If Heating Goes Electric, We're Going to Need a Better Grid

(Bloomberg Opinion) -- When the power went out in Texas last month, most people lost their heat too. Sixty-one percent of occupied housing units in the state rely on electricity for heating, according to the Census Bureau, versus 39.5% nationally. Only six states, all also in the South, have a higher electricity share.

Dependence on electric heat also drove the demand surge that helped cause the Texas blackouts in the first place. The power grid managed by the Electric Reliability Council of Texas, which covers almost all of the state, at one point delivered 20% more electricity than its peak winter forecast, according to BloombergNEF, Bloomberg's energy-research arm. Actual demand was 30% or more above the forecast. The combination of electrical generation from coal, natural gas, wind and even nuclear falling out for a variety of freeze-related reasons and millions of Texans cranking up the electric heat because it was so cold proved more than the system could handle.

The weather itself was not, contrary to some earlier reports, unprecedented. A December 1989 Texas cold snap imposed more extreme heating needs on a population-weighted basis, according to a new and not-yet-peer-reviewed analysis by environmental engineers from Rice, Stanford and Columbia universities. But at that point Texas had 12 million fewer inhabitants than it does now, and only about 40% of its households depended on electricity for heat.

The Texas switch to electric heat has been especially rapid, but electricity has been gaining ground on natural gas as a home heating “fuel” nationwide as well. Continued electrification of heating is also seen as essential to cutting carbon-dioxide emissions enough to slow or stop global warming. There are drawbacks to every kind of heat, and on balance I agree that electric is the best bet for the future. But if we're going to become more reliant on it that means working hard to avoid what just happened in the Lone Star State.

Here's the national heating picture. I've included every fuel that has been used in more than 10% of homes at some point since 1940, so the mix of fuels is a little different than in the Texas chart.

A lot of this move toward electric heat has to do with where the U.S. population has been shifting. More new houses have been built in Texas and the rest of the South, where electric heating has been dominant for a while, than in the Midwest and Northeast where it is not. But after bottoming out a couple of decades ago, electric heat's market share in new housing has risen everywhere.

The big rise in the 1970s was all about the energy crisis. As oil and natural gas prices skyrocketed, electricity — then produced in the U.S. mainly by burning coal — became a more attractive alternative. There was a boom in heat pumps, a century-old invention that was first put to widespread practical use in the 1950s and offered the promise of far-more-energy-efficient heating and cooling.

Then natural gas prices stopped rising in 1983 and stayed flat for nearly two decades, while heat pumps quickly fell out of favor everywhere except in the South.

Heat pumps work by, well, pumping heat from inside to outside and vice versa. When the temperature difference between indoors and outdoors is modest they can be spectacularly effective and efficient, but when it grows large they have tended to struggle. This explains why heat pumps are so much more common in the South than in colder parts of the country — the temperature differential between 70 degrees indoors and 95 degrees outdoors is a lot smaller than between 70 degrees and 10 below. Heat pumps are often supplemented with electric resistance heaters meant to kick in when outdoor temperatures drop below about 40 degrees. Because these heaters require about three times as much energy as a heat pump to produce the same amount of heat, this switchover can sharply accelerate the increase in electricity demand in a cold snap in a place with lots of heat pumps.

Ground-source heat pumps in which heat is exchanged not with the outdoor air but with the ground or a body of water can be effective in much lower temperatures but they're expensive to install and remain pretty rare, constituting 2% of all heating systems in U.S. single-family houses completed in 2019. Over the past decade, technological advances have made it possible to build air-source heat pumps that keep houses warm when it's 10 below out, but I doubt many people in Texas or anywhere else have those yet.

What's more, even if you had installed the most efficient cold-weather heat pump available in your LEED-platinum-certified Texas house it still wouldn't have done you any good if your power went out last month. Same goes for almost everybody who relied on natural gas for heat, given that 87% of natural-gas heating systems in single-family homes in the U.S. are warm-air furnaces that need electricity-powered fans to distribute the heat.

Just to complicate things even more, natural gas has long been the main fuel for electricity generation in Texas (in the U.S. as a whole it first surpassed coal in 2016). Another cause of the Texas blackouts was that home use of natural gas gets priority over generating plants, even though many more Texans now get their heat from natural-gas-powered electricity than from natural gas directly. Yet another was that power outages shut down the compressor stations that keep natural gas flowing through pipelines.

How should these problems be addressed? Lots of Texans have been taking matters into their own hands and buying gasoline- or diesel-powered generators, which is totally understandable but not exactly efficient on a mass scale and definitely not climate friendly. It's also not an option for most of the state's apartment dwellers (you're supposed to keep generators at least 20 feet away from buildings), who are especially dependent on electricity for heat. About one-fifth of Texas housing units are in buildings of five units or more, and 95% of such units in the West South Central Census division, which is mostly Texas, have electric heating systems.

Batteries can also play some of the role that generators do, and there are people with visions of a future in which millions of parked electric cars plugged into the grid will play a major role in balancing the supply and demand of electricity. But while such a system would probably have been able to avert last summer's evening blackouts in California, where power imbalances lasted just a few hours, it's not so well suited to a days-long increase in heating demand.

Another possible response is managing that demand better with more-dynamic pricing of electricity. Given the headlines about customers of one Texas power provider, Griddy, facing bills of more than $10,000 in the wake of last month's cold weather this may seem unnecessary and even unwise, but Lucas Davis, a professor at the Haas School of Business at the University of California at Berkeley, argues that Griddy serves only a tiny share of the market while most Texas utility customers had no incentive to cut back on power use.

Overall, though, what Texas seems to have needed most last month was a more reliable system of generating and distributing electricity, in particular one not so vulnerable to a cold snap. Electricity producers in colder parts of the country are better prepared to deal with extreme cold, and states that don't cut themselves off from the rest of the country's power grid have more flexibility in an emergency. But increased reliance on intermittent solar and wind power coupled with increased electrification of energy are going to require a major upgrading of the grid in more places than just Texas.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”

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