What does it take to grow a sustainable and equitable heat pump market?
With California’s ambitious greenhouse gas targets on the horizon, the California Public Utilities Commission (CPUC) needed to identify the most effective, scalable, and equitable ways to help people switch from fossil-fuel based HVAC and water-heating systems to heat pump systems. Nothing less than a full-scale transformation of the heat pump market would meet California’s ambitious climate goals.
With expertise testing and implementing innovative approaches to drive market adoption of heat pumps, VEIC was a natural choice to join the TECH Clean California implementation team and help California design and implement a comprehensive market transformation strategy. Services: Building Decarbonization , Energy Efficiency
In its first year alone, TECH has installed more than 10,000 heat pump water heaters and HVAC systems predicted to cut greenhouse gas emissions by 3,359 metric tons. TECH has also distributed more than $2 million in grants to overcome barriers to heat pump adoption, with an additional $2 million planned for 2023.
Achieving Emissions Reductions with Building Electrification
Increasingly, states and municipalities are taking big steps to reduce emissions and address climate change. As of August 2022, 25 states and the District of Columbia had established economy-wide targets to reduce greenhouse gas (GHG) emissions and advance clean energy. Provisions in the recently-enacted Inflation Reduction Act will make it possible for even more jurisdictions to follow suit with rebates for customers to install heat pumps and upgrade their homes.
Yet, critical as they are, rebates alone will not create lasting change in the HVAC and water heating markets and make heat pumps the default choice for customers and contractors. Market transformation requires a holistic approach with equitable and scalable strategies that overcome barriers to heat pump adoption.
“Innovation is at the heart of TECH Clean California and that’s exactly why we decided to partner with VEIC. With decades of experience identifying and piloting emerging technologies and innovative program design, VEIC has helped us identify, test, and refine the solutions we need to bring the benefits of clean energy to all of California.”
Embracing Innovation to Transform Markets
Beginning in 2021, California embarked on an ambitious $120 million initiative to increase adoption of low-emissions space and water heating equipment across the state. For California to achieve its goal of 6 million heat pumps installed by 2030, this initiative—TECH Clean California (TECH)—must bring about a wholesale transformation of California’s heat pump market.
With experience piloting new program ideas, approaches, and technologies, in Vermont, Wisconsin, and Hawaii, VEIC was a natural choice for TECH’s pilot and demonstration arm. Energy Solutions, the lead implementer for TECH Clean California, selected VEIC to administer two key components of TECH: a series of six Regional Pilot projects and a multi-year Quick Start Grant program. In addition to discovering and refining scalable solutions to overcome barriers to heat pump adoption, the results of these two programs will also inform policy making and ensure the long-term viability of California’s heat pump market.
Regional Pilot Studies and Quick Start Grants
Launched in Fall 2021, six Regional Pilots are currently testing ways to overcome barriers to heat pump adoption in single- and multifamily homes. The pilots include tariffed on-bill financing; streamlined permitting; multifamily property installations; low-income building retrofits; targeted customer outreach; and heat pump water heater (HPWH) load shifting. VEIC manages all six pilot programs, working closely with local partners to implement the pilots and overcome challenges, and compiling and analyzing program data to enable future program improvements. The data generated from these pilots will ensure that future state investments support programs with verifiable results.
VEIC also manages a one-of-a-kind Quick Start Grant Program, a funding opportunity for targeted, innovative pilots run by outside organizations focused on overcoming market barriers to the adoption of heat pumps, primarily in historically underserved communities. The first round of funding supported eleven different projects implemented in 2022. 73% of this funding supports projects serving low- income communities or households. A second grant solicitation will fund a new group of projects implemented throughout 2023, all of which will support historically underserved communities.
Quick Start Grant Project Spotlight: Barnett Plumbing
One obstacle to heat pump installation is that switching from existing fossil fuel equipment to new, efficient electric alternatives can delay the installation of the new equipment. It can take days or even weeks to purchase, permit, and finish the electrical or infrastructural changes that can be necessary to install a new heat pump water heater (HPWH). If the existing system has failed, customers are often unwilling to wait that long to restore hot water for their household. Barnett Plumbing developed an innovative solution—a water heater loan program. If a homeowner commits to installing a HPWH, Barnett will temporarily loan and install a gas water heater to bridge the time necessary to acquire permits and complete the electrical system upgrades. Given customers’ enthusiastic response in the first few months, this program may very well become a model for businesses across the state.
Additional Quick Start Grants are testing pre-designed central heat-pump boiler installations to fill a gap in the technology available for small multifamily buildings; 120V HPWH that plug into existing outlets; software to provide remote support for HP installations; targeted outreach to remote and tribal communities left out of previous incentive programs; funding for home repairs that often prevent low income households from participating in HP programs; solar-plus-storage to offset potentially higher energy costs associated with heat pumps; HPWH in manufactured homes; and training for groups underrepresented in the HVAC workforce. The second round of Quick Start Grant funded projects will begin in 2023, but already, the Quick Start Grant program has distributed $2 million and allowed dozens of promising projects to move forward that may not otherwise have found funding.