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Beneficial Electrification and Building Decarbonization: Exclusive Interview with Steven Koep, Beneficial Electrification Ambassador

Steven Koep

With eliminating carbon emissions associated with the energy sector becoming a more pressing priority for utilities with each passing day, a common refrain has been that the first step towards that goal is to increase the level of electrification across industries and sectors. By first implementing electrification, we can then move to decarbonization by ensuring that the power generation going into the grid is from clean energy sources.

The concept itself isn’t a difficult one to understand, but implementation is a whole different ballgame. As an ambassador for beneficial electrification, Steven Koep will be sharing with colleagues at the 40th PLMA Conference next week his outline for what such a shift in the industry looks like and how we can best usher in that change in the presentation “Beneficial Electrification & Building Decarbonization – You Can’t Have One Without The Other!

If you’re not fortunate to catch the presentation in St. Petersburg next week, you can at least take in some of the key takeaways that Steven shared with me in this interview:

Matt Chester: As a starting point, can you give a background on your history in the utility industry and how you got involved with PLMA?

Steven Koep: My path to the electric utility industry came through the water-heating industry.  I started with a water-heater manufacturer in the late '80s, introducing the first lifetime warranty, electric resistance storage water heater that came to the market as the Sears Survivor and then came to the utility industry as the Marathon product. That was the start, and from there I did a stint at Edison Electric Institute in the early '90s, where I ran an organization called The Electrification Council. 

My career has come almost full circle now that I am working on beneficial electrification.  I got involved with PLMA a little over 10 years ago, when I was working with Rheem as a manufacturer member of the organization and sponsored what became the first PLMA interest group on Grid-Interactive Water Heating.  I also served on the PLMA executive committee a couple years ago, so it's been a great association, and I've enjoyed it quite a bit.  

 

MC: Your presentation will be covering the need for Beneficial Electrification as a means towards decarbonization. Why do you think this is a topic that needs to be stressed—is it not being recognized by the decision-makers at utilities and across the energy industry currently?

SK: It's gained quite a bit of momentum just within the last two or three years. The term Beneficial Electrification goes back to a paper that was entitled "Environmentally Beneficial Electrification" from late 2015 or early 2016.  There was some talk about electrification at that time, but through the work of EPRI and NRDC and their projections for the future of the electric utility industry, they were showing that electrification, transportation, space heating, and water heating were going to be a big part of what needed to be electrified in order to reach climate goals through the continued reduction in the carbon intensity of electricity.

I think it needs to be recognized across the entire electric utility industry because the organizations that have been promoting energy efficiency have rightly made the statement that they expect that energy efficiency can get us half the way to our climate goals.  Everybody points to the declining cost curves for wind and solar and storage, but nobody really talks that much about the customer choices that have to be made for water heating and space heating over the next 5, 10, 15 years to shift more of those end uses to electricity and why that is so important. 

Beneficial Electrification needs to be thought of on a level comparable to renewable energy and energy efficiency, that if you line them all up together, energy efficiency and renewable energy and beneficial electrification, that's the path to decarbonization and sustainability.  NRDC even refers to it as the three pillars of decarbonization, so I think we're getting to that point, but that's an important first step for this work is to position it correctly. 

 

MC: When discussing the electrification of energy supplies, there are unique hurdles across different sectors such as residential vs. industrial vs. commercial vs. transportation. Where, among these sectors, do you see the greatest challenges and where, conversely, is the lowest hanging fruit?

SK: I have spent most of my career working in the residential and light commercial markets, so that's where I have the most confidence in speaking about these things.  I think transportation is going to be a big challenge only because you've got an entrenched industry.  Even though the car makers are starting to build more electric vehicles, I think the fossil fuel industry is just gearing up to try to slow that down.  On the industrial side, a lot of customers are starting to buy renewable energy on the open market, but for the timelines of replacing equipment, they have longer timelines.

In terms of the lowest-hanging fruit, which is based upon my personal history, I point to water heating.  Water heaters are replaced on average roughly every 10 years, depending on where you're at in the country.  That means in any given year, 10% of the installed base of water heaters are being changed out.  That's a sunk cost.  That money is going to be spent.  We could, when electric water heaters are being replaced, replace them with HPWHs or get grid-interactive controls on the replacement units, we can capture that storage resource just for the cost of the controls.  If we can convert more gas water heaters over to electricity, we have the potential to integrate vast quantities of renewable energy.  There are currently 80,000 megawatts of renewables on the grid.  If we could control the electric water heaters currently installed, we could integrate a total of 100,000 MW.  If we convert all gas water heaters to optimized electric water heaters, we could integrate 140,000 MW of renewable energy.  It's a huge resource, just from the fact that there's this annual turnover of equipment.  I think that's the low-hanging fruit.

That also carries over into the multi-family market and the commercial market.  When you get into space heating, the replacement periods are extended, probably 12, 15, 20 years for when heating systems get replaced on an average basis.  Those equipment replacements are going on all the time, and we have an entire industry building and installing equipment.  We have everything we need in place in order to convert more space heating to electricity so that they help to support the stability and resilience of the grid. 

MC: When you look towards programs that have successfully encouraged Beneficial Electrification as a means towards decarbonization, are there any examples that jump to mind that have shown the best roadmap for other technologies to follow? Are there any that fell into pitfalls that you’d highlight for others to specifically avoid?

SK: In terms of examples that would show a good road map, I would point to Great River Energy, a G&T cooperative based in Minnesota.  Over a period of a couple of decades, they've got about 100,000 water heaters under control.  They have this huge battery that they charge up every night between 11:00 at night and 7:00 in the morning, and they can use it to do energy arbitrage.  They charge it up when wind energy is cheap.  They can do a lot of really interesting things with this huge aggregated battery, so again, pointing to water heaters and a utility program, I think that's a big success story. 

Another success story is the attention that's being paid now to leasing electric water heaters.  At one time, almost every electric utility in New England and in most of Eastern Canada rented electric water heaters.  Most people didn't buy them.  They just called up the utility when they needed a new one, and they got a water heater for $6 or $8 a month or so.  They could rent them from the utility.  Sometimes, they were controlled, other times not.  I think that that model of leasing water heaters or leasing air source heat pumps as air conditioner replacements holds tremendous potential.  We could actually learn from things we've already done in the past. 

In terms of pitfalls, I'd make a general statement that higher rebates don't always get you the results that you're looking for.  Sometimes, higher rebates or higher incentives often translate into higher prices for equipment.  Though many readers may not remember the solar water heating market in the early '80s, I was in that business at the time, and there were generous tax credits from the federal government and from individual states.  They were all tied to a maximum installed system price of $10,000.  That's where the tax credits maxed out.  What happened was that every solar hot water system automatically was priced at $10,000 whether there was a good case to be made that it functioned more efficiently or that it was better equipment. The market skewed itself to respond to the incentives.  Sometimes, the market doesn't respond in the way that you expect.

 

MC: Aside from the presentation you’ll be giving at the PLMA Conference, are there other topics of discussion or expected presentations that you’re particularly excited about to catch as an attendee?

SK:  Any electric end-use load that can be controlled, whether it's an air conditioner or a water heater, can be classified as a distributed energy resource (DER), so I'm always interested in grid-interactive energy resources.  When you can get high-speed, two-way communications to a particular electric device, for example, you can make a water heater act like a battery.  You can do lots of interesting things when you have two-way communication to these devices.  Homeowners’ comfort or their access to hot water is not impacted at all, and the utility can gain tremendous resources.  When they aggregate these loads together, they can bid them into the regional system operators.  That's what gets me excited.  I know that there are a few presentations on water heating scheduled, so I'm always interested in what people are doing with water heaters. 

Also, we expect that the Beneficial Electrification pre-conference session will be very well attended.  We're not officially a PLMA interest group, but we may be approaching that based on the size of the crowds that we've been able to draw.  Our first session was in Minneapolis back in May.  We had 50 registered, and 120 people showed up.  That was a strong indication that there's a real interest in Beneficial Electrification and all the multi-sided benefits it can provide, for the utility, the customer,  the grid and the environment. 

 

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If you’re interested in hearing more about Steven’s insights into beneficial electrification, be sure to find him at the 40th PLMA Conference taking place in St. Petersburg, Florida, from November 4 to 6. You can check out the agenda and register for the conference here.

Matt Chester's picture

Thank Matt for the Post!

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