Should Colorado Change its Energy Policy to Encourage More All-Electric Buildings?

Colorado’s electricity rates and rebate programs are spurring the state’s residential and commercial builders to hit the off switch on all-electric buildings, even though they’re cheaper to build than spaces that use natural gas. 

That’s according to a report from consulting firm Group14 Engineering and Community Energy Inc., a firm that partners with utilities, companies and communities to develop wind and solar energy. 

“Colorado spent over $16 billion on new residential and commercial construction in 2019, with the overwhelming majority of these new buildings relying on natural gas,” Community Energy co-founder and director Eric Blank stated. “Colorado has a near-term opportunity to modify its energy rates and rebate programs to encourage building electrification and accelerate the clean energy transition.”

The study, which Community Energy commissioned, concluded that single-family homes with all-electric space and water heaters are about 25% less expensive to build than homes with comparable natural gas-powered equipment. For commercial spaces, the cost savings was about 8%, according to the report. 

But the study found that the upfront savings from using electrical appliances gets wiped out in the long run by the state’s electricity rates and rebate programs for all-electric systems versus natural gas systems. Colorado’s average electricity rate is about 12 cents per kilowatt hour, which is just below the national average of 13.14 cents, according to a study from Choose Energy.

The Community Energy and Group14 report is based on an analysis of the historic annual utility costs for a 3,000-square-foot single family home and a 28,000-square-foot office building, both of which are in Colorado.

For the home, both the standard and time-of-use rates increased for the electrified building by $250 to $350 a year when compared with natural gas.

To bring the utility costs for all-electric homes in line with natural gas, Colorado would have to reduce its electricity rate by about 25% during peak demand hours and 30% during off-peak times, according to the study. 

For office buildings, annual heating costs for electrical pumps and water tanks was $1,700 to $5,215 more expensive than natural gas. 

The study’s lead author, Celeste Ciziki, a principal at Group14, suggested that the state could easily modify its electricity rates and rebates to encourage builders to move away from natural gas equipment, which “lock-in higher CO2 emissions for the majority of the +50-year building life,” the report states. 

“Simple changes today can make a large difference in realizing the low-hanging fruit of electrifying new building construction and reducing carbon emissions, all while providing comparable comfort and service,” she stated.