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Pump up the volume: Heat pumps for a decarbonised future

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The most powerful tool for rapidly decarbonising heating in buildings and homes is the humble heat pump. How powerful? The International Energy Agency’s recently released analysis estimates that potential global carbon dioxide emissions reductions from heat pumps can reach at least 500 million tonnes in 2030. This would be akin to eliminating the annual CO2 emissions from all of the cars in Europe today.

Evidence from the IEA underscores the ‘why’ of switching to heat pumps while the Regulatory Assistance Project (RAP), CLASP and the Global Buildings Performance Network offer further insights on the ‘how.’ The three organisations collaborated to create a toolkit to help policymakers develop packages to drive the heat pump market and deployment of the technology at scale.

On 15 December, the Electrification Academy welcomes the lead author of the IEA report, Yannick Monschauer, and two of the heat pump toolkit authors, Richard Lowes of RAP and Matt Malinowski from CLASP. They will share:

We welcome your questions after the presentation.

Hybrid Heat: the Cool Path to Home Heating

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The opportunity: If the over 50 million US homes that have central air conditioning and a separate heating system just replaced their AC with a look-alike and more efficient “two-way” heat pump unit, those households could not only cool over the summer, but they could also heat during the spring and fall. This would produce the immediate benefit of cutting a home’s fossil-fuel bill and its carbon emissions.

On a practical level, how easy is it to replace a failed central AC unit with a heat pump?

In a webinar last month, Make the Swap: Why It’s Time for Heat Pumps, Not ACs, CLASP,  RAP, and their guests answered this and other questions.

SPOILER ALERT:  It’s pretty easy.

“Make the Swap” assembled a panel of speakers to provide manufacturer, installer, and policy perspectives.  Camille Kadoch from RAP moderated a discussion with Matt Malinowski of CLASP;  Weston Berg of the American Council for an Energy-Efficient Economy (ACEEE); Nick Harbeck of Johnson Controls; and Nate Adams of HVAC 2.0.

What follows are excerpts from their discussion.

The Premise

Matt Malinowski, who spent over a decade supporting the federal Energy Star efficiency programs and is now CLASP’s director of climate research, framed the discussion with a short presentation that builds on CLASP and RAP’s recent study, Combating High Fuel Prices with Hybrid Heating: The Case for Swapping Air Conditioners for Heat Pumps. In a nutshell: Today, the homes that cool during the summer with central AC, heat during the cooler months with a separate furnace or boiler. When that AC unit dies, if it’s replaced with a heat pump, then that efficient appliance could not only cool the home more efficiently in the summer months, but it could also heat the home in the fall and spring, displacing less-efficient fossil or electric resistance heating.

“It’s a little sneaky,” admitted Malinowski when questioned by Kadoch. “Getting at heating load through cooling allows people to keep their current heating systems and does not require a full change out.”

Why Is This Hybrid Approach Possible?

According to Malinowski, Americans buy 4 million heat pumps and 4 million gas furnaces each year.  But they also buy 6 million central AC units each year. If, over ten years, those AC units were replaced with heat pumps, then more than half the US housing stock would have installed heat pumps, independent of any other efforts to swap out furnaces and boilers.

Kadoch noted, “So, this approach is about ‘displacing’ and not ‘replacing.’ ”

“Yes, our modeling for the lower 48 states and Washington DC, found that under very conservative assumptions — the ‘changeover,’ where the heat pump hands back home heating to the furnace at 40 degrees Fahrenheit — we could eliminate 39% of fossil fuel heating.” Furthermore, he explained, “under those assumptions, household utility bills and CO2 emissions would drop by 11%, and emissions reductions would grow to about 50 million tons of CO2 annually by 2032.”

As Matt’s summary made clear, there are many advantages to this approach. They include reduced consumer costs, increased choice, a cold climate backup with the existing furnace (but avoided fossil-fuel emissions when that furnace doesn’t need to be used) and ease of installation: heat pumps can be “dropped in” to replace central AC.

How Can Heat Pumps Just Be ‘Dropped In’?

Kadoch then turned the conversation to Nate Adams, the “House Whisperer” who has been electrifying homes since 2014 and is CEO of HVAC 2.0, a nascent network for HVAC contractors that lean towards electrification.

Kadoch: “Nate, so, what does it look like when you replace a failed central AC unit with a heat pump? Are we ready for this?”

Adams: “The answer is there’s not a big difference. The way that I compare a heat pump and an air conditioner, it’s like two identical cars, but one [the heat pump] has a reverse gear and the other doesn’t.”

“Are we ready, largely, yes. It doesn’t take much more time to install — 20 or 30 minutes.  Fundamentally, it’s the same piece of equipment; all the connections are the same.”

Kadoch: “Is it going to be challenge finding someone to do this installation?”

Adams: “One  of the reasons this hybrid approach came up in the first place — it lets everyone keep their existing heating system — their safety blanket. You can do this in any home with central AC with little pushback from contractors.”

“But the critical thing that needs to happen — because the vast majority of installs are done on an emergency basis when the AC fails on a hot day — is that a heat pump needs to be available in the contractor’s supply house.  Otherwise another air conditioner will get installed. A contractor puts in what’s on the shelf.”

“The wholesale cost difference, what the contractor pays off the shelf at the supply house, runs generally between $300 and $600 difference for the same type of unit.”

Getting Heat Pumps on the Shelf

Kadoch then questioned Nick Harbeck, manager of regulatory and environmental affairs at Johnson Controls, a company manufacturing residential and commercial heat pumps in Wichita, Kansas and Norman, Oklahoma.

Kadoch: “Nate, given that there are more ACs sold today than heat pumps, are manufacturers now targeting the AC market with heat pumps?”

Harbeck: “Yes. We view this as an enormous opportunity both from a market perspective and with respect to CO2 reductions.”

“It is also important to recognize that there are programs out there to incentivize the installation of heat pumps. So, in addition to the low cost of switching from an AC to a heat pump, there is the Inflation Reduction Act, for example. Section 25C provides homeowners with a tax credit for investments in certain high-efficiency appliances, and the HOMES program is a rebate program for housing energy retrofits. Both provide strong encouragement to install heat pumps. Those incentives are very rich and can be expected to move the needle toward the more advantageous equipment to install.”

The Policy Environment

Kadoch also explored the policy landscape for heat pumps with Weston Berg, a senior researcher with ACEEE who provides research and technical assistance related to utility regulations, and is one of the authors of ACEEE’s State Energy Efficiency Scorecard since 2016.

“We are seeing the greatest amount of activity from states that have recently passed clean energy legislation and want to secure carbon reductions from the power sector,” Berg said. “California and Massachusetts get mentioned a lot, but just in the past year we’ve seen activity in the Midwest — Minnesota’s Eco Act, Illinois’ Climate Equitable Jobs Act, and energy legislation and other policies coming out of Colorado.”

“Perhaps the biggest barrier that we see is that utility energy efficiency programs are not inclined to support fuel switching from fossil fuel heating to electric. In some places it is actually prohibited.”

“That said, we are seeing states do the work and try to reform those types of policies,” Berg added, highlighting states such as Maine and New York that are setting particular targets for heat pump adoption, as well as others that are retooling their efficiency targets to emphasize total fuel savings or avoided emissions.

“The second point is that states are changing energy efficiency rules to make clear that programs can fund electrification as a form of energy efficiency, when it saves total energy and avoids GHGs,” Berg said. “Giving a green light for funding, of course, provides some certainty and enables utilities to go after those savings in a deliberate way.”

Berg went on to explain that cost-effectiveness tests are a key determinant as to whether utilities can go after these savings. Not valuing the full range of benefits skews the analysis and will impede heat pump adoption. Colorado, for example, now requires the analysis of heat pumps to incorporate the social cost of carbon. Some states are adopting performance incentive mechanisms to reward utilities for heat pump adoption. There are also cases where utilities are rewarded for building retrofit measures or where jurisdictions adopt building codes that incorporate electric-ready requirements.

Summary

This hybrid approach is available today for more than 50 million US homes. Doing it sounds pretty easy, too. Perhaps most important, this is urgent, as the authors of Combating High Fuel Prices with Hybrid Heating emphasized:

Every six seconds a new residential furnace or air conditioner starts up in the United States, and that decarbonization opportunity is lost until 2035-2040.

Using Benefit-Cost Analysis to Improve Distribution System Investment Decisions: Issue Brief

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Electric utility regulators are paying closer attention than ever before to individual distribution system investment decisions, in part because of the rapid growth in distributed energy resources and the need for new grid modernization investments.

To achieve the best outcomes for ratepayers and society, regulators need robust and comprehensive tools for evaluating utility investments. Benefit-cost analysis is, in many cases, a superior analytical tool to traditional least cost/best fit methods. It can recognize and maximize a wider range of benefits and consider a broader range of impacts. It also allows for a more detailed analysis.

This issue brief compares the two analytical approaches and describes the many opportunities to use benefit-cost analysis (BCA) in new and better ways.

Author John Shenot and contributors Elaine Prause and Jessica Shipley also explore five crucial questions that regulators must answer as they shape benefit-cost analysis policies for their jurisdictions:

  • In what proceedings will we use BCA methods?
  • Who will conduct BCAs?
  • How will we engage stakeholders?
  • Which cost-effectiveness test(s) will we use?
  • How will we use BCA results to make decisions?

For those interested in a more thorough treatment of the topic, a companion reference report offers more detail as well as many examples from state regulatory proceedings.

Using Benefit-Cost Analysis to Improve Distribution System Investment Decisions: Reference Report

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Electric utility regulators are paying closer attention than ever before to individual distribution system investment decisions, in part because of the rapid growth in distributed energy resources and the need for new grid modernization investments.

To achieve the best outcomes for ratepayers and society, regulators need robust and comprehensive tools for evaluating utility investments. Benefit-cost analysis is, in many cases, a superior analytical tool to traditional least cost/best fit methods. It can recognize and maximize a wider range of benefits and consider a broader range of impacts. It also allows for a more detailed analysis.

This reference report compares the two analytical approaches and describes the many opportunities to use benefit-cost analysis (BCA) in new and better ways.

Author John Shenot and contributors Elaine Prause and Jessica Shipley also explore five crucial questions that regulators must answer as they shape benefit-cost analysis policies for their jurisdictions:

  • In what proceedings will we use BCA methods?
  • Who will conduct BCAs?
  • How will we engage stakeholders?
  • Which cost-effectiveness test(s) will we use?
  • How will we use BCA results to make decisions?

The reference report includes many examples of BCA use from state regulatory proceedings.

A companion issue brief offers a condensed treatment of the topic for those seeking a summary.

A policy toolkit for global mass heat pump deployment

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Heat pumps, a critical technology for clean energy systems, are poised to become the most important technology for heating decarbonisation. Currently, the vast majority of heat is provided by fossil fuels. In order to promote and encourage heat pump installations across the globe, the Regulatory Assistance Project, CLASP and the Global Buildings Performance Network have developed this heat pump policy toolkit, which provides a suite of tools, and advice on how to use them, for policymakers interested in promoting this critical technology.

The structure of the toolkit is loosely based on that of a Greek temple, with foundations and pillars, supporting a rapidly growing heat pump market. The interactive toolkit (which includes clickable links throughout) also features short videos that give an overview of each relevant element of the toolkit. These videos make up a short series which complements this document.

This toolkit works as a synthesis of policy approaches to heat pump deployment and a guide to designing the best packages of policies. As you’ll see in the toolkit (and in the graphic below), a complete policy package needs to consider foundational elements and must also take account of each pillar. We provide details, examples and potential issues, and solutions within the various policy elements discussed.

Heat Pump Toolkit temple

Foundational elements of this toolkit recognise the need for coordination and communication around heat pump policy efforts and strategies.

Pillar 1 considers economic and market-based instruments. These instruments are fundamentally associated with balancing the economics of heat use towards clean options, such as heat pumps, so that their lifetime costs are cheaper than fossil-based alternatives.

Pillar 2 considers financial support. Within this pillar, we identify three key elements of financial support for heat pumps — grants and tax rebates, loans and heat-as-a-service packages.

Pillar 3 considers regulations and standards. We look at buildings codes and standards, appliance standards and heat planning and zoning.

To build an effective heat pump policy package, policymakers must consider foundational elements as well as each of the pillars. And even within each pillar, combinations of elements may be appropriate.

Collaborating for Gas Utility Decarbonization

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Beginning in late 2021, RMI and National Grid jointly convened a series of facilitated collaborative workshops with stakeholders from the nonprofit and utility sectors across several regions, including RAP. This roundtable group explored what it may take to decarbonize the gas distribution system in the United States and the customer end uses it serves today, with a focus on the nation’s residential and commercial buildings.

This report, the roundtable’s final product, describes how the process was designed and conducted and lays out a set of guiding principles and strategies to inform decarbonization of the gas utility and corresponding end uses. Because participants had widely divergent perspectives on an array of issues, the report seeks to reflect initial areas of consensus and does not necessarily reflect the specific policy positions of any individual participating organization. This report is meant as a first step to inform further discussion and action for policymakers and regulators, primarily at the state level.

Make the Swap: Why it’s Time for Heat Pumps, Not ACs

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Amidst rising gas prices and groundbreaking US climate legislation, heat pumps are in the national spotlight. Now is the time to accelerate the deployment of this super-efficient technology across the country. But on a practical level, what is the most feasible and cost-effective path for consumers to adopt and operate heat pumps in their homes?

CLASP and RAP co-hosted a dynamic conversation about the opportunities to increase the deployment of heat pumps by using them to replace end-of-life air conditioners. This unique solution, in which the legacy heating system remains in place as a backup for high heating loads, offers consumers leading cost and energy savings while taking vital steps toward full home heating decarbonization.

Participants heard from leaders across the policy, research, industry, and installer communities to learn more about how this solution is already contributing to state and federal decarbonization goals.

For background information and analysis of this opportunity, please see the latest report from CLASP and RAP or the two-page summary.

A Win for Building Electrification: EPA Elevates Heat Pumps over One-Way ACs

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Millions of U.S. homes have central air conditioning for the summer and separate fossil fuel heating systems for the winter. A great way to boost home heating electrification is to replace those central air conditioners with look-alike “two-way” heat pump units, which can provide highly efficient heating in addition to cooling, at little extra up-front cost. CLASP and RAP analyzed ways to make this happen in a recent report. Our recommendations included revising appliance standards to require ACs to have two-way operation.

Central AC vs. Heat Pumps

Earlier this month, the Environmental Protection Agency put this idea into policy, saying that two-way heat pumps deserve the agency’s coveted Energy Star “Most Efficient” rating — and that even the best traditional one-way air conditioners no longer do.

This is big news for building electrification. It means that the hybrid electrification idea — where households ease into electrification, retaining their old fossil systems only for backup on the coldest days — is gaining ground. This approach has the immediate benefit of cutting fossil-fuel use, as households use their legacy fossil systems less. It also helps to smooth the path to full home electrification by boosting demand for heat pumps, increasing the capacity of heat pump contractors and installers, and raising consumer familiarity with heat pumps.

The details of EPA’s move: The agency issued final recognition criteria for specific products to qualify in 2023 as Energy Star Most Efficient. In its response to stakeholders who encouraged the EPA to remove one-way central AC units from the Most Efficient program, the agency wrote that it “expects 2023 to be the last year we recognize central air conditioners” as qualifying for the rating. It went on to state that it “agrees that hybrid heating is the logical next step for retrofits in existing homes, given the modest incremental cost to install a heat pump instead of an AC.” Furthermore, it indicated that it is adjusting its “marketing and communication strategy accordingly.”

In encouraging the EPA to reach such a conclusion, stakeholders pointed out that traditional central AC units only provide cooling and are currently paired with a fossil-fuel-fired furnace that delivers 100% of a home’s heating needs. By contrast, switching from central AC to heat pumps would allow consumers to use a cleaner and more efficient appliance for at least some of their heating needs. That in turn would avoid approximately 250 million tons of CO2 over 10 years, save $27 billion on heating bills, and produce an additional $80 billion in societal benefits.

The hybrid heating strategy, as a way to kickstart home electrification in the United States, is described in detail in CLASP and RAP’s report: Combating High Fuel Prices with Hybrid Heating: The Case for Swapping Air Conditioners for Heat Pumps. We make the case for appliance standards requiring ACs to have two-way operation, and the EPA decision is an important step in that direction. We also provide analyses of four major heating fuel types — oil, propane, methane and electric resistance — and outline key recommendations for how state governments and utilities can support accelerated heat pump adoption across the country.

The Energy Star Most Efficient designation is intended for use at point-of-sale on materials and product literature. The goal of the program is to encourage new, more energy-efficient products into the market more quickly by targeting early adopters. With the EPA’s decision, consumers will now have better information about the most efficient choices to make for cooling appliances.

This change should also have significant effects on state- and utility-run efficiency programs across the country due to their reliance on Energy Star information to decide what appliances to support. Fifty-four million American homes have one-way central ACs that can be easily swapped for a two-way heat pump, which would run in a hybrid configuration to both cool and heat the home, with the existing heating system as colder-weather backup. In a world where fossil fuel prices are high and volatile, the electric grid is getting cleaner, heat pumps are getting more and more efficient, and the demand for air conditioning is increasing, a big push for a swap of air conditioners to heat pumps over the next five to 10 years will smooth the way for full building electrification.