Published: 17 May 2024
Contributors: Alice Gomstyn, Alexandra Jonker
Electrification is the conversion of a device, system or process that's dependent on nonelectric energy sources, such as fossil fuels, into one powered by electricity. The major benefits of electrification include lower energy costs, improved energy efficiency and support for the clean, renewable energy transition.
Electrification is taking place in major industries such as agriculture, construction, manufacturing and transportation. Some of the major technologies enabling electrification in these and other industries include electric vehicles (EVs), electric heat pumps, boilers and water heaters.
The 19th century saw major scientific developments in electricity, such as the discovery of electromagnetism, the invention of electric generators and the invention of electric motors. These helped make electricity a source of energy viable enough to replace other energy sources, such as coal, natural gas and petroleum.
The construction of electric power plants further helped pave the way for the widespread use of electric power. American inventor Thomas Edison opened the first central power plant in New York City in 1882. Early examples of electrification include major cities replacing gas-powered street lamps with electric ones, and manufacturing facilities switching from steam engines to electric motors in industrial processes.
There are several benefits of electrification:
Energy technologies that use electricity, such as heat pumps, are more efficient than fossil fuel-reliant technologies, such as gas boilers. The efficiency associated with electrification is even greater with renewable, clean energy, such as wind power, solar power and hydropower, which don’t lose energy during the energy generation process.
Greater energy efficiency through electrification leads to lower utility and fuel bills, with everything from transportation to water heating found to be less expensive when the energy use is electric. A 2020 study found that households that choose to use more electric appliances (instead of appliances powered by fossil fuels) and whose inhabitants drive electric vehicles could save more than USD 2,500 a year in energy costs.1
Electrification can support the renewable energy transition. When we generate electricity through clean, renewable energy sources, we don't produce greenhouse gas emissions (including carbon emissions). As more electricity from renewable energy displaces electricity derived from fossil fuels, society comes closer to achieving net zero.
While air pollutants stemming from transportation and industrial production exist outside, fossil fuel-powered facets of domestic life can result in air pollutants circulating indoors. Over 40% of the global population burns coal or biomass fuels, such as wood, for cooking, heating and lighting.2 Burning such solid fuels releases particulate matter and carbon monoxide, among other air pollutants. Switching to electricity from clean energy sources can reduce pollutant concentrations both indoors and outdoors.
Electric technologies are integral to electricity demand response programs that help utilities balance energy supply and demand throughout the day. Through these programs, variable energy rates or other financial incentives encourage customers to shift their energy consumption away from peak load periods. Users can charge technologies such as electric water heaters and electric vehicles during periods when power grids face lower electricity demand.
Electrical energy storage systems also enable energy system flexibility: during times of excess supply, electricity is stored in electrical energy storage systems and then discharged into electricity systems as necessary.
Key industries reaping the benefits of electrification are the agriculture, buildings, manufacturing and transportation sectors.3
New equipment and systems are helping electrify the agricultural sector, including electric tractors, solar energy-powered agricultural sprayers, water heaters and thermal electric storage systems. In addition to reaping cost savings and decarbonization from electrification, farmers are benefiting from reduced noise pollution and safer work environments.
Technologies we commonly use for the electrification of the construction sector include water heaters, heat pumps, induction cooktops and other electric appliances. We cab install such technologies into new buildings as well as retrofit them into older ones. As electrification lowers energy costs for building owners, it also helps reduce safety risks linked to fossil fuel-powered appliances and cooking methods, such as natural gas leaks and open flames on gas stoves.
New electric technologies adopted by manufacturers include boilers, forklifts, furnaces, heat pumps and rock crushers. As with agriculture, electric equipment in use at manufacturing facilities is considered safer than its fossil fuel-powered predecessors. Advanced electrical equipment is also enabling leaner manufacturing processes, saving companies in labor costs.
Electric sedans and SUVs represent the most prominent form of transportation electrification. However, other electrification technologies include electric light-duty vehicles (such as light-duty pick-up trucks), electrified commercial fleets (such as delivery vehicles and semi-trailer trucks), electrified public buses and trains, and electric aircraft.
The benefits of reduced air pollution and greenhouse gas emissions from electric vehicles are well known but, as with agricultural electric equipment, electric transportation can also help reduce noise pollution. Electric vehicle batteries might also someday be employed as a form of energy storage for electricity grids.
Although electrification promises cost savings down the road, the upfront costs for upgrades to electrification technologies can be prohibitive for consumers and business owners. The installation of solar panels for onsite electricity generation can run anywhere from USD 25,000 for a residence to USD 1 million or more for large commercial buildings.
In response to these barriers, policymakers around the world have created incentives to encourage more widespread electrification and the use of clean electricity:
- In the US, as of 2023, tax incentives were offered for rooftop solar panel installation and electric heat pump purchases. In addition, the 2022 Inflation Reduction Act included new tax credits for the purchase of various electric vehicles.
- Finland launched a subsidy fund in 2022 to support the electrification of heavy industries.
- New Zealand banned the installation of new coal boilers in 2021 to encourage industries to use cleaner alternatives.
- China phased out its long-time electric vehicle purchase subsidy program in 2022 but, as of 2024, maintained tax breaks for EV buyers.
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Renewable energy is energy generated from natural sources that are replenished faster than they are used.
Thermal energy refers to energy within a system that’s created by the random motion of molecules and atoms.
Decarbonization is both a method of climate change mitigation and the process of significantly reducing or eliminating greenhouse gas emissions from the atmosphere.
As companies push toward net zero, new utilities partnerships, networks and marketplaces will be essential.
We can reduce carbon emissions from buildings by switching from fossil fuels to electricity to meet energy needs.
The ability to store energy is key to reducing the environmental impacts of energy production and consumption.
Footnotes
1 “No Place Like Home: Fighting climate change (and saving money) by electrifying America’s households” (link resides outside ibm.com), Sam Calisch, Saul Griffith, RewiringAmerica.org, 21 October 2020.
2 “Household Energy and Clean Air” (link resides outside ibm.com), US Environmental Protection Agency, 3 April 2024.
3 “Voices of Experience | Electrification: A Stakeholders Guide” (link resides outside ibm.com), US Department of Energy, Office of Electricity, accessed 8 May 2024.