DBRS Morningstar published a commentary discussing how electric heating can help in decarbonizing the economy.

Key highlights include the following:

— Global carbon dioxide emissions reached a record high in 2022, with heat-related emissions accounting for 39%. Electrifying building heating with renewables is the key for future net-zero emissions.
— Electric heating is safer, provides significant public health benefits with zero emissions, and has a longer lifespan than gas heaters.
— The widespread adoption of electric heating poses challenges, including the potential strain on the electric grid, need for substantial expansion of non-carbon-emitting electricity, and required modifications to utility regulation. It also faces obstacles such as higher upfront costs and higher energy costs compared with fossil fuels.
— Electrified heating can support net-zero energy consumption for buildings, but prior to achieving widespread adoption, there are numerous efforts that need to be done.

“We have witnessed capital spending for electrification and policy efforts such as the U.S. Inflation Reduction Act of 2022, aimed at accelerating electrification by lowering the cost of renewable energy,” said Jasper Shi, Senior Analyst, Energy, Utilities, and Natural Resources. “Nonetheless, we believe it is premature to consider any significant credit impact on the utility sector at this stage since the current challenges associated with electric heating pose difficulties in achieving widespread adoption without further policy support.”