The problem with electrification? Friction
· 21 min read
Getting the world to net zero emissions relies heavily on electrification. But there are numerous friction points slowing progress. Here are some of the ways we can overcome them.
I help businesses and communities reduce their greenhouse emissions, both directly and indirectly by influencing government policy (through advocacy and submissions) and public action.
Over the past few years, the solution for mitigating a big chunk of emissions reduction has winnowed down to two key steps1:
The rallying cry of “electrify everything” applies to:
Couple that with the transition to fully renewable electricity grids, and collectively it adds up to the potential to slash over 50% of global emissions3.
And it gets better. A fully renewable electricity grid has zero marginal cost of energy, so once current transition issues are sorted out (which in some markets are leading to reliance on relatively expensive gas generation), electricity costs should be cheaper overall. And, as they said in the opening sequence of the 1970s TV series The Six Million Dollar Man, “we have the technology”! Pretty much everything we need to electrify uses proven technologies including electric motors, heat pumps, and induction units. In some cases, such as aviation and certain high-heat industrial applications, we still need to innovate on existing technologies to adapt them safely for specialist uses.
Everyone understands the concept of friction - the way an object in motion is slowed down by the air it is moving through and in the case of a vehicle the friction from the contact of its tyres with the road. In electrical terms there is friction too: the resistance that an electrical current passes through a wire. In fact, a lot of inefficient electrical heating currently relies on electrical resistance to release heat (and light) energy.
But neither of those are the types of friction we're talking about here. Because what's holding us back on electrification is transactional friction. And now we're getting out of physics and into economics.
Transactional friction is described as "the sum of all the direct and indirect costs of performing a transfer." Whenever a commercial transaction takes place there is some combination of search and information costs, bargaining costs, and administrative or compliance costs.
Let's compare the two tasks that collectively could deliver over half the emissions savings we need to make.
An electricity grid is incredibly complex, and there are many technical, permitting, and commercial challenges involved in transforming it to being renewably based. But at the end of the day (with the exception of rooftop solar and home batteries), for a given country it comes down to the actions of dozens to a few hundred highly regulated entities (power generators, transmission and distribution utilities, and electricity retailers) to get it done. It's a B2B world where professionals are employed to make rational decisions (not that they always do, and not that politics hasn't often been in the way of efficient and long-term outcomes).
Electrification is a whole different ballgame. In this case, we're relying on the actions of perhaps a billion households globally, along with millions of commercial building owners and businesses, to make a series of transactions, not all of which may appear to be in their immediate self-interest.
What are these transactions? In most cases it's about changing the machines households and businesses use to heat their buildings and water, cook their food, and how they get around.
And what are the types of transactional friction they experience? These are the ten friction points I see in the field:
Let's face it, many people just aren't plugged into the climate breakdown. They don't understand that anything is wrong with their current machines that rely on fossil fuels. Even if they've heard about electrification as a tool to reduce emissions, they may be unreceptive to the message due to their politics or ideologies.
And in some countries, governments aren’t exactly making it clear to householders what needs to be done to avert catastrophic levels of “global boiling”. Lately in Australia, in the wake of a couple of progressive regions introducing bans on new gas connections, the gas industry has been allowed to run advertising spruiking cashback offers to swap old electric appliances for new gas ones, alongside easily debunked claims that gas is essential to the energy transition.
In Australia, where I'm based, about a third of households rent, and renters generally have no ability to make changes to the dwelling. Landlords don't pay energy bills, so even if part of the attraction of electrification is energy cost savings (due to superior efficiency, the ability to generate your own electricity from rooftop solar, and reducing from two or more energy sources, each with daily supply charges, to just one electricity bill) there is no direct incentive for the owner to invest. Condominiums are another area where individual unit owners may wish to electrify, but the owner’s corporation may balk due to costs, visual amenity concerns or other factors.
For those who are disposed to electrify, the next question is what's involved?
While the technology of a heat pump has been around for a century (there's one in every refrigerator), the idea of using it for heating air or water might seem a bit unlikely. Some people already have an air conditioner (another type of heat pump) with reverse cycle functionality but have never used it for heating and rely on a gas heater instead.
If people are used to the convenience of an instantaneous gas hot water system, they might be worried about running out of hot water mid-shower when switching to a tank-based heat pump system.
Some people are dismissive of induction cooktops, either wedded to the purported benefits of “cooking with gas”, or perhaps because of a mediocre experience with a cooktop that had the same smooth glass finish but was actually using an inefficient resistive coil or ceramic elements.
I can personally attest that cooking with induction is great: it takes half the time to bring a pot to a boil than with gas; control is precise and instantaneous; there is no wasted heat so you only cook the food, not the room (great in summer); there are no toxic gases as there are with a gas stove (my child's asthma vanished when we removed gas appliances from our home, having been one of the 12% of children with asthma who needlessly suffer due to living with gas); and they are so much easier to clean than greasy gas trivets and burners. If you're into wok cooking, you can also get induction models with a concave cooking surface that heats the sides of the wok.
If they're considering an electric vehicle, people may have many questions about range (even though 99% of the year they will only be using it for short journeys such as urban commuting, school drop-offs and/or shopping). They might be concerned about the ability to charge easily if they don't have the convenience of off-street parking at their residence, or if they're in an apartment building with limited ability to install a charger in their parking spot.
If it ain’t broke, don’t fix it. Many residential occupants are perfectly happy with their existing appliances and would only consider changing if renovating, or if the current one breaks (some estimates suggest up to 80% of hot water and fixed heating systems are purchased this way). In the context of substantial renovations, electrification makes perfect sense. But in the context of urgent replacement, the path of least resistance is a like-for-like replacement in the absence of appropriate regulation and/or incentives.
The technology for residential electrification is mature. However, in some circumstances, it is physically difficult. Low uptake rates for solar on existing single dwellings in established suburbs, for example, can be a result of factors including overshadowing, or roofs made from fragile (e.g. slate) or dangerous materials (such as asbestos). In apartment buildings, obstacles might include inadequate pathways for cable reticulation, inadequate capacity for additional electrical loads, or lack of space for new equipment (which can be bulkier or have a different form factor to existing plants). These barriers are not necessarily insurmountable but can add significant cost or complexity to the electrification task, putting off many householders and apartment owners.
Assuming technology reticence is overcome, and the decision-maker perceives there is sufficient incentive to make a change, people seeking - and able - to electrify need to do a bit of research on what to buy. Most people switch home appliances rarely, if ever. And a vehicle is a major purchase for most.
Not only are the leaders in electrified brands often not the names people are used to (for example Tesla and BYD in the EV space), but the key features by which you assess the relative merits of an electrified vehicle or appliance can sometimes be quite different. Battery size and range, versus fuel tank capacity and miles per gallon (or km/l), for example. In the hot water space, coefficient of performance, decibel ratings and recovery rates feature alongside the more familiar tank size and warranty considerations.
Unfamiliar brands also spark the next transactional friction point: do I trust them? Will they still be there over the life of the warranty?
And it’s not just the piece of equipment. The tradespeople: the plumbers and electricians who are needed to install new appliances, solar, or EV chargers, often have an uneasy relationship with their customers. Survey after survey finds high levels of distrust of tradies (to use the Australian vernacular). Who wants the hassle of dealing with them, particularly when you’re asking them to do something that you don’t know much about?
That’s if the plumber who eventually turns up to provide a quote doesn’t try to talk you out of the heat pump hot water system you’re asking about - a complaint we hear from many householders here.
And if you do manage to get a few quotes, how can you be sure you’re comparing apples with apples? Will they do a good job with the installation? Or will they start, and then suddenly remember that you need a separate electrical circuit and either “that’ll be extra” or “you’ll have to get your electrician to put that in”?
The preceding section presupposes you’ve managed to find a few tradespeople who have the right skills, can supply the product you want, and who have bothered to turn up and quote. In some areas, competent electrification trades are so thin on the ground that you might be waiting months to get a phone call returned, let alone for them to do the work.
Of course, that’s a generalisation but given that we need to be electrifying about 100,000 homes a day (globally), every day, to achieve net zero by mid-century, it’s clear that the challenge requires a massive pool of qualified, capable and motivated tradespeople. Technical colleges around the world just aren’t minting new electricians fast enough. Let alone enough tradespeople with a basic grasp of customer service and project management.
You’re sold on electrification. You’ve done your research, picked the appliance or vehicle you want and, if applicable, found someone you think you can trust to install it. But when you try to place an order, you’re informed of a multi-month delay.
This challenge peaked during the COVID-19 pandemic and has eased back, but some electrification items may have longer lead times than their fossil-based equivalents.
If you’re replacing an otherwise functional appliance or vehicle, you might be happy to wait. But as mentioned above, many appliances are only replaced when the old one breaks. Say it’s a hot water system or a heater and it’s the middle of winter: most people are not going to wait around for a newfangled electric unit to be delivered when the emergency plumber has a replacement gas one in their van, are they?
Even if the emergency plumber happens to be well disposed towards electric appliances, electrification from gas (or oil-based heating) often involves the installation of a new electrical circuit. The plumber might need an electrician to run this. The home’s electrical board might not have capacity. Neat reticulation of the cable to the necessary location might be complex depending on how the building is built. If it’s an apartment, permission of the owner’s corporation may need to be sought if the works pass through common areas of the building.
Faced with these sorts of challenges, it’s pretty reasonable that the householder would throw up their hands and accept a like-for-like replacement of a broken fossil-fuelled appliance.
Electrification doesn’t come cheap. While a fully electrified home needn't cost any more if you build it that way up front, retrofitting an existing home or apartment costs thousands to tens of thousands of dollars (part of which is due to the extra electrical work noted above). Whether the householder was planning to replace appliances anyway will affect their perception of the payback period: if replacing an otherwise serviceable gas product, the energy cost savings may not seem compelling. On the other hand, simply insulating and draught sealing a leaky home can be very cost-effective.
Electric vehicles still sell for an upfront premium (plus you may need to install charging facilities) and there is, as yet, relatively little second-hand stock on the market, meaning used EVs remain somewhat expensive. On the other hand, charging costs are significantly cheaper for the same distance driven compared to buying petrol or diesel, and there are considerably fewer moving parts to service. Battery warranties are typically a minimum of eight years, and many models are achieving longevity and mileage well in excess of a typical internal combustion vehicle. That’s of little comfort to a low-income family, for whom even second-hand EVs remain out of reach.
Cost remains a huge friction point, and it's a brick wall for low-income households.
1980s car advertisements often touted the vehicle’s drag coefficient - the extent to which friction reduced the vehicle’s fuel efficiency. The lower the number the less wind resistance. Today, to meet the electrification challenge head on, we need governments to roll out a suite of complementary policies that reduce transactional friction, including:
The first priority is educating households about the electrification imperative and critically, creating a compelling “what’s in it for me” narrative weaving in messages about cost-effectiveness, other performance benefits (eg the effortless acceleration of EVs), and reduced air pollution / better health. Common objections or myths should be addressed head-on, such as “I’ll need to replace all my pots and pans with special induction ones” or “EVs can’t tow a trailer”.
One benefit we haven’t touched on yet is the capital gain of an efficient, electrified home or apartment. A study of thousands of real estate sales in Australia found a price premium of 17% for homes and 12% for apartments that mentioned solar or other sustainability features in their listings. That's far more than such features would have cost the owners to install. While not a rigorous study, it is an encouraging message to homeowners, including landlords. If building a home to the highest possible standard in Australia, the trade-off for upfront costs vs energy savings can be as much as 8 years saved off the life of the mortgage. That’s 26% of a 30-year mortgage!
Impartial and well-publicised buyer's guides for electrified appliances and EVs, from trustworthy sources including consumer advocacy groups and government rating schemes, go a long way to helping households sort good brands from the rubbish and ask the right questions of installers and appliance retailers. Australia’s star rating scheme for electrical appliances is currently different than that for gas, and has no ratings for heat pump hot water schemes, leaving householders confused and poorly informed.
Financial incentives may be critical to overcome cost friction, particularly for low-income households. A growing number of countries have introduced government incentives to reduce electrification costs, including energy savings certificate schemes, rebates, tax credits and concessional finance covering building and transport electrification. Some electricity utilities are introducing finance plans for efficiency and electrification upgrades that can be paid back as the household uses electricity at no greater cost than they previously paid.
Support for low-income households needs to be sufficient to overcome incumbency and up-front installation costs. There should be incentives and support for landlords and changes to minimum renting standards if the electrification outcomes for low-income households are to be improved. Failure to do so will leave low-income households increasingly worse off as they pay higher costs for a gas network than those who can afford to are abandoning. Instant asset write-off plans may encourage some landlords; capital gains tax discounts at the point of sale of fully electrified dwellings might incentivise others.
However, governments must walk a fine line between incentives that are ineffective at stimulating demand for electrification due to their complexity or difficulty, versus those that simply wind up as additional profit margins for manufacturers or installers, or those that encourage unscrupulous installers to flog cheap, low-quality appliances to profit from generous government subsidies. Careful scheme design by experienced policy specialists is critical.
While incentives provide a carrot, a firm regulatory stick is also needed to achieve the pace of electrification required to avert catastrophic climate change. The Ottawa Charter for Health Promotion provides useful guidance here: make the desirable habit - electrification - the logical choice, by making the undesirable harder to perpetuate. Sunset dates for the sale of new internal combustion vehicles are a welcome move in several jurisdictions. Gas connection bans for new dwellings send a key signal to householders and avert massive retrofit costs. An end date on the sale of non-electrified appliances would then help existing building owners start to transition, particularly if emergency plumbers were incentivised and enabled to only replace broken gas items with electric.
Phasing in minimum rental efficiency, energy, and/or health standards pushing landlords towards electrification would deliver dividends for renters and capital gains for owners - negating the split incentive friction point covered earlier. A number of countries are some way down this path, as noted in this 2020 review conducted by the Australian government.
Electricity distribution (poles and wires) in urban areas becomes a key challenge as loads start to increase due to electrification and more variable renewables are added to the grid. Depending on distributor utility ownership structures and regulations, they might be incentivised to build out the network in a way that winds up passing massive costs to electricity consumers and avoids tapping into the considerable opportunities of distributed energy resources (DER), including solar on building roofs, making use of the aggregated demand response capabilities in water heaters and reverse cycle air conditioning systems, tariff structures that encourage electric vehicle and home battery owners to charge when renewables are producing excess, and so on. Regulation requiring distributor utilities to model the optimal path towards full electrification and avoid unnecessary "gold plating" of the network will become critical as densities of EVs and replacement of fossil-fuelled building appliances increase.
Strata (apartment) regulations might also need to be amended to make it easier for individual residents to electrify, add EV chargers, and for common upgrades to be pushed through owners’ corporations and third-party strata management companies. Ensuring financial incentives are available to apartment owners and owner’s corporations is critical: some are mainly applicable to separately titled homes.
In the EV space, careful consideration and facilitation of charging requirements for different user needs will go a long way toward addressing a key friction point in that market. A personal peeve of mine is seeing progressive politicians at ribbon-cutting ceremonies for Level 3 DC fast chargers when the vast majority of urban charging needs will be met by Level 1 and Level 2 chargers. Moreover, rather than assuming every current vehicle owner will switch to an EV, governments should plow much more of their transport budgets into active and public transport: experts recommend 20% of government transport budgets be allocated to pedestrians and cyclists, with a further 50% dedicated to mass public transit. Increasingly, city-dwellers should feel confident to ditch personal vehicle ownership and roll with great, affordable public transport, safe micro-mobility (eBikes, scooters and the like), car-sharing schemes for occasional uses, and great pedestrian infrastructure for short trips (including trees or shade structures).
Governments also have a role to play in accelerating the number of qualified engineers, electricians, plumbers, and other trades necessary to undertake the vast amount of electrification work, while maintaining high standards of safety and, where possible, reducing the labour costs associated with electrification. A massive ramp-up of electrification skills training and licensing is critical, along with funding for professional conduct and complaints handling.
One (relatively) simple idea that would help reduce costs for householders without compromising safety, is to cross-train and certify plumbers to run the additional electrical circuit needed for a heat pump hot water system or when replacing a gas cookstove with induction, in cases where the meter board has spare capacity, and where other conditions are met that reduce the risk and complexity.
The US Inflation Reduction Act is an example of legislation aiming to bolster domestic supply chains for the electrification challenge. However, few countries have the mass market potential of the United States, so many will continue to rely on imported materials, parts or finished products. Clear signals from governments that they are on an electrification fast track, combined with sensible regulation and incentives for businesses, may help shore up the availability of imports.
Given growing paranoia around battery fires (which is somewhat justified for e-mobility devices given lower quality and certification standards and poor user practices, but somewhat hyped in the case of EVs), it is essential that governments beef up safety certification of local and imported equipment, determine sensible fire safety measure, ensure fire departments are appropriately trained and equipped to deal with low frequency but hard to extinguish EV battery fires, and work collaboratively with insurers to maintain coverage and affordability.
That's merely a small sampling of potential government interventions. Electrification, in conjunction with the move to renewable grids, represents the single biggest opportunity to reduce greenhouse emissions and avert climate breakdown. But it's also one of the hardest areas to tackle, because of the sheer number of people and organisations that need to make billions of decisions and spend trillions of dollars to make it happen. At the moment, as New Zealand musician Tim Finn sang, there's a fraction too much friction. Governments must take the lead in providing the necessary lubrication to allow the electrification revolution to accelerate.
1 There’s a third step, which is to “efficiency the heck out of everything,” because if you do that then we could slash the amount of renewables and storage we ultimately need to build. Electrification usually delivers a substantial efficiency dividend, but when it comes to buildings there are often a lot of scopes to insulate, draught-proof, and otherwise improve their thermal performance. A great co-benefit of such efficiency improvements is that they also improve the resilience of buildings when it comes to protecting occupants from the growing number of extreme heat events.
On the other hand, the Jevons paradox holds that energy efficiency in turn increases overall energy demand in the absence of regulation to the contrary. An extension of efficiency is to question whether there is a genuine societal benefit to a given product or service. The wealthier amongst us already enjoy many frivolous but energy and/or emissions-intensive luxuries that our biosphere cannot sustain. To avert climate and biodiversity breakdown it seems inevitable that such excesses would need to be curbed.
2 Moving away from coal, oil and gas also reduces the amount of energy we currently use to dig it up, process, store, and transport fossil fuels. For example, about 40% of cargo shipping involves the transport of these fuels.
3 Actual emissions savings depend on assumptions around the ultimate extent of electrification that is achieved. Some of the savings accrue from reducing fugitive and energy-use emissions at fossil mining sites associated with the reduction in fossil fuel use, and from the reduction in primary energy due to the superior end-to-end efficiency associated with electrification. Estimated using Our World in Data - Emissions by Sector.
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