Will Fuel Prices Drive Energy Conservation?

Americans will be paying more to stay warm this winter, thanks to the Russian invasion of Ukraine. According to the Energy Information Administration (EIA), higher fuel prices combined with higher demand due to a forecast of colder weather are going to add up to a big bill. The EIA reports:

"Nearly half of all U.S. households heat primarily with natural gas. We expect households that use natural gas as the primary space heating fuel will spend about $930 this winter, 28% more than they spent last winter. Our forecasted increase in natural gas expenditures is the result of both higher expected prices and consumption."

Those who heat with oil, mostly in the Northeast, are going to be hit even harder. If, as expected, this winter is a bit colder than last winter, gas heating costs could rise over 50%.

Electricity prices are rising the least, so anyone who converted to a heat pump gets an extra benefit, as do people in southern states, where 65% of the homes are heated electrically.

Nobody knows how long this will go on, and it is nothing compared to the increases hitting households in Europe and the United Kingdom, but it is still significant and raises some important questions.

For the last decade, energy prices have been low, thanks to plentiful supplies of gas—or methane, as I prefer to call it—due to the fracking boom. Energy efficiency was a hard sell, particularly when one is talking about Passivhaus levels of insulation and the more expensive triple-glazed windows that are usually required. So Passivhaus proselytizers like me would promote comfort! Air quality! Quiet! Luxury! It's Climate Action!—because people didn't seem to care all that much about energy costs, and the payback period on the extra investment was around never. I would quote architect Sheena Sharp:

"I’d like to suggest that the payback on building a Passive House is immediate because when you are in a comfortable, well designed and balanced space it can improve your families quality of life right-away. Every day this investment pay’s itself off. Being comfortable in your own home can have incalculable “trickledown” benefits on every facet of your families life, improving mood, energy levels, and long-term health."

A year ago, during a natural gas spike in prices, I thought that this might be changing and that the payback period would start going down. And that was before we had a war, gas pipelines being blown up, and American Liquified Natural Gas (LNG) being shipped out as fast as they can fill the tankers.

A lot of gas is used now to generate electricity, and that is going to stay high as well since a lot of coal-fired generating stations have been demolished or converted; according to the EIA:

"Natural gas still provides the largest share of U.S. electricity, which we forecast will contribute 36% of total generation during winter 2022–23, unchanged from last winter. We expect natural gas generation to remain near record levels this winter despite the higher natural gas prices, because coal-fired power plants, which have traditionally acted as alternatives to natural gas, are facing fuel supply constraints. The coal generation share in the forecast averages 20% this winter, down from 21% in winter 2021–22."

Given that electricity prices have risen so much less than natural gas/methane prices, it is also a good time to consider converting to a heat pump. At the start of the Russia-Ukraine war, in Germany, which used Russian gas, heat pumps were suddenly 39% cheaper to run than gas boilers. No doubt, a similar calculation could be made in the U.S., although the result probably would not be so extreme.

I asked a few people in the industry for their thoughts, as to whether the spike in prices would drive more people to Passivhaus, or whether the increases in material costs and shortages would cancel it out. Zach Semke, Director of the Passive House Accelerator, tells Treehugger:

"My take is that the 25% increase in fuel prices and panic about the security of supply will probably only have a marginal impact on individual homeowners deciding to go Passive House. However, I think it could have significant impacts in other ways. In my hometown of Seattle, the shortage of housing is so acute and the price of homes and of construction is so ridiculously high right now, that homebuyers are desperate to get into anything that keeps the rain off their heads and has space for their families. The cost of getting basic shelter right now dwarfs the cost of monthly energy bills, at least in Seattle. I do think that with the incentives available thanks to IRA, individual homeowners will be more likely to make Passive-friendly upgrades. We certainly plan to start taking advantage of those beginning next year. (But our motivation isn't energy savings...rather, it's protection from wildfire smoke and heat waves, and climate action.)"

He does think it will make a bigger difference in the rental marketplace.

"For affordable housing developers/providers who build-and-hold and take some responsibility for their tenants' energy bills, energy efficiency will become more important in the overall financials of a project, making Passive House a logical solution. (Never mind all the other benefits to the health and well-being of their clients.) Passive House can help make projects viable when energy is expensive."

And all of this is moot for many Americans who don't have the money for heat pumps or Passivhaus. In 2021, the Kleinman Center for Energy Policy noted that "a third of households find it difficult to afford the energy they need to heat and cool their homes, and to provide lighting and cooking." And they are linking back to an EIA source from 2015 when fuel was cheap. As Isabella Simonetti writes in The New York Times,

"While people can choose a cheaper protein at the grocery store or repair a vehicle instead of replacing it, there is often only one choice when heating a home.“You can’t switch the way you heat your home based on fuel prices,” said Mark Wolfe, the executive director of the National Energy Assistance Directors’ Association."

When the question is deciding between food and fuel, Passivhaus and heat pumps are not on the menu.