#Buildings

There are several options for the decarbonization of building energy use as part of an economy-wide net-zero scenario. Energy efficiency is a major driver of reductions in both energy use and emissions in all scenarios, both in terms of building shell efficiency and the efficiency of energy-using equipment and appliances. For example, projected efficiency improvements in heat pumps and air conditioning could offset growth in demand for cooled floorspace, even accounting for higher temperatures over time due to climate change, leading to lower electricity use than today for cooling by 2050. These technology trends could also drive significant increases in the adoption of heat pumps for space and water heating, displacing both inefficient electric resistance heating and natural gas use. At the same time, efficiency improvements in natural gas appliances and the opportunity for hybrid heat configurations combining heat pumps with gas backup suggest a continued role for natural gas (or blended equivalent) in buildings as part of a cost-effective economy-wide net-zero strategy. Particularly in colder climates, based on the modeling assumptions in these scenarios, the marginal cost of fully electrified space heating is generally higher than retaining a mix of pipeline gas and electricity.

As shown in Figure 41, many of the efficiency and electrification trends are reflected in the Reference scenario, in which gas use in buildings falls by around 20% by 2050 while electricity demand remains roughly flat, driven by the economic adoption of new technologies as building and equipment stocks evolve. The electric share in service demand for space heating rises from 39% to over 60%, while for water heating the share increases from around 40% to over 50%. In the Net-Zero All Options scenario, these trends are accelerated, but only slightly—for most of the time horizon leading up to 2050, the carbon price implied by the target low is enough that the relative costs of electric versus gas options for buildings customers do not significantly change the trade-offs. Even in 2050, when the economy-wide net-zero target is binding, and any use of natural gas must be offset with negative emissions (the cost of which is reflected in its delivered price), a hybrid heat pump with gas backup is competitive with an all-electric configuration, especially in colder climates. In the most restrictive Net-Zero Limited Options scenario, there is around 70% electrification of building service demand by 2050 and much deeper cuts in buildings gas use, to around 50% of current levels, as well as shift in the gas supply to a mix of mainly renewable and synthetic equivalents. In this scenario, carbon prices and the marginal cost of gas supply become much higher by 2050, suggesting that, in this case, by 2050, all electric heat pump configurations could be the most cost-effective option for new-vintage installations, even in colder climates. However, this is not the case during the preceding decades, during which gas equipment continues to be a cost-effective alternative, implying that gas infrastructure requirements in buildings would remain in 2050.