How Do Distributed Energy Resources Change the Economics of Decarbonization in Michigan

Abstract

Residential space heating is responsible for about 7% of U.S. greenhouse gas emissions. Many analysts believe that electrification with electric heat pumps, energized by clean energy, is a straightforward way of decarbonizing this sector. However, electrification is expected to raise heating bills in cold climates (e.g., in Michigan), making adoption difficult. Here, we use actual electricity and gas prices and rate structures in Michigan, combined with simulated hourly energy use data from nearly 3000 single-family homes, to investigate whether coupling heat pumps with rooftop solar photovoltaic generation (solar PV) might ameliorate the increase in bills from heating electrification. Using projected short run marginal emissions factors from the National Renewable Energy Laboratory’s Cambium database, we investigate to what extent combining rooftop solar PV with heat pumps might affect the reduction in greenhouse gas emissions. We find that, for most Michigan homes, the reduction in bills brought by the combination of heat pumps and solar PV is more than the sum of savings from each strategy individually; that is, the strategies are synergistic in terms of bill reductions. The installation of electric heat pumps will reduce greenhouse gas emissions more than solar PV if the electricity grid is decarbonized by 2035. However, if the grid is only decarbonized by 2050 solar PV would be more effective at reducing emissions. We find that heat pumps and solar PV are not always synergistic in terms of greenhouse gas emissions reductions.