HomeEnvironment & Climate NewsEconomy-Wide Electrification Costs between $18 and $29 Trillion, New Study Says

Economy-Wide Electrification Costs between $18 and $29 Trillion, New Study Says

A new state-by-state analysis of the cost of transitioning the entire power supply to a 100 percent carbon dioxide emissions-free energy, made up largely of solar and wind power with battery backup, estimates the direct capital costs of such an effort would range between $18 trillion and $29 trillion.

The study by Tom Tanton, director of Science and Technology Assessment at the Energy & Environment Legal Institute, details the capital costs necessary for the “electrification” of the entire nation. Electrification is defined in the study as “converting the entire economy to use electricity as a fuel. This includes all appliances in residential and commercial buildings, as well as every transport vehicle.”

‘More Frequent Outages’

Completely electrifying the economy carries high costs and will result in a less reliable power supply for businesses, consumers, and residents, says Tanton.

“Electrification of everything is a poor means to reduce greenhouse gasses and exposes customers to more frequent outages,” Tanton writes. “Further, we’d just be substituting one set of environmental impacts for another … and we simply can’t afford to electrify everything as the report clearly shows.”

Tanton estimates the capital cost delivering the current level of demand for electric power from an electric grid powered 100 percent from “renewable” sources like wind or solar power would cost approximately $2.8 trillion.

“To ensure no bias is inadvertently input into the analysis, data come from the Energy Information Administration (EIA),” Tanton said. “This includes the consumption by state per fuel type, as well as technology costs.”

Tanton’s analysis does not account for anticipated growth in electric power demand.

The cost of converting the country’s entire on-road vehicle fleet to electric vehicles would range between $560 billion and $1.4 trillion, depending on the size of the federal tax credits for the purchase of electric vehicles.

Off-road vehicle replacement, for instance, construction equipment, lawn equipment, loaders, recreational vehicles, and tractors, would cost a further $415 billion.

Infrastructure changes necessary in aviation would cost $550 billion, while maritime infrastructure changes would total $200 billion.

The study does not provide estimates for the costs necessary to install batteries and electric motors in every airplane and boat in the country, or necessary to build replacement vessels, let alone provide any commentary over whether doing so is even remotely feasible.

Eliminating natural gas use in buildings would cost $1.6 trillion for residential structures, Tanton argues, and roughly $9 trillion for commercial structures.

Tanton notes, these cost estimates should be inflated by approximately $7 trillion to account for the excess electric power needed to replace natural gas during extreme weather events “like artic blasts, ‘bomb cyclone,’ ‘polar vortex,’ or extended low temperatures … when the adequacy of the delivery mechanism is most critical to human health and safety.” The facilities generating this emergency load would in effect be hugely expensive stranded costs for most of each year, either being idled or act as spinning reserve, during non-emergency periods of time.

State-by-State Cost Estimates

Tanton’s analysis finds, at $3.157 trillion, Texas will experience the highest total electrification costs, followed by California at $2.823 trillion.

By comparison, Tanton calculates completely electrifying the economies of Florida, New York, and Pennsylvania, will costs $1.721 trillion, $1.465 trillion, and $1.156 trillion, respectively. The The per capita costs of electrification do not mirror the total state electrification costs. The per capita costs of electrification were the highest in Alaska at $190,009 per capita, followed by Louisiana at $166,065, Wyoming at $158,961, North Dakota at $133,847, and Oklahoma at $122,568. The U.S. average per capita costs were $88,990.

In addition, Tanton estimated that the per-household indirect costs of the higher prices paid for goods and services, if the power supply were to be completely electrified, would top $5,000, and the “annual consumer expenditure for energy would roughly double.”

High Cost Emission Reduction Policy

Tanton found electrifying the economy is a very expensive way to reduce carbon dioxide emissions from energy use, ranging from a low cost of $4,814 per ton of carbon dioxide avoided in New York to a high cost of $28,938 per ton of carbon dioxide avoided in Florida.

By comparison, the U.S. Environmental Protection Agency (EPA) uses the “social cost of carbon,” an estimate of the theoretical damages avoided by reducing one ton of carbon dioxide emissions, to compare policies to cut reduce emissions. Depending on the year cuts begin, the discount rate used in the calculation, the estimate of how sensitive the climate actually is to carbon dioxide emissions, and whether one includes only domestic benefits or global harms avoided as well in the calculation, EPA estimates the harms avoided from reducing a ton of carbon dioxide from the atmosphere range between $11 and $212 per ton.

Tim Benson (tbenson@heartland.org) is a policy analyst at The Heartland Institute.


Online Info

Tom Tanton, “Cost of Electrification: A State-by-State Analysis and Results,” E&E Legal Institute, October 2020; https://www.heartland.org/publications-resources/publications/cost-of-electrification-a-state-by-state-analysis-and-results

Tim Benson
Tim Benson
Tim Benson joined The Heartland Institute in September 2015 as a policy analyst in the Government Relations Department.


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