Rate Design to Unlock Industrial Decarbonization
Synapse evaluated the technical and economic potential of electrifying industrial facilities in Colorado and Illinois with heat pumps and thermal batteries, focusing on how alternative rate structures could improve the economics of electrification. Synapse focused on four utility territories: ComEd (IL), Ameren (IL), Xcel (CO), and Black Hills (CO), representing the vast majority of industrial energy demand for heating in each state.
Synapse developed alternative rate structures for each utility by starting with the utility’s existing tariffs and making targeted, data-driven adjustments that strengthen price signals for load flexibility. For industrial subsectors in each utility territory, Synapse evaluated electricity bills for heat pumps and thermal batteries under current and alternative rate structures. Synapse also evaluated the levelized cost of heating for electrified vs. incumbent technologies at all the studied facilities.
Across all four utilities, the economic results show that these alternative rate structures can materially improve the economics of industrial electrification, particularly when customers can shift load. However, rate reform alone is not always sufficient to close the cost gap with incumbent fossil-fuel-based technologies. Thus, there should also be consideration of additional policies and programs to help address the economic barriers faced by industrial facilities seeking to electrify, including capital and installation cost support, incentives for on-site distributed energy resources, and support for grid upgrade costs.