Rincon Consultants, Inc.
449 15th Street, Suite 303
Oakland, California 94612
510-834-4455
www.rinconconsultan ts.com
Attachment 1: Single-Family and Low-Rise Multifamily Buildings Electrification Costs
Upfront Electrification Costs
Electrification upfront costs include all costs to purchase an appliance, install and permit it, and make it operational. This includes wiring, labor, and contractor mark ups. Upfront costs were analyzed using the most recent and location specific data available. See Appendix A for data sources.
For most upfront costs, median install values were selected to inform the cost analysis. Using median costs helped remove outlier quotes from contractors, which would have influenced the average value.
Quotes for some equipment, such as furnaces, could vary between contractors by as much as $15,000 for the same project. Where median costs were not available, averages were used.
In general, the costs for single-family homes and the costs per unit for low-rise multifamily buildings (3 stories and under) will be similar. Low-rise multifamily buildings tend to use similar equipment to single-family homes and one piece of equipment may even serve multiple units in some buildings. For example, an 80-gallon hot water heater being used by both units in a duplex. The refore, the per unit costs for electrification in Table 2 are assumed to be conservative for multifamily buildings which use residential (as opposed to commercial) sized equipment. High-rise multifamily homes (over 3 stories) look more like commercial buildings with a wide variety of equipment and the potential for larger centralized systems.
Like for Like Scenario: Replace Gas Appliances with New Gas Appliances Upfront Costs In the gas ‘like for like’ scenario (base case), where it is assumed that the building owner replaces existing natural gas appliances with new natural gas appliances, the typical whole-home cost in San Mateo without air conditioning1 is $11,012. Once costs for air conditioning (AC) are added in, the total projected cost to replace all appliances that run on gas plus an air conditioner is $18,512. The results are summarized in Table 1.
Table 1 Like for Like Scenario: Replace Gas Appliances with New Gas Appliances Appliance, Install, Wiring End Use Median/Average Cost (All Data) Gas water heater Water Heating $2,800
Gas furnace Space Heating $6,132
Air conditioner (keep existing furnace)* Space Cooling $7,500 Gas dryer Clothes Drying $925
Gas stove Cooking $1,155
Whole-Home Total Cost without AC $11,012
Whole-Home Total Cost with AC $18,512
*Note: Existing datasets did not cover the cost of air conditioning, which was found using desktop research (Angie’s List), filtering for location-specific costs by zip code, refers to central air conditioner.2 The air conditioner uses electricity not gas to operate.
1 According to the 2035 Peninsula Clean Energy Decarbonization Analysis, only 25% of homes in San Mateo County have Air Conditioning, with central air conditioning being the most common type of air conditioner. 2 https://www.angi.com/articles/how-much-does-installing-new-ac-cost.htm City of San Mateo
2 Electrification Scenario: Gas to Electric Upfront Costs (No Incentives) Installation costs for heat pump HVAC and the potential need for an electric panel upgrade are two of the largest influencers of cost in home electrification for the City of San Mateo. Differences across installation bids for heat pump HVAC systems are a major cost variable for the electrification of space heating. Accordingly, a ‘low’ and ‘median’ scenario was broken out for each to detail the significant difference in installation bids for heat pump HVAC systems. This discrepancy in installation bids from contractors stems from home-specific needs for ductwork upgrades, locations to site HVAC systems, and labor costs which are highly variable depending on the contractor. Note, heat pump HVAC systems provide both electric space heating and cooling. Electric panel upgrades were also a significant cost variable, adding $3,700 to total electrification costs if they were necessitated as part of the e lectric appliance installation.3 Upfront costs to electrify each appliance are described above in Table 2.
Table 2 Electrification Scenario: Replace Gas Appliances with New Electric Appliances (No Incentives)
Appliance, Install, Wiring End Use Median/Average Cost (All Data) Electric heat pump water heater Water Heating $6,000
Electric heat pump HVAC system
(provides both space heating and cooling)
Space Heating/Cooling:
Low-Cost Scenario
$13,965
Space Heating/Cooling:
Median-Cost Scenario
$17,910
Electric dryer Clothes Drying $1,963
Electric stove Cooking $2,375
Panel upgrade (if needed) Electrical $3,700
Electrification Scenario: Incremental Costs (Difference Between Gas and Electric Install Costs)
‘Incremental costs’ for electrification of individual appliances are at the core of this analysis because they describe the cost premium (if any) that a building owner would pay to make a switch to electric at the time of appliance replacement. Incremental costs describe the price difference between a gas replacement and an electric appliance . The incremental cost analysis below also factors in $7,500 savings for homes that displace both a gas furnace and air conditioning with a single heat pump HVAC unit.
Table 3 shows incremental costs for replacing gas appliances with electric appliances, with no incentives. The next section will demonstrate the impact of current incentives to reduce the upfront costs of electrification.
3 As discussed in the BayREN Decarbonizing Single-Family Homes Case Study, potentially costly electric panel upgrades are frequently recommended by contractors without first understanding the many potential avenues to avoid this cost through maximum usage of existing service capacity. The threshold for a panel upgrade appears to be around 100 amps. A single family home with a panel below 100 amps may need a panel upgrade to accommodate all-electric appliances. Panels 100 amps and above can likely find pathways to electrify without a panel upgrade. The BayREN Decarbonization Case Study recommends several ways for “panel optimization”, including making a whole home electrification plan, and investing in circuit sharing and pausing infrastructure instead of a panel upgrade.
City of San Mateo
3 Table 3 Electrification Scenario Incremental Costs (No Incentives) Incremental Cost = Electric Appliance Cost – Gas Equivalent Cost Appliance End Use
Electric
Appliance Cost
Gas Equivalent
Cost
Median/
Average
Incremental
Cost
Gas furnace only: Electric heat
pump HVAC system
Space Heating/Cooling:
Low-Cost Scenario
$13,965 $6,132 $7,833
Space Heating/Cooling:
Median-Cost Scenario
$17,910
$6,132 $11,778
Gas furnace with AC: Electric
heat pump HVAC system
Space Heating/Cooling:
Low-Cost Scenario
$13,965 $13,632*
$333
Space Heating/Cooling:
Median-Cost Scenario
$17,910
$13,632*
$4,278
Electric heat pump water heater Water Heating $6,000 $2,800 $3,200 Electric stove Cooking $2,375 $1,155 $1,220
Electric dryer Clothes Drying $1,963 $925 $1,038
Panel upgrade (if needed) $3,700 N/A $3,700
* Includes $7,500 for a new air conditioning unit as well as $6,132 for a new furnace.
Figure 1 displays the incremental cost to electrify as the difference between the blue bar [electric] and gray bar [gas], which display appliance replacement costs. The difference between each bar is the increase in cost for upgrading to an electric appliance before rebates are applied. 4 Note that Space Heating & Cooling [Total Cost- Gas] combines cost for AC and a gas furnace.
Figure 1 Incremental Costs ($) to Electrify Each Appliance
4 Figure 1 combines costs for AC + a gas furnace to illustrate the full cost of dual space heating and cooling. It also selects the median, not low-cost HVAC scenario as a conservative estimate for an electric scenario for space heating and cooling. Units are displayed in $ amount.
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4 Figure 2 reflects four different HVAC scenarios which each result in a different incremental cost. A major finding is that when a heat pump HVAC is used to replace a gas furnace and AC, the incremental cost to upgrade is much lower and, in some cases, may be close to cost parity.
Figure 2 Incremental Costs ($) to Electrify: Detailed Heat Pump HVAC Scenarios
Whole-Home Electrification Incremental Costs
Electrification in existing buildings will likely happen on an individual appliance level instead of at the whole-home level, as building owners will likely only upgrade appliances as they fail. However, looking at the incremental cost to electrify on the whole -home level is useful for understanding the overall upfront cost impact of building electrification.
Over the course of 10-20 years a building is expected to replace each of its major gas consuming appliances including the water heater, furnace, air conditioner (if appli cable), dryer, and stove which all have effective lifespans of less than 20 years. During this time a homeowner would spend between $11,000 and $18,500 dollars to replace gas equipment with new gas equipment. During this same time period upgrading to electric appliances would cost between $24,300 and $32,000 before any incentives and dep ending on varied HVAC costs and need for a panel upgrade . This means the incremental or increased costs associated with whole-home electrification could be between $5,800 and $21,000.
A full cost table can be found in Appendix A detailing different scenarios for electrification.
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5 Current Incentives for Electrification
Current electric appliance incentives available through the Inflation Reduction Act (IRA), Peninsula Clean Energy (PCE), BayREN, TECH Clean California when combined make building owners eligible for $15,500 in rebates and tax credits, as summarized in Table 4. Incentives take the form of both rebates and tax incentives.
Data for existing rebates were collected from most recent online sources on existing federal-level (IRA5), local (PCE 6, BayREN 7, TECH Clean California 8) sources of home electrification rebates. Note that funders change available rebates often. Table 4 data reflect the most recent rebates as of December 2023.
Table 4 Current Electric Appliance Incentives – No Income Qualifications (as of December 2023)**
Appliance End Use
$ Rebate/
Tax Credit*
Available Funder Notes
Electric heat pump
water heater
Water
Heating
$2,000 PCE Stackable with other incentives, but most cannot exceed cost of projects. Must be a PCE Customer
$400 BayREN BayREN Home+ program. All BayREN- capped at $4,000 per customer over an 8-year period.
$3,100 TECH Incentives based on tank size- low-end highlighted here for conservative application of scenarios
$2,000* IRA Max for IRA 30% heat pump water heater tax incentive ($2000) max, must have paid taxes in
calendar year. Additional low-middle income IRA
incentives are upcoming but not included here.
Heat Pump Water
Heater Total Stackable
Rebates and Tax
Credits Available
$7,500 Note that incentives cannot exceed whole project cost which is projected to be $6,000. Whole
project cost currently covered with all stacked
incentives.
Heat Pump HVAC
System
Space
Heating/
Cooling
$2,500 PCE Stackable with other incentives, but most cannot exceed cost of projects
$400 BayREN High efficiency heat pump ≥ 17 SEER replacing existing natural gas system
$2,000* IRA Tax Credit, same as description for electric heat pump water heater
$1,000 TECH Single family incentives of $1,000 for new heat pump HVAC systems, with up to two incentivized
systems per home for a total of $2,000; must be a
TECH-enrolled contractor; project must be a non-heat
pump to heat pump installation; no new construction,
retrofits only; equipment must be AHRI matched
systems; equipment must meet Title 24 code
minimum standards.
Heat Pump HVAC
System Total Stackable
Rebates and Tax
Credits Available
$5,900
5 https://www.rewiringamerica.org/IRAguide
6 https://www.peninsulacleanenergy.com/residential-programs/ 7 https://www.bayren.org/articles-tools-tips/electrification 8 https://switchison.org/
City of San Mateo
6 Appliance End Use
Rebate/ Tax
Credit*
Available Funder Notes
Electric dryer Clothes
Drying
$250 BayREN Specifies heat pump clothes dryer
Electric Dryer Total
Stackable Rebates and
Tax Credits Available
$250
Induction Stove Cooking $250 BayREN Specifies Induction Range Induction Stove Total
Stackable Rebates and
Tax Credits Available
$250
Electrical Panel and New Circuits $1,000 PCE
$600* IRA Tax credit for panel upgrades- available in conjunction with other home upgrades (ex.
weatherization, electrification, solar)
Electric Panel Total
Stackable Rebates and
Tax Credits Available
$1,600
Total Electrification Incentives
(Rebates + Tax Credits) Available
$15,500
Total Electrification Rebates
Available $
$10,900
Total Electrification IRA Tax Credits
Available $*
$4,600
*While rebates can be applied upfront by either the building owner or contractor, depending on the incentive program, IRA tax credits can be deducted from total taxes owed, meaning that the building owner would have to wait until tax season to receive the full cost reduction to electrify. Tax incentives through the IRA are provided as a credit but require the building owner to have some tax burden to reduce.
** Note that funders change available rebates often. These rebates reflect the most recent rebates as of 12.15.2023.
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7 Federal Electrification Incentives under the Inflation Reduction Act (IRA) & the High Efficiency Electric Home Rebate Act9
The IRA was signed into law in August 2022, ushering in significant federal policy support and funding for building decarbonization. The High Efficiency Electric Home Rebate Act (HEEHRA) is the official name of the IRA’s rebate program for electric home technology including heat pumps, electrical wiring, and induction stoves, which will be available starting in 202 4. Low-income households up to 80% of Area Median Income (AMI) can access 100% of upfront discount incentives, while moderate -income households from 80-150% AMI can access up to 50% of the upfront discount, in addition to tax credits that vary based on household income. Total HEEHRA discounts are capped at $14,000 across all electrification projects.
Cost reductions under HEEHRA are not included in this analysis as details are still developing and the incentives and most City of San Mateo building owners are generally classified as high income and would be ineligible . However, for low and moderate -income households up to 150% of AMI in San Mateo, IRA incentives may further incr ease the effectiveness of local electrification incentives available via PCE and BayREN, and help to close the gap for appliances where subsidies don’t always zero-out incremental costs, like HVAC systems, dryers, and induction ranges.
Table 5 details the rebates available through HEEHRA. These rebates are also extended to multifamily buildings where fifty percent of the residents are LMI. 10 With all HEEHRA rebates a pplied, LMI households in the City could fully close the incremental cost gap to electrify, and potentially entire project costs up to $14,000.11
Table 5 High-Efficiency Electric Home Rebate Act (HEEHRA): low-moderate income rebates: <80-150% Area Median Income (expected to be available in 2024) Appliance End Use
$ Rebate
Available Funder Notes
Heat Pump Water Heater Water Heater $1,750 HEEHRA
100% electrification costs for <80% AMI
(Low-Income)
50% electrification costs for 80-150% AMI
(Moderate-Income)
Heat Pump HVAC Space
Heating/Cooling
$8,000 HEEHRA
Electric dryer Clothes Drying $840 HEEHRA
Electric stove/ cooktop Cooking $840 HEEHRA
Panel upgrade
(if needed)
$2,500 HEEHRA
$4,000 HEEHRA
All rebates from HEEHRA capped at $14,000.12
9 https://www.rewiringamerica.org/IRAguide
10 https://www.rewiringamerica.org/policy/high-efficiency-electric-home-rebate-act 11 $14,000 value includes $1,600 for weatherization (insulation, air sealing, ventilation), but each individual maximum electrification end use adds up to more than $14,000 total rebate cap.
12 https://www.rewiringamerica.org/policy/high-efficiency-electric-home-rebate-act City of San Mateo
www.rinconconsultan ts.com
Electrification Costs with Incentives Applied
In the final piece of the analysis, we have applied the rebates described in Table 4 to the incremental costs described in Table 3 to see if rebates and tax incentives can make electric technologies the same cost, or less costly than the gas scenario . For this analysis, an available $5,500 whole-home electrification rebate provided by Energy Smart Homes California was not applied since it requires a whole-home electrification project at one time.
Electrification Incremental Costs + Incentives
Once incentives are applied, heat pump hot water heaters and heat pump HVAC systems which replace both the furnace and AC unit result in incremental cost savings. This means that it is less expensive to install efficient electric space and water heating today in many cases. Future changes to incentives for home electrification could continue to move the needle towards upfront cost -effectiveness for whole-home electrification. Additionally, as more building -owners install electric appliances, the upfront cost of these appliances is expected to decline over time as these electric technologies become more widely adopted.13
Figure 3 illustrates that stacked incentives help close the incremental cost gap to electrify , in some cases outperforming costs to install a new gas appliance. Stacked electric heat pump water heater incentives can cover all upfront costs for water heating .14 It should be noted that the total rebates claimed cannot exceed total project costs, even if they are available (in the case of water heating).
Bright blue bars indicate the total costs to electrify once rebates are applied . This visual allows for a comparison of remaining costs to electrify versus total new gas appliance cost which would have been taken on by the building owner.
On the high end of the incremental costs + incentives range, electrifying a home without AC, with a panel upgrade, under the Median HVAC cost analysis scenario, would be $8,536 more expensive than a gas-for-gas scenario. These results are summarized in Table 6 at the appliance level. Whole home- electrification costs are further described in Appendix A.
BAAQMD Zero NOx Covered Appliances: Water Heaters and Furnaces Upcoming BAAQMD Zero NOx rules require water heater equipment replacements to be zero NOx in 2027 and space heating equipment replacements to be zero NOx in 2029 . Based on the current incentives and installation costs, installing a heat pump water heater was found to be no-cost, resulting in savings of $2,800 dollars without a panel upgrade or a savin gs of $700 when paired with a panel upgrade. This represents a major opportunity area for building electrification in San Mateo. By electrifying water heaters now and installing a panel upgrade where needed, residents can save money compared to installing a new gas water heater while preparing for future electrification.
The electrification of furnaces with the addition of air conditioning also offers immediate cost savings of between $1,622 to $5,567 when compared to replacing both a furnace and AC. This means that electrification of water heaters as well as furnaces (when also replacing an AC offers immediate cost savings over a ‘like for like’ replacement scenario. Working to facilitate these replacements would both reduce GHG emissions and save residents money upfront in San Mateo while also preparing for these upcoming regulations.
13 https://www.rewiringamerica.org/pace
14 It should be noted that this table’s marginal cost references the combined cost for air conditioning and a gas furnace, as well as a ‘median’ case HVAC.
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9 Table 6 Electrification Incremental Upfront Costs + Incentives* Appliance Electric
Appliance Cost
Combined
Incentives
Electrification
Cost After
Incentives
Gas Equivalent
Costs
Electrification
Incremental
Cost or
(Savings)
Electrification Scenario Incremental Cost with Peninsula Clean Energy, BayREN, IRA Incentives Electric heat pump water
heater $6,000 $(7,500)** - $2,800 $(2,800)
Without AC
Low-Cost HVAC Scenario $13,965 $(5,900) $8,065 $6,132 $1,933 Without AC
Median-Cost HVAC Scenario $17,910 $(5,900) $12,010 $6,132 $5,878 With AC
Low-Cost HVAC Scenario $13,965 $(5,900) $8,065 $13,632 $(5,567) With AC
Median-Cost HVAC Scenario $17,910 $(5,900) $12,010 $13,632 $(1,622) Electric dryer $1,963 $(250) $1,713 $925 $788
Electric stove $2,375 $(250) $2,125 $1,155 $970
Panel upgrade (if needed) $3,700 $(1,600) $2,100 N/A $2,100 *Note that IRA incentives take the form of tax credits, while other rebates can be applied upfront by the building owner or contractor after completing program documentation requirements. Please refer to Table 4 for a full summary of rebates and incentives by funder. Note that incentive costs cannot exceed total project cost. **Rebates cannot exceed total project cost which is expected to be $6,000 Figure 3 Incentives Help Close the Incremental Cost Gap To Electrify ($)
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10 On-Bill Costs for Single-Family Home Electrification On-bill costs are another important piece of the overall economics of electrification. On -bill costs describe how much the building owner will pay to operate their appliances. PCE and Silicon Valley Clean Energy (SVCE) recently evaluated on-bill cost impacts of whole-home single-family electrification vs. mixed fuel in a September 2023 analysis.15
The Study shows that electrification of an average single -family home could lead to savings of ~$380/year when switching from gas to standard -efficiency electric appliances. If high -efficiency electric appliances are used, savings could increase to $495 annually as shown below (depicted monthly savings) in Table 7.
Table 7 Bill Impacts of Mixed Fuel vs. All-Electric Homes
Source: PCE & SVCE September 2023 Analysis
With the caveat that both natural gas and electric rates, like incentives, change often, these values can be used to project potential return on investment for going electric. One whole-home electrification scenario led to immediate upfront cost-savings. As shown by Table 8 the remaining scenarios project a return -on—investment (ROI) ranging from 2 -18 years depending on if the household switched to standard or high-efficiency appliances.
15 Bill Impacts of Decarbonizing Existing Single Family Homes. September 2023. Peter Mustachich (SVCE), Blake Herrschaft (PCE). https://svcleanenergy.org/wp-content/uploads/SVCE-PCE-Single-Family-On-Bill-Impacts-Results-2023.pdf
City of San Mateo
11 Table 8 Whole-Home Potential Return on Investment for Whole-Home Electrification Whole-Home Electrification Scenario with PCE,
BayREN, IRA Incentives
Total
Incremental
Cost After
Incentives
Standard
Efficiency ROI
(Years)
High-Efficiency ROI
(Years)
Existing Home without AC
Median-cost HVAC scenario, with panel upgrade $6,936 18 14 Median-cost HVAC scenario, no panel upgrade $4,836 13 10 Low-cost HVAC scenario, no panel upgrade $891 2 2
Existing Home with AC
Median-cost HVAC scenario, with panel upgrade $(565) N/A- Immediate Cost Savings
N/A-
Immediate Cost
Savings
Median-cost HVAC scenario, no panel upgrade $(2,665) N/A- Immediate Cost Savings
N/A- Immediate
Cost Savings
The study also notes that switching to the electric residential rates (E -ELEC or EV-2A) were critical in achieving on-bill savings, as shown below in Table 9.
Table 9 Selecting the Correct Electric Rate is Critical for On-Bill Cost Savings
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12 Appendix A
Single and Low-Rise Multifamily Building Data Sources + Analysis Overview For most upfront costs, median install values were selected to inform the cost analysis. Using median costs helped remove outlier quotes from contractors, which would have influenced the average value.
Quotes for some equipment, such as furnaces, could vary by as much as $15,000 for the same project.
Where there are exceptions to this data filtering process, due to missing data, the applied data substitution methods will be clarified in the relevant cell of the analysis. Data sources are shown below in Table A-1.
Table A-1 Data Sources Analyzed for Single Family Cost Analysis Author/Source Source Description Analysis Use and Considerations Peninsula Clean Energy
(PCE)
2035 Decarbonization Feasibility
Analysis & Plan: Complete Analysis and
Draft Plan (September 2022)16
Electric and gas appliance installation costs,
including wiring, appliance cost, labor, and
markup.
Commercial rooftop package unit cost data.
Josie Gaillard & Tom Kabat
via funding from BayREN &
County of San Mateo Office
of Sustainability
Decarbonizing Single Family Homes
(January 2023)17
Single-Family Home Decarbonization
Case Study: San Mateo 1-Story Home
(March 2023)18
Electric and gas appliance installation costs
(all-cost inclusive), based on specific
equipment and models, bids for 10 homes
under consideration as part of cumulative
case study.
One City of San Mateo Single-Family Home
case study analyzed.
BayREN Contractor Install
Dataset
BayREN Contractor-Input Raw Data for
Electric Appliance Installation (Excel),
filtered for most recent year input (2022)
This raw data source was also used to inform
the PCE 2035 Decarbonization Feasibility
Analysis and Plan
TECH Clean California
Install Dataset
TECH Clean California Install Dataset-
Input Raw Data for Electric Appliance
Installation (Excel), filtered for most
recent year input (2022)
This raw data source was also used to inform
the PCE 2035 Decarbonization Feasibility
Analysis and Plan
Note: Existing datasets and reports did not cover the cost of air conditioning (both appliance and installation), which was found using desktop research (Angie’s List), filtering for location-specific costs19
16 https://www.peninsulacleanenergy.com/wp-content/uploads/2022/01/2022.09-BOD-2035-Decarb-Plan-Complete-Analysis-Draft-Plan-
1.pdf
17 https://www.smcsustainability.org/wp-content/uploads/Decarbonizing-Single-Family-Homes.pdf 18 https://www.smcsustainability.org/energy-water/decarbonizing-homes/cost-plans/ 19 https://www.angi.com/articles/how-much-does-installing-new-ac-cost.htm City of San Mateo
13 Whole-Home Electrification Incremental Cost Scenarios The total incremental cost for whole-home electrification described in Attachment 1 is outlined in Table A-2 with detailed scenarios for primary cost variables including HVAC costs and need for panel upgrade.
Table A-2 Whole-Home Electrification (Replace All Gas Appliances with Electric) Incremental Costs
Existing Home without AC Whole-Home Electrification Incremental Cost
Low-cost HVAC scenario, no panel upgrade $13,291
Low-cost HVAC scenario, with panel upgrade $16,991
Median-cost HVAC scenario, no panel upgrade $17,236
Median-cost HVAC scenario, with panel upgrade $20,936
Existing Home with AC Whole-Home Electrification Incremental Cost
Low-cost HVAC scenario, no panel upgrade $5,791
Low-cost HVAC scenario, with panel upgrade $9,491
Median-cost HVAC scenario, no panel upgrade $9,736
Median-cost HVAC scenario, with panel upgrade $13,436