Does Going All-Electric Lower Construction Costs?

The common assumption is that all-electric buildings cost more to build than gas buildings. On most multifamily projects we have modeled in Massachusetts, the opposite is true once you factor in incentives and the full system cost.

The Real Comparison

On a recent multifamily development, we ran a side-by-side comparison of gas and all-electric paths.

The gas path used gas-fired boilers for heating, gas domestic hot water, and gas ranges. The equipment itself was cheaper than the electric alternatives. That is the number most developers look at, and it is where the "gas is cheaper" assumption comes from.

The all-electric path used heat pump heating, heat pump water heaters, and induction ranges. Higher equipment cost per unit.

But equipment cost is not construction cost. The all-electric path eliminated gas line infrastructure throughout the building: no gas piping, no gas meter banks, no gas venting, no gas detection systems, no gas shut-off valves per unit. Those infrastructure savings offset a significant portion of the equipment premium.

The Incentive Differential

The all-electric path qualified for roughly $15,000 per unit in Mass Save incentives. This was a townhome development where each unit qualifies individually at the single-family Energy Star tier, which pays significantly more than the multifamily tier. The gas path qualified for far less because the incentive programs are structured to reward electrification.

For standard multifamily buildings (not townhomes), the per-unit incentive is $2,500 at the Energy Star tier or $3,750 at Passive House tier. The dollar amounts differ, but the principle is the same: all-electric qualifies for higher incentive tiers regardless of building type.

When we added the incentive differential to the construction cost comparison, the all-electric path was $526,000 cheaper across the entire project.

The Efficiency Factor

Heat pumps are 2 to 3 times more efficient than gas combustion for heating because they move heat rather than creating it. In moderate weather, a heat pump delivers roughly 3 units of heat for every 1 unit of electricity (COP 3.0). In Massachusetts winter conditions, that drops to COP 1.5 to 2.0, which is still meaningfully more efficient than gas boilers at 80% to 95% combustion efficiency. That efficiency difference means lower operating costs for tenants and better performance on the energy model.

The better energy model performance translates into lower HERS scores, which can allow envelope simplifications that further reduce construction costs. On this project, the all-electric path's better HERS performance allowed us to use standard double-pane windows instead of the upgraded windows the gas path required.

When Gas Still Wins

There are scenarios where gas makes financial sense.

Domestic hot water in very large buildings. Central gas boiler plants for domestic hot water can be more cost-effective than distributed heat pump water heaters in buildings with 100+ units, depending on the design.

Non-incentive markets. If your project is in a municipal electric territory where Mass Save incentives are not available, the incentive differential disappears, and the equipment cost comparison may favor gas.

Developer preference and risk tolerance. Some developers have extensive experience with gas systems and view the switch to all-electric as a construction risk. That is a valid consideration, though the risk decreases as all-electric construction becomes more common.

The Decision Framework

The right fuel source depends on your specific project. The wrong approach is to assume one is cheaper without running the numbers. A feasibility study that models both paths with your actual building geometry, local utility rates, and available incentives gives you the data to make this decision correctly.

On most projects we study in Massachusetts, all-electric wins after incentives. But "most" is not "all," and the margin varies significantly by project.