The Electricity and Heating Cost Crisis of 2022-2023 - Now What?
The War in Ukraine shocked energy markets and hit consumers here in Connecticut across the board. Back in June, the price of heating oil was as high as $5.80 per gallon. Thankfully, that price is now around $4 per gallon, but it will remain unstable as long as the war goes on. With Russia nearly shutting off Europe’s supply of natural gas, it sent the price of natural gas here in Connecticut up to $16.07 this January which is 21% more than a year ago. And from here, who knows where it goes and for how long? There are no signs the war is going to conclude anytime soon. We could see years of historically high prices to heat our homes. The only good news is this has been a mild winter so far.
But the price rise in home heating across Connecticut is further exacerbated by the rise in the price of electricity, which has gone up due to the price of liquefied natural gas. The price increase for electricity is up 50% per kilowatt hour and that too is due to the war. This means consumers are paying hundreds of dollars more for all forms of energy and will likely be doing so for the foreseeable future.
So, what is a consumer to do?
First, climate change is an imperative like no other. We need to move away from fossil fuels to clean and renewable energy for generating electricity and do it quickly. Connecticut is behind on this front and consumers need to advocate for a faster transition to a more balanced mix of electricity generation that leads to 100% renewable electricity in Connecticut by 2040 or earlier. It is precisely because of our over-reliance on natural gas that we are experiencing spiking electricity costs. Consumers need to press Connecticut policymakers to make a real commitment to these lower cost renewable alternatives such as wind and solar. Massachusetts makes nearly 20% of its electricity from solar power whereas Connecticut only generates 3% of its electricity from solar. This makes us more vulnerable to price shocks like the war in Ukraine.
Second, consumers need to embrace the electrify everything mantra for their homes and transportation. The Inflation Reduction Act (IRA) will give them financial help in doing so with tax incentives and rebates that will make their transition more affordable. For Low- and Moderate-Income families, those subsidies are very significant and put these solutions truly within financial reach.
But what does that look like practically, and what steps should be taken to electrify a home?
The formula begins with a home energy audit. The fastest way to save money on energy is to make sure you are not wasting energy due to insufficient insulation and a poorly sealed home envelope. Home energy audits that lead to a home insulating and sealing project will lower your bills right away and there is money in the IRA to help you pay for it. If you need new windows, they also have incentives.
Consumers also need to think ahead about electrifying their homes because they may need to upgrade or expand their electrical panel to support the needs of new electrical equipment. According to Rewiring America, a leading non-profit organization dedicated to helping consumers electrify their homes, this planning will pay off the next time you have some major energy using appliance fail in your home, and the cost of upgrading your panel is also helped by the IRA.
Rather than be caught in an emergency and needing to quickly replace equipment to keep your house and your water warm, you can plan ahead and make these changes on a more convenient schedule. This will allow you to shop around and educate yourself. Rewiring America has a guide with different scenarios and advice for thinking about a plan to electrify your home over multiple years and how much you can save from using the money from the Inflation Reduction Act.
The next step involves assessing your opportunities to electrify heating, cooling, hot water, cooking and clothes drying. Twenty percent of your energy is used to create hot water. The heat pump hot water heater can replace an existing electric, oil, gas, or propane-heated hot water heater and save you money right away due the fact that heat pump technology is 300% more efficient. Not only will it heat your hot water at lower cost, but it will also help dehumidify your basement thereby saving summertime electricity. In fact, it is better not to wait for your existing water heater to fail before you make this move. With IRA incentives, on top of the baseline savings of $350 per year and $3500 over the life of the water heater, this is something you will want to take quicker action on. Depending on how you heat your water today, you may need to pay for an electrician to wire the new water heater. Those costs are also offset from the Inflation Reduction Act. The supply chain for these water heaters is not backed up right now so you get one installed relatively quickly in Connecticut to start saving money and reducing your carbon emissions.
The other big opportunity in home heating and cooling is to move to a high-efficiency heat pump in place of both your current method of heating your home and for cooling it. Heat pumps come in multiple forms (ground source, air-source ducted and air-source mini-split), but they all can save you money on home heating. According to an August 2021 study reported in Carbon Switch, you could save as much as $900 or more versus an oil boiler or furnace, as much as $800 for a propane furnace, and even save over a gas furnace by $100. Of course those figures are before recent significant increases in the cost of these fuels and the higher cost of electricity, but nonetheless, a heat-pump also provides summer-time cooling with high efficiency, and it does not have the risks of carbon monoxide from combustion nor Nitrogen Dioxide and Benzene associated with gas boilers, furnaces, stoves and dryers.
The other thing homeowners should consider is evaluating if adding solar panels to their home is an option. If you have a newer roof, and it is situated with a decent sun-angle without a lot of trees, it can give you a return on investment in as little as six years and the system will last for 25 or more. With the high cost of electricity, many homeowners are considering lowering or nearly eliminating their electric bills permanently. Again here, the Inflation Reduction Act is offering significant tax incentives.
So, there are plenty of solutions for consumers to save real money on their energy costs and save the planet from climate warming home energy emissions. The savings will require time to research, get quotes, and get in line for installations, but once implemented, will provide years of savings to those who take these steps. Take advantage of the links above to get more detail on your options and make a resolution to electrify everything!
Stephen Lewis is our Greater Hartford Group Chair and serves on the Legislative, Political and CTFA committees of Sierra Club Connecticut.
Join us on February 7 to hear more from Steve at our event: “How the Inflation Reduction Act Can Help You Save Money on Energy Costs”