Going Electric Saved $2.46M and Handed Tenants the Bill

A 104-unit senior duplex project in Massachusetts had to file with MEPA, which means the energy analysis behind it is public. The filing compared a gas design against an all-electric one, and the all-electric version came in $2.46M cheaper to build. That is a real number and the developer gets to keep it. What the same filing shows further down is that the tenants pay it back over the next thirty years. Both things are true at once, and which one you care about depends on which side of the lease you are sitting on.

The Real Numbers

The energy code related costs, net of incentives, came out like this. Gas: $8,277,984. Electric: $5,820,048. The gap is $2.46M in favor of going electric, before a single unit is occupied.

$1.56M of that $2.46M gap is Mass Save incentives. The remaining $900K is the cost of running gas into each building. On a duplex layout that second number is not a surprise. Service has to reach every structure rather than one central point, so trenching, meters, and regulators multiply with the building count instead of the unit count. A 104-unit project laid out as duplexes is a lot of separate buildings to bring a fuel to.

So the capital case is not really a case about equipment. Roughly two thirds of it is rebate money, and the rest is infrastructure the all-electric design simply never has to install. Take the incentives away and the gap closes to $900K. That is worth knowing, because incentive programs get revised and gas service costs do not.

It is also worth noticing what is not driving the number. Nobody won this comparison on heat pump efficiency or on a smarter envelope. The two designs met the same code requirement. The money moved because of a rebate and a trench.

The Operating Side

Annual operating cost came out the other way. Gas: $247,575. Electric: $304,536.

Electric costs $57K a year more to run today, about $550 a year per unit. On senior housing that is not an abstraction. It is a fixed-income household absorbing an extra $550 a year in a building that somebody else was paid $2.46M to make cheaper.

That gap is not fixed either. It grows every year, by 2.34%. So the comparison people usually run, which is capital cost against first-year operating cost, is the one comparison guaranteed to flatter the electric design. The first year is the year the penalty is smallest.

Senior housing sharpens that, because the occupancy is the least able to absorb a bill that grows faster than their income does. A $550 a year gap in year one is an annoyance. The same gap compounding for two decades against a fixed income is a different conversation, and it is one the developer is not in the room for.

Why the Escalation Rates Decide It

Electric rates in this filing climb 4.2% a year. Gas climbs 1.86%. That is more than double, and the spread between those two numbers is the entire story of the second half of this project's life.

Escalation compounds, which means the operating penalty is not $57K a year for thirty years. It is $57K growing at 2.34% a year, every year, against a construction savings that was collected once and never grows at all. A one-time number and a compounding number are different species. Given enough years, the compounding one catches the fixed one. Here, it takes about thirty years, which is well inside the life of the building.

When you consider everything over thirty years, it is basically a wash. That is the finding. Not a win, not a loss, a wash, with the developer and the tenant standing on opposite ends of it.

The uncomfortable part is who is on each side. That $1.56M rebate is funded by the same utility whose electric rates climb 4.2% a year. It is hard not to read that as the utility buying the developer off up front, so they can bill the tenant for the next thirty years. The money does not disappear. It changes hands once at closing, and then again every month for three decades.

This is also why escalation assumptions deserve more scrutiny than they usually get. They arrive in a model as two innocuous cells, they are almost never argued about in a design meeting, and they are doing more work in the thirty-year outcome than most of the equipment selections above them.

When Gas Still Wins

When the building is one structure rather than a duplex layout. The $900K service premium here is a function of running gas to many separate buildings. Consolidate the same unit count into one or two structures and that line shrinks toward the cost of a single service, which takes most of the capital advantage with it.

When the owner is holding the asset long term. Split incentive cuts both ways. An owner still holding the building in year fifteen has a reason to care about the $57K a year, because it turns up in turnover, in collections, and in what the building appraises for.

When the incentives do not land. The all-electric case here leans on $1.56M of Mass Save money. Program budgets get revised, eligibility shifts, and applications get timed wrong. A design that only pencils with the rebate is a design with a schedule risk attached to it.

When the heating load is severe and the equipment selection is marginal. This filing ends up with a less effective heating system on the electric side. Cold climate heat pumps have closed most of that gap, but sizing and selection still decide it, and a bad specification turns an efficiency argument into a comfort complaint in January.

When the fuel mix was never actually a choice. Some projects have a code path, a program requirement, or a decarbonization commitment that settles the question before the spreadsheet opens. In that case the exercise is not gas against electric, it is making the electric design as cheap to operate as it can be, which is a different and more useful problem.

The Decision Framework

Check what the number is measuring before you spend it. The $2.46M in this filing is construction cost, net of incentives, on one building geometry, in one utility territory, with one rebate program open at one moment. Move any of those and the answer moves with it.

Then price the whole life, not the closing. Capital plus thirty years of operating cost, using the escalation rates your utility is actually filing rather than a flat assumption, which here meant 4.2% for electric against 1.86% for gas. Those two cells decide more of this outcome than the mechanical schedule does. Get them wrong and a wash reads like a win.

And be straight about the result. The developer keeps the $2.46M. The tenant gets a huge power bill, and a less effective heating system. The carbon emissions are lower, which is the actual point of the policy, and it is worth being honest that the policy is paying for that outcome out of somebody's utility bill.

None of which transfers to the next project. Change the building count, the length of the service run, the rebate window, or the rate territory, and this same comparison lands somewhere else entirely. There is no general answer to gas against electric. There is only what your building does, which is why we run the numbers on each one before anybody commits to a fuel.