How much can efficiency and electrification change demand? Buildings, heat, transport and industry

Price saved energy for Prairie City’s buildings, electrify its districts on the coldest day, and sort industry’s heat by temperature

A15 of Energy Systems, Step by Step: build a cost-of-saved-energy curve for a fictional city’s buildings with a rebound check, electrify heat and cars district by district against each substation’s limit on a cold design day, try a heat network with a store, and sort industrial heat by temperature.
  • Analyst · L2
  • 35 min guided · about 30 min practice
  • After F3 and F9

Prairie City's buildings: the cost of saved energy at a 6% discount rate (2025 dollars)

Prairie City is fictional; its numbers are illustrative.

Measure, cheapest first Extra cost per unit, up front Extra per unit a year Life (years) MWh saved per unit a year City MWh saved a year Per MWh saved Average price it competes with
Electricity saved
1. Heat-pump water heaters, homes heated with electricity $885 none 15.1 2.25 70,640 $40.3 $144.4
2. LED tubes in fluorescent fixtures, shops and offices $73 none 15.2 0.09 19,548 $83.2 $111.9
3. Heat pumps in homes heated by electric resistance $7,797 $109 15.3 8.54 133,641 $105.7 $144.4
4. Weatherize pre-1980 homes heated by electric resistance (after block 3) $6,876 none 20.0 1.28 10,141 $467.1 $144.4
Gas saved
1. Condensing gas furnaces (99%) at replacement $688 $60 22.5 2.92 192,041 $39.9 $48.8
2. Weatherize pre-1980 homes heated with gas (after block 1) $6,876 none 20.0 4.60 134,128 $130.3 $48.8

Each block counts only what it saves after the blocks above it. Prices are Kansas's 2025 averages, flat per MWh.

  • Electricity. 3 of 4 electricity blocks cost less than the average price of what they save: 223,829 of 233,970 MWh a year.
  • Gas. 1 of 2 gas blocks cost less than the average price of what they save: 192,041 of 326,169 MWh a year.
  • The core on the design day. As in 2025: 212.8 MW; Half the gas heat to heat pumps: 268.6 MW; All of it: 325.4 MW, against a 250 MW substation.
  • Efficiency first. With every older home sealed and insulated and every resistance heater swapped too, the all-electric core peaks at 257.0 MW.

The suburbs on the design day, with 30% electric cars

Charging rule Charging a day Peak At
As today (evening) 271.8 MWh 199.3 MW 20:00
A timer at midnight 271.8 MWh 233.0 MW 05:00
Fill the valleys 271.8 MWh 192.1 MW 07:00

The core's heat on the design day: every furnace replaced, 30% of its gas heat on a network

How the heat is made Peak Store
Heat pumps in every building 325.4 MW none
A network without a store 312.6 MW none
A network with a store 310.7 MW 86 MWh, about 3,700 m³ of water

Each district on the design day, every furnace replaced

District Peak Substation limit
Dense core 325.4 MW 250 MW
Suburbs 326.1 MW 230 MW
Rural fringe 77.6 MW 60 MW

The three districts together peak at 729.0 MW at 05:00, almost the sum of their own peaks (729.1 MW): one cold night hits every district at once. Over their limits: dense core, suburbs, rural fringe.

Not in the bars: the industrial park (22.3 MW, flat) and the data-center campus (114.2 MW), each a load on its own substation; with them, Prairie City peaks at 865.5 MW at 05:00.

The industrial park's heat, sorted by temperature

What is needed Electric option Electricity, MWh a year
Food plants: below 100 °C (washing, pasteurizing, hot water), 140,000 MWh a year Industrial heat pump 48,276
Food plants: 100 to 400 °C (steam for cooking, drying, sterilizing), 120,000 MWh a year Electric boiler 122,449
Food plants: above 400 °C (ovens and fryers), 10,000 MWh a year Electric ovens and furnaces 10,204
The fertilizer plant: 15,000 t of hydrogen a year from gas reformers Hydrogen by electrolysis 862,500

At a heat-pump COP of 2.9, the process heat would need 180.9 GWh a year and the plant's hydrogen 862.5 GWh: 32% of the city's 2025 electricity, a steady 119.1 MW. A ceiling, not a forecast.

With JavaScript on, you build the curve, add a rebound, electrify each district on the cold design day, try charging rules and a heat network, and sort the park's heat.

  • Illustrative. Prairie City is fictional; its numbers are illustrative, and its homes, heat, days, substations and prices come from the course's shared city data.
  • Measures. Costs and lives from EIA (2023 and 2026, 2022 dollars) and DOE's weatherization evaluation (ORNL, 2014), the same values as A18; all in 2025 dollars with BEA's GDP deflator.
  • Prices. Kansas's 2025 average retail prices of electricity and gas (EIA), taken as a flat price per MWh; a customer's own tariff, with fixed, demand or time-of-use charges, can differ.
  • Heat pumps. F3's cold-climate COP curve at each hour's temperature; the design day's temperatures are set for teaching.

About 35 guided minutes, and about 30 more of practice under Check; for a refresher, F3 covers energy services and COP, A1 discounting.

What you just did, as diagrams

Efficiency as a resource
A saved MWh has a cost: the extra cost spread over the life with the capital recovery factor, plus any extra yearly cost, divided by the MWh saved a year.
The curve
Cheapest first, each block counting what it saves after those to its left, 3 of 4 electricity measures for Prairie City's buildings cost less than Kansas's average price (6%, no rebound).
Rebound
Part of a saving comes back as more comfort; it raises the cost per MWh actually saved.
Peaks, not MWh
All the core's gas heat on heat pumps adds 14% to its year's electricity but 53% to its peak on a design day whose minimum is −18 °C.
Industry by temperature
Heat below about 165 °C suits heat pumps, some low-pressure steam included; hotter steam, ovens and hydrogen need boilers, resistance heating or electrolysis.
Go deeper · AnalystThe cost of saved energy, by hand

A measure costs \(C\) more up front and \(A\) more a year (upkeep, a fan’s electricity), lasts \(n\) years and saves \(\Delta E\) MWh a year; at a real discount rate \(r\),

\[\text{CSE} = \frac{C \times \text{CRF}(r, n) + A}{\Delta E}, \qquad \text{CRF}(r, n) = \frac{r(1+r)^n}{(1+r)^n - 1}\]

  • Capital recovery factor turns a cost paid now into equal yearly payments over the life (A1).
  • At replacement or any time. When old equipment is replaced anyway, count only the extra cost of the efficient choice; a retrofit pays the whole cost.
  • Yardstick. Here, Kansas’s 2025 average retail price, flat per MWh; a customer’s own tariff can differ, and a utility compares the CSE with the supply cost it avoids, which this lesson leaves out.
  • Real programs. U.S. utility programs saved electricity at a total cost of about $0.049 per kWh in 2009–2015 (2016 dollars, LBNL).
Go deeper · AnalystWhy the order of measures matters
  • Savings interact. After a heat pump with seasonal COP \(\bar c\), a better envelope saves \(1/\bar c\) as much electricity, so its CSE rises by \(\bar c\) (practice item 4).
  • Packages. Measures that compete for the same equipment (a condensing furnace or a heat pump) cannot both be counted in full.
  • The curve is a sequence. Each block counts only what it saves after the blocks to its left, so the widths add up; a different order gives different blocks.
Go deeper · AnalystPeaks, design days and substations
  • Design day. Planners size heating and wires for a cold day that comes back every few years, not the average one.
  • Coincidence. A district’s coincident peak is the most it draws in one hour; when many homes heat at once, it nears the sum of their own peaks.
  • Simplifications. One substation per district; base load follows SPP’s 2025 shape, which already carries some of the region’s electric heating, so winter base load runs a little high.
Go deeper · ModelerFrom closed forms to an optimization
  • Here, every measure and every switch is set by hand and priced on its own.
  • In a model, a linear program chooses envelopes, heat pumps, networks and stores together, with each substation’s limit as a rule and the hour-by-hour balance of heat and power.
  • Next. The City Planner sandbox (SB3) and the city energy hub (M12) build that model.
Go deeperWhat this lesson leaves out
  • The grid costs that savings and new peaks avoid or add: generation, wires and capacity.
  • Substation and feeder upgrade costs, and their timing.
  • Comfort and health, and the value of the rebound itself.
  • Cooling: the summer peak, which electrifying heat does not raise.
  • How fast homes and firms actually adopt each measure.

Check yourself

Practice, about 30 minutes: four myths, one question, then seven worked exercises.

Myth or fact? “Electrifying heat only adds kilowatt-hours over the year.”

  • Myth
  • Fact
Answer

Myth. The core's gas heat on heat pumps adds 14% to its year's electricity but 53% to its design-day peak: 212.8 to 325.4 MW.

Myth or fact? “Heat pumps stop working in a cold snap.”

  • Myth
  • Fact
Answer

Myth. ENERGY STAR's cold-climate criteria ask for a COP of at least 1.75 at −15 °C (5 °F), and this lesson's curve gives 2.29 at −18 °C: efficiency falls, so peaks grow.

Myth or fact? “Charging cars after midnight always eases the grid.”

  • Myth
  • Fact
Answer

Myth. On the design day a midnight timer puts the suburbs' charging on the coldest hours: 233.0 MW against 199.3 MW as today, with 30% electric cars.

Myth or fact? “Every efficiency measure pays for itself.”

  • Myth
  • Fact
Answer

Myth. Weatherizing an older home with a standard gas furnace saves gas at $105.3 per MWh at 6%, above Kansas's 2025 average gas price, $48.8; comfort and a lower peak are not in that number.

A measure saves energy at $40 per MWh with no rebound. With a 25% rebound, what does a saved MWh cost?

  • $30.00
  • $53.33
  • $50.00
Answer

$40 ÷ (1 − 0.25) = $53.33: the cost is the same, the MWh saved are a quarter fewer.

Practice · about 30 minutes on your own

  1. One measure by hand. What does a saved MWh of gas cost, and does it beat the price?

    Extra purchase cost (a condensing furnace against a standard one) $688.01
    Extra a year: upkeep and fan electricity $59.87
    Life 22.5 years
    Gas saved a year 2.918 MWh
    Real discount rate 6%
    Gas price (Kansas average, 2025) $48.77 per MWh
    Answer

    CRF = 0.0821; $688.01 × 0.0821 = $56.49, plus $59.87 = $116.36 a year; ÷ 2.918 MWh = $39.88 per MWh, under gas at $48.77.

  2. The discount rate decides. Does it beat the price at a 3% and at a 10% real discount rate?

    Weatherizing an older home heated by resistance (a retrofit) $6,875.72
    Life 20 years
    Electricity saved a year 4.401 MWh
    Electricity price (Kansas homes' average, 2025) $144.40 per MWh
    Answer

    At 3%: CRF 0.0672, $462.05 a year, $104.99 per MWh, so yes; at 10%: CRF 0.1175, $807.90, $183.57, so no. Near the price, the rate decides.

  3. Rebound. What does a saved MWh cost with the rebound?

    A heat pump replacing resistance heat, no rebound $105.67 per MWh saved
    Rebound 20%
    Electricity price $144.40 per MWh
    Answer

    $105.67 ÷ (1 − 0.20) = $132.09 per MWh, still under $144.40. Rebound shrinks the saving, not the cost.

  4. Interactions. With the heat pump in first, what does weatherization's saved MWh cost?

    Weatherizing a resistance-heated home, on its own $136.23 per MWh saved
    Seasonal COP of a heat pump installed first 3.43
    Electricity price $144.40 per MWh
    Answer

    The heat pump already divides the heat's electricity by 3.43, so weatherization saves that much less: $136.23 × 3.43 = $467.27 per MWh, now over $144.40. The curve's block 4 gives $467.09 with the COP unrounded.

  5. A cold hour. Half the gas and propane heat moves to heat pumps: what is the hour's total load?

    Hour on the design day 07:00, −15.8 °C
    Heat-pump COP at that hour 2.37
    The core's heat need 371.4 MW
    Base load 124.4 MW
    Cars charging 0.2 MW
    Shares of the heat: gas, propane, resistance, heat pumps 0.693, 0.000, 0.187, 0.120
    Answer

    Heat-pump share 0.120 + (0.693 + 0.000) ÷ 2 = 0.467; 371.4 × (0.187 + 0.467 ÷ 2.37) = 142.6 MW of heating; plus 124.4 MW base and 0.2 MW of cars: 267.2 MW, against 250.

  6. Evening chargers. How much do the suburbs' cars add at 19:00?

    The suburbs' charging a day, 30% electric cars, as today 271.8 MWh
    Share of a day's charging at 19:00 10%
    Charging at 19:00 in 2025 1.01 MW
    Answer

    271.8 × 0.10 = 27.2 MW, against 1.01 MW in 2025.

  7. Industrial heat pump. How much electricity would heat pumps need, as a steady MW?

    The park's heat below 100 °C 140,000 MWh a year
    Heat-pump COP 2.5
    Hours in a year 8,760
    Answer

    140,000 ÷ 2.5 = 56,000 MWh a year; ÷ 8,760 h = 6.4 MW.

Numbers, sources and what’s next

Numbers to remember

Number What it means Source
$0.049 per kWh Total cost of saving electricity (programs and participants) through U.S. utility customer-funded efficiency programs, 2009 to 2015, national average, 2016 dollars at a 6% real discount rate. LBNL, The Cost of Saving Electricity Through Energy Efficiency Programs Funded by Utility Customers: 2009-2015, Table 6-1 · June 2018
less than 30% The direct rebound effect for household energy services in OECD countries, as a review concludes (abstract). Sorrell, Dimitropoulos and Sommerville, Energy Policy 37(4) · 2009
up to 165 C Heat-sink temperatures of industrial heat pumps commercially available at scale, as LBNL found in 2022 (DOE's January 2024 tip sheet: up to about 175 C). LBNL, Electrification of U.S. Manufacturing With Industrial Heat Pumps, p. 4 · October 2022
COP 1.75 at 5 F The least heating COP at 5 F (-15 C) for ENERGY STAR's cold-climate criteria, as EIA's equipment study lists them. EIA, Updated Buildings Sector Appliance and Equipment Costs and Efficiencies, Appendix A, p. 40 · March 2023

Keep going

Back to the course map

Sources and further reading

This lesson's measures and settings:

Prairie City's data (shared by the city lessons), the parts used here:

Spotted an error, or stuck? Write to hlli@ksu.edu. Corrections are made in place and dated here.

Text licensed CC BY 4.0, code MIT: teachers and students may reuse and adapt it, with credit to Honglin Li.