The number of electric heat pumps to warm water and heat and cool air flowing in homes is expected to grow significantly over the next five years, according to a study by the California Public Utilities Commission released June 13. But installations are being slowed by the technology’s high costs and lack of customer and contractor awareness, it found.

Homes and commercial buildings produce 12% of the carbon emissions in California, which also factors in water use and wastewater treatment. That makes this sector the state’s second largest source of carbon pollution after the transportation sector. Moving away from natural gas fueled water and space heaters, which consume the lion’s share of residential fossil fuels, is essential for greater building electrification to drive down greenhouse gas emissions in the state.

Electrifying homes “largely using high-efficiency heat pump technologies for space conditioning and water heating and, less so, electric dryers for drying and heat pump pool heaters for pool heating—will be instrumental to reducing building energy use because they offer a low- or no-carbon pathway to meeting critical building functions.” That is according to the CPUC study by Opinion Dynamic released on Monday.

California set a goal of 6 million electric heat pump installations by 2030. An estimated 350,000 are installed in the state each year, but that will need to be doubled over the next eight years to reach 6 million, the Air Conditioning Heating and Refrigeration Institute (AHRI) told the CPUC during an April 5 workshop. In addition, the much higher costs of heat pumps has been a major deterrent to installations. They are about $11,530, including labor and needed electric wiring, which is about $4,500 more than a gas system. That makes subsidies critical, especially since about half of the home furnaces will need to be replaced over the next decade.

Of the 12.2 million space heating units in California residences in investor-owned utility territories, only 4% are electric heat pumps, according to the CPUC study.

Needed incentives

The CPUC has $95 million in subsidies for hot water heat pumps, with $40 million of that added in April to lower the cost of the electric heat pumps to close the gas heater cost gaps, including for necessary electric panel upgrades. Hot water heat pumps are far more efficient, can help reduce climate pollution and when connected to the grid can help balance supplies during times of high demand.

Incentives are also available to struggling households from the low-income tax credit system, which encourages heat pumps because builders can profit from utility bill savings by using the California Utility Allowance Calculator, the CPUC report states.

The federal government also is offering incentives and exerting pressure. Last week, the Department of Energy invoked the Defense Production Act to waive tariffs on imported solar panels and also advance domestic heat pumps. The “authorization will reduce reliance on adversaries like Russia for oil and gas and expedite the installation of Made in America heat pumps across homes and other buildings,” DOE stated. It also is projected to drive down heat pump prices.

This week, DOE announced it would issue regulations requiring home furnaces to be 95% efficient by the end of the decade, which is expected to help drive an uptake in electric heat pump furnaces. The new rule is estimated to save consumers $30 billion over three decades and cut carbon emissions by 373 million metric tons and methane emissions by 5.1 million tons.

Also pushing the growth of heat pumps are local building codes prohibiting or limiting gas appliances in new homes. There are more than 40 local ordinances that restrict gas use in new construction, with the City of Berkeley the first to enact such an ordinance.

The CPUC study pointed out that both the lack of customer and builder awareness of heat pumps needs to be reversed. “Reportedly as few as five percent of California architects are aware of heat pumps,” it states. It also notes that many in the construction trade “remain unfamiliar with heat pumps, how they work, or their design requirements.”