Priming the (Heat) Pump
Building operations account for ~13% of U.S. GHG emissions, with space and water heating accounting for the majority of energy usage. ~2/3 of U.S. households are heated by fossil fuels (~59M devices, majority are fossil gas). Replacing fossil fuel heating appliances with efficient electric alternatives is therefore an imperative in the fight to lower building emissions. Enter: the heat pump.
A heat pump is a device that utilizes electricity and a refrigerant to move thermal energy between two spaces. Heat pumps function by taking advantage of the fact that heat energy flows from higher temperature and pressure areas to lower ones. By compressing and expanding refrigerant, heat pumps can either “pull” heat from a home to cool air, or pull heat from outside air and recycle it into a home for heating. (There’s more to the science; see here for detail).
Heat pumps come in a variety of forms based on the medium they are transferring heat to and/or pulling heat from — i.e., air-source (outside air), geothermal (underground air), and water. Air-source heat pumps are most common in a residential setting. The mechanics underpinning a heat pump are not novel — refrigerators and air conditioning units rely on similar technology — however, unlike those devices, heat pumps can both heat and cool spaces, and do so more comfortably than fossil-powered alternatives.
Efficiency improvements have increased heat pumps’ Coefficient of Performance (“COP”) — or the heating / cooling energy provided by the device based on the electrical energy used by the system. A COP of 2.0 or higher is considered a conservative baseline for air-source heat pumps today. These technical improvements and associated cost reductions have helped foster heat pump adoption in Europe and the U.S. over the past decade.
European Heat Pump Installations
Source: https://www.rehva.eu/rehva-journal/chapter/european-heat-pump-market
U.S. Air-Source Heat Pump Shipments
Source: https://www.ahrinet.org/statistics
Because heat pumps run on electricity rather than fossil fuels and are hyper-efficient, they have the potential to both lower emissions and household energy costs. However, unlocking emissions reductions is dependent on the CO2e intensity of the electricity being used, while cost savings are dependent on the price of electricity relative to fossil gas. Both of these factors vary based on geography. And understanding these differences will be critical for governments, contractors, homeowners, and utilities to enable heat pump adoption.
Thankfully, new research from the Lawrence Berkeley National Laboratory has helped add context to regional differences in heat pump efficacy in the U.S. Key charts from that report are shown below, which illustrate the heat pump COP required to reach parity on (1) emissions and (2) operating costs relative to an 80 AFUE fossil gas furnace in each respective state.
Minimum Heat Pump COP to Reach Emissions Parity (vs. 80 AFUE Fossil Gas Furnace)
In the chart above, emissions reductions are realized in most states relative to an 80 AFUE fossil gas furnace given COPs are below the conservative standard of 2.0. However, in states like Wyoming and West Virginia, where the carbon intensity of the grid remains high due to coal, heat pumps need to be considerably more efficient (i.e., have a higher COP) to break-even with fossil gas furnaces from an emissions perspective. The good news: 80% of the U.S. population lives in a state where switching to a heat pump with a COP of 2.0 would decrease household emissions today.
Minimum Heat Pump COP to Reach Operating Cost Parity (vs. 80 AFUE Fossil Gas Furnace)
Realizing economic benefits from heat pumps versus fossil gas furnaces is more elusive than emissions reductions. Electricity versus fossil gas prices by state drive intra-regional variation, but operating cost savings tend to be best in warmer regions that require less heat in the winter. In states like California, Minnesota, and Wisconsin, fossil gas is cheaper relative to electricity, which increases the threshold of heat pump efficiency or COP to be operating cost break-even. Note: this analysis does not include installation costs for heat pumps (~$8K) versus fossil gas furnaces (~$5–6K), which would make heat pumps even less economical, but it also reflects 2019 fossil gas prices, which were ~50% lower than today and would improve heat pump economics.
Heat Pumps: Bridging the Financing Gap
Fixing the heat pump cost divide will require the help of government rebates (see Rewiring America) and utility incentive programs, but technical and business model innovation will also play an important role. For example, new platforms are seeking to consolidate and streamline the home electrification process, which should lower installation costs. And advancements in core heat pump technology should improve efficiency. We’re investing our capital behind these new models in the hopes of accelerating their adoption.
And as Russia’s invasion of Ukraine has laid bare the geopolitical risks of a fossil fuel dependent economy, heat pumps have emerged as an urgent solution. We are hopeful that European regulations and incentives to scale heat pump deployment to lower reliance on Russian fossil gas will serve as a template for the U.S. to follow. Indeed, Washington just became the first state to require heat pumps for all new commercial and multifamily construction. The transition is getting under way.
