $8,000 for a heat pump for space heating or cooling; and

(iii) not more than $840 for— (I) an electric stove, cooktop, range, or oven or (II) an electric heat pump clothes dryer.

There are more incentives on page 588:

(i) not more than $4,000 for an electric load service center upgrade;

(ii) not more than $1,600 for insulation, air sealing, and ventilation; and

(iii) not more than $2,500 for electric wiring.

(C) MAXIMUM REBATE.—An eligible entity receiving multiple rebates under this section may receive not more than a total of $14,000 in rebates.

Considering the financial resources available to the average consumers, it seems that the only people who could claim a $14,000 rebate have well above average income.  If so, like $7,500 electric vehicle (IEV) rebates, this is an incentive that primarily will benefit the already well-to-do; except nearly twice as much as EV’s.  

Peak Demand: Electric vs. Gas

Traditionally, both electric utilities and gas utilities designed peak capacity for worst-case scenarios plus a safety margin of around 10 percent. Electric utilities were summer-peaking due to cooling demand, while gas utilities were winter peaking due to heating demand. 

In terms of maximum Btu demand, winter peaks tend to be much higher than summer peaks. The reason is largely a matter of inside to outside temperature differences between summer peaks and winter peaks.  For example, assuming a winter design temperature of -10 deg F. and an interior thermostat setpoint of 75 deg. F, the difference is 85 deg. F. Assuming a summer design temperature of 110 deg. F. and the same interior thermostat setpoint of 75 deg. F, the difference is less than half the winter difference.

Without gas utilities to serve heating demand, electric utilities will become winter peaking, requiring massive investments of generating capacity and/or battery storage.  The worst-case scenario would then be a prolonged “polar vortex” with no wind (a.k.a., “wind drought”) coupled with snow covered photovoltaics. During such periods, all the heat from a typical electric heat pump will be in the form of electric resistance that is built into it; that’s just how typical heat pumps work.

If your local electric utility has “transitioned’ to all renewables, they will need several days’ worth of battery storage. Also, battery capacity drops sharply in extreme cold. That’s just how batteries work. Altogether, this equates to astronomical costs that get passed on to consumers.  In short, if you are “all-electric,” you will need to fend for yourself and should at least consider investing in your own emergency generator system, assuming you can afford it.

Enemy Collaboration: Bad Consequences

The electric utility industry deserves much of the blame for these travesties. Leading electric utility industry trade associations support HR 5376.  This was documented by an S&P Capital IQ on July 28^th in an article (behind a paywall) titled “US climate package contains ‘robust’ clean energy tax incentives.”  

Specifically, S&P interviewed Jim Matheson, CEO of the National Rural Electric Cooperative Association and Edison Electric Institute President Tom Kuhn.  Both praised the numerous energy efficiency tax incentives.

The Energy and Policy Institute also discussed electric utility involvement in an online article published on August 4, Utilities that support Inflation Reduction Act are members of trade groups attacking it.  This title is just as misleading as calling HR 5376: “The Inflation Reduction Act.” 

What the article inadvertently documented is that the electric utility industry doesn’t like how they too may see income tax increases, and they aren’t holding back their disapproval of such provisions. But, on the other hand, the Federal government is essentially transferring the energy delivered by gas utilities over to electric utilities, and they will  be collecting more revenue from increasingly captive consumers as their size at least doubles.

The electric utilities are not complaining about that. Maybe that will change in time as electric utilities realize their product is no longer reliable or affordable.  But that may not matter since they became “the only game in town.”

Some of us saw this coming. Electric utility interests have been aligned with those of “all renewables all the time” advocates for several years.  This alliance was announced in 2018 at a national conference of utility regulators, which I wrote about: Warring Against Natural Gas: Joint EEI/NRDC Statement to NARUC (crony environmentalism at work). Their efforts are largely being augmented by the Federal government subsidies and DOE’s “national labs,” since the Biden (mis)Administration took control or the lack thereof).

The Forgotten Consumer

 Politicians and pundits from both parties appear reluctant to question obvious restraint of trade issues and reduced consumer choice impacts. Why?

• For politicians, it’s because their interests lie elsewhere, like using “other peoples money” to trade with vested interests in return for campaign donations and insider information. It’s also because they don’t want to risk a reduction in generous campaign contributions from electric utility interests. [1]
• For pundits, it’s because most of them cater to environmental interests that are “in on it.” They even have their own trade association: The Society of Environmental Journalism. The one thing they do best is to “stick to the script.”

But who wrote the script? Globalists abd global warming activists along with electric utility-oriented organizations like the “nonprofit” Rewiring America boast about their role in drafting these provisions. This is further evidenced by the following yahoo finance article: Inflation Reduction Act would lead to $1,800 in savings for average household, analysis finds.

We have recently begun to witness how Green New Deal variants are failing within the EU. We are also witnessing how the inherent intermittency of renewables put lives at risk. Now “reimagine” the combination of “all renewables all the time” and a major cold weather emergency event (a.k.a., “polar vortex”) like what happened in Texas last year. Further “reimagine” being without coal or natural gas for electric generation as well as natural gas and propane for home heating. 

People will die at a far great pace than the 247 that  died in Texas last year from Winter Storm Uri. This vicious cycle will just get worse the more reliant our society becomes upon on supposedly “clean” (but unreliable) energy sources. And yet, most politicians are reluctant allow for an opportunity for healthy/democratic debate. Instead, most House and Senate hearings have become infomercials for monied interests.

What Now?

Even if there is new management in the House and/or Senate, such problems may persist if public service remains secondary to self-enrichment. Maybe it will take more people dying to get their attention.  Or maybe such loss of life will just be dismissed as “collateral damage” in the ongoing propaganda war against carbon.

Assume there will be meaningful changes in the House and/or Senate after the midterms, along with a new willingness to NOT pull punches regarding the complicity of electric utilities within an increasingly socialistic central planning of energy, what then?  Then, hopefully, we can truly debate the alternatives about what is best for consumers and the environment.  Maybe the debate can move closer the best way to maximize benefits at the least societal cost; taking every effort to minimize the economic damage to consumers.

The Biden Administration is apparently willing to “bet your farm” (or at least your 401K) that the electric grid can, in the time allotted, absorb everything that is now served by the direct use of gaseous fuels AND simultaneously transition away from “dirty” fossil fueled generation WHILE reducing overall utility bills.

Renewables Forcing: How Much, How Far

 The following EIA based graphic from a recent Washington Post article portrays the magnitude of transforming (perhaps unwittingly) the present energy generation mix to renewables. But be reminded, they are also planning to transfer the energy requirements presently served by the direct use of natural gas over to electricity. This could easily double or triple electric generation requirements. That effect isn’t shown in the following chart.

Another observation to be made from the above chart is that there is still a lot of black (coal) and orange (natural gas) in them. Basically, this means that switching to all-electric may have little if any carbon reduction benefits in such states. It is likely that in at least some states, fuel switching to electricity will increase carbon emissions.  So “buyer beware” (in terms of both carbon savings and utility bill savings).

Clearly, the electric utility industry stands to profit from doubling (or more) in size and rate-basing much more expensive renewable technologies, all with the increased cost of “monopoly rents.”  The environmentalists also get what they’ve craved: economic control. Together, they can achieve social control; awarding energy compliance and punishing energy disobedience; like how the system presently works in China.

Summary & Conclusions

For whatever reason, the gas utility industry has not been very effective in countering these threats. I really don’t have an explanation why, but most gas utilities are owned by electric utilities. This fact is also reflected within gas utility trade associations.

All I know for sure is complacency kills and gas utilities will either capitulate or litigate.  I also know that the “Inflation Reduction Act” will cause $billions in stranded gas utility assets. 

My advice to gas utilities:

• Assuming there is still “fight in the dog,” it’s time to start fighting like your livelihoods (and those of your customers) depend on it, because they do.
• Also study up on the takings clause in the constitution and find a way to live with the long-term liability of safeguarding our country’s abandoned gas pipes.

My advice to consumers:

• Be prepared to fend for yourself by investing in a natural gas or propane-fueled emergency generator system (if you can afford one).  But note that if you have an electric heat pump, you’re going to need a much larger generator than if you didn’t.

 I also have some closing advice to regulators:  Do your job.  Integrated Resource Planning (IRP) should not be Institutionalized Revenue Plundering and Demand-Side Management (DSM) should not be Deceptive/Strategic Marketing. Instead, reconsider Least-Cost Planning that was the standard before it was hijacked by corrupted IRP and DSM.  

UPDATE August 4^th, 2022: Ben Lieberman, Senior Fellow with the Competitive Enterprise Institute, wrote an article titled Think Handouts to Rich Electric Vehicle Buyers Are Unfair? Check Out the Inflation Reduction Act’s Homeowner Tax Breaks.  Please read it for his perspectives on this issue.

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Mark Krebs, a mechanical engineer and energy policy consultant, has been involved with energy efficiency design and program evaluation for more than thirty years. He has served as an expert witness in dozens of State energy efficiency proceedings, has been an advisor to DOE and has submitted scores of Federal energy-efficiency filings. 

His many MasterResource posts on natural gas vs. electricity and “Deep Decarbonization” federal policy can be found here.

Mark’s first article was in the Public Utilities Fortnightly and titled “It’s a War Out There: A Gas Man Questions Electric Efficiency” (December 1996). For more of Krebs’s analysis, see his MasterResource archive.

Recently retired from Spire Inc., Krebs is forming an energy policy consultancy with other veteran analysts.

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[1] Increasingly, fear mongering environmentalists have raised sufficient funding to also contribute and/or fund negative political advertisement in efforts to control political narratives.