Heat Pump Water Heaters: A Quick Look at Recent Developments

Regulatory Assistance Project (RAP) has just released Beneficial Electrification of Water Heating, a new paper in its excellent “Electrification in the Public Interest” series. This paper looks at water heaters from consumer, grid and environmental perspectives and provides a detailed analysis (along with references to a wide variety of related studies) of the value of electrifying water heating loads. The analysis includes both standard electric water heaters (EWHs) and heat pump water heaters (HPWHs).

As a general conclusion, RAP found that “the beneficial electrification of water heating constitutes an economical and practical path forward for saving consumers money, managing the power grid,and reducing related greenhouse gas emissions.” RAP provides a number of recommendations.

The report notes that the consumer economics of electrifying water heating can vary significantly based on climate, fuel type, electric rates, and housing type, but there are many situations where the consumer economics would support changing to heat pump water heaters as a replacement for other types of water heating. Electric water heating is a readily controllable load, which enables integration with the grid to use variable renewables when available or shift to lower cost time periods. The report makes a number of recommendations for furthering the electrification of water heating such as codes, standards, and a wide variety of state policies. 

To remind us all of where we are in our carbon reduction framework, note that one recommendation is simply, “Prohibiting or discouraging fuel switching is a policy that states would be wise to revisit with electrification in mind.” The framework for deciding what is beneficial really has changed! Sometimes the first step is getting out of the hole we created 50 years ago when options and implications were very different.

Building Decarbonization Coalition

The Building Decarbonization Coalition (BDC) is a recently-formed, California-based organization that is bringing together a broad coalition of stakeholders to “…power California's homes and workspaces with clean energy.” The group has released three policy papers: California’s Building Decarbonization Opportunity, Rate Design for Building Electrification, and Strategies and Approaches for Building Decarbonization.  

Part of the impetus in California is the passage of SB 1477 in September 2018, which BDC calls “the first legislatively mandated building decarbonization bill in the country…that will grow the market for clean, low-emission heating sources in new and existing homes and buildings”. SB 1477 provides incentives for near-zero emission homes and market development for clean energy technologies (such as HPWHs). The bill also provides support to ensure that low-income residents benefit from the innovations. With a typical California scale of energy efficiency operations, the bill also authorizes $50 million annually to implement its provisions. The California Public Utility Commission (CPUC) is currently developing the policy framework to guide implementation.

BDC is focused on retrofit-ready heat pump water heaters (HPWH) as an initial opportunity. In October 2018, the BDC held a Retrofit-Ready HPWH Summit and has published meeting notes, information on a draft specification, and presentations on its website.

Retrofit-ready is an important concept as it encompasses issues such as fitting in various existing building spaces -  and very importantly – operating with 110 power rather than 220. The change in voltage will enable retrofits to happen without requiring a new electrical panel in many cases, reducing retrofit costs significantly. Another key aspect of the retrofit-ready concept will be the smart controls, which need to work with California’s increasingly renewable energy grid to achieve maximum grid and consumer benefits. Water heating is a readily controllable load, and that control must be optimized.

Northwest Energy Efficiency Alliance

California’s entry in the HPWH will change the scale and definition of HPWHs for manufacturers, with benefits to the whole country. But just to the north, Northwest Energy Efficiency Alliance (NEEA) is the organization that has really set the market for the last decade. While consumers in most of the country wonder what a HPWH is, in Oregon and Washington the market share of HPWHs is 10 percent (of electric water heaters), still early in technology adoption, but increasingly familiar. More importantly, when one of NEEA’s qualified water heater contractors recommends a HPWH, 30 to 50 percent of the time, the consumer installs the heat pump, even though the initial cost is higher.

NEEA evaluates market progress over time; not just program accomplishment, but measurable progress in market shares, pricing, and installer knowledge, for example. Its recent Market Progress Evaluation #4 shows how its multi-year initiative has fared recently, and shares some longer-term trends. Some key findings include:

  • New construction dominates sales, accounting for 70 to 90 percent of all HPWH sales. Bulk pricing for developments, packaging as part of an energy upgrade package, and increasing building codes are all drivers.
  • Pricing of HPWHs is erratic. HPWH are still in an early stage of market adoption where they compete as an upgrade. Sometimes installers are less familiar with the technology and bid higher, and some installations can be more complicated.
  • Planned replacements are greater than emergency replacements, and as one might suspect, are more amenable to selection of a HPWH. The table below shows a breakdown in market activity in the Northwest for 2017.

NEEA is focused on HPWHs from an efficiency perspective rather than replacement of fossil fuels. NEEA also has some interest in demand management, but it is not a major driver of activity; smart controls are not required as part of the installation protocol. However, in conversation with Jeff Harris, Chief Transformation Officer for NEEA, he noted that they have some data to indicate that upsizing residential water storage tanks to 66 gallons would enable HPWHs to recharge anytime within a 24 hour cycle without disrupting normal household activities. Currently, about two-thirds of the HPWHs installed have tanks smaller than 55 gallons. Upsizing tanks could add more flexibility to the grid at very low cost to help incorporate renewable generation peaks or other excess capacity periods. As HPWHs come to scale, this could become a significant consideration.

This blog is part of Building Decarb Central, a series of blogs and other resources aimed at providing a constant flow of information on building decarbonization. Be sure to check out our web portal for more stories, resources, and information.

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