3. Austin HVAC Contractor HP and Refrigerant Study Final Report — original pdf

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HVAC-R CONTRACTOR STUDY Advancing high-efficiency, climate-smart heating, ventilation, air conditioning, and refrigeration (HVAC-R) technologies and practices in support of the Austin Climate Equity Plan. April 2024 Prepared by City of Austin HVAC Contractor Study: Contractor Engagement Plan iii Acknowledgements This report was prepared by Jen Cregar and Marisa Hanson-Lopez for the City of Austin Office of Sustainability. We are grateful to the following individuals and organizations for sharing their time and insights that informed this study. ● Jason Baker, Acme A/C & Heating ● Amanda Mortl, City of Austin Office of ● Alpha Tounkara, American Conservation & Sustainability Air Institute ● Harvey Giblin + faculty, Austin Career ● Greg Arcangeli, Austin Energy ● Aiden Cohen, Austin Energy ● Heidi Kasper, Austin Energy ● Sara Norris, Austin Energy ● Sally Phipps, Austin Energy ● Holly Prosser, Austin Energy ● Joe Teng, Austin Energy ● Tom Turner, Austin Energy Joni Zacharisen, Austin Energy Jordan Garcia, Better Service Co. Inc. Coalition ● Ted Tiffany, Building Decarbonization ● Zach Baumer, City of Austin Office of Sustainability ● ● ● Sarah Talkington, City of Austin Parks & Recreation Department ● Trey Farmer, Forge Craft Architecture + Design ● Katelynn Essig, Foundation Communities ● John Chavez, hvacMENSCH ● Al D’Andrea, McCullough Heating & Air ● Kevin DeMaster, Mitsubishi Electric Trane ● Garrett Smith, Mitsubishi Electric Trane ● Ben Lipscomb, National Comfort Institute ● Dominick Guarino, National Comfort Conditioning HVAC US LLC HVAC US LLC Institute Plumbing ● Paul Wieboldt, Tradewinds Appropriate Technologies ● Shawn Hoover, Vertex Mechanical ● Victoria Kramer, Bluebonnet AC Services, ● Roland Arrisola, Stan’s Heating, Air & City of Austin HVAC-R Contractor Study i Table of Contents Acknowledgements ....................................................................................................................................... ii Executive Summary ....................................................................................................................................... 1 Background & Purpose ................................................................................................................................. 5 Contractor Engagement Approach ............................................................................................................... 6 Findings & Recommendations ...................................................................................................................... 8 Residential Heat Pump Barriers .............................................................................................................. 10 Multifamily Heat Pump Barriers ............................................................................................................. 25 Low-GWP Refrigerant Barriers ................................................................................................................ 31 Conclusion ................................................................................................................................................... 37 Appendix A. Survey Results ....................................................................................................................... A-1 Appendix B. Peer Municipally Owned Utility Heat Pump and Heat Pump Water Heater Incentives ........ B-1 City of Austin HVAC-R Contractor Study ii Tables Table 1. Summary of Recommendations ...................................................................................................... 2 Table 2. Contractor Engagement Approach.................................................................................................. 7 Table 3. Contractor Engagement Representation ........................................................................................ 7 Table 4. Summary of Residential Heat Pump Barriers and Solutions ......................................................... 10 Table 5. Recommended Solutions to HP Upfront Cost Barrier ................................................................... 12 Table 6. Summary of Single-Family Heat Pump and Heat Pump Water Heater Incentives from Peer Municipally Owned Utilities1....................................................................................................................... 14 Table 7. Recommended Solutions to Contractor Resistance Barrier .......................................................... 19 Table 8. Recommended Solutions to Longer Sales Cycle Barrier ............................................................... 21 Table 9. Recommended Solutions to Poor Cold Temperature Performance Barrier ................................. 22 Table 10. Recommended Solutions to Electrical Upgrade Experience Barrier ........................................... 23 Table 11. Summary of Multifamily Heat Pump Barriers and Solutions ...................................................... 25 Table 12. Recommended Solutions to Affordable Housing High Maintenance Cost Barrier ..................... 26 Table 13. Recommended Solutions to Austin Energy Multifamily Incentive Design Barrier ...................... 28 Table 14. Summary of MultiFamily Heat Pump and Heat Pump Water Heater Incentives from Peer Municipally Owned Utilities1....................................................................................................................... 29 Table 15. Recommended Solutions to Maintenance Staff Training Barrier ............................................... 30 Table 16. Summary of Low-GWP Refrigerant Barriers and Solutions ......................................................... 31 Table 17. Recommended Solutions to Limited Local Influence on Refrigerant Choice Barrier .................. 34 Table 18. Recommended Solutions to Contractor Resistance to Refrigerant Destruction Barrier ............ 35 Table 20. CPS Energy Heat Pump Incentives – Single-Family .................................................................... B-1 Table 21. Los Angeles Department of Water and Power (LADWP) Heat Pump and Heat Pump Water Heater Incentives – Single-Family .............................................................................................................. B-2 Table 22. Sacramento Municipal Utility District (SMUD) Heat Pump and Heat Pump Water Heater Incentives – Single-Family .......................................................................................................................... B-3 Table 23. Sacramento Municipal Utility District (SMUD) Heat Pump and Heat Pump Water Heater Incentives – Multifamily ............................................................................................................................. B-4 Table 24. Seattle City Light Heat Pump and Heat Pump Water Heater Incentives – Single-Family and Multifamily ................................................................................................................................................. B-5 City of Austin HVAC Contractor Study: Contractor Engagement Plan iii Figure 1. Heat Pump Adoption by Household Income, 2020 ....................................................................... 8 Figure 2. Percent of Austin HVAC System Installations that are Heat Pumps .............................................. 9 Figure 3. Everett M. Rogers’ Innovation Adoption Curve ............................................................................. 9 Figure 4. Contractor Perspectives on What Motivates Them to Sell Heat Pumps ..................................... 12 Figure 5. Austin ISD-City of Austin Pep Rally for School- and Community-Based Zero Waste Challenge .. 17 Figure 6. Contractor Promotion of Heat Pumps ......................................................................................... 18 Figure 7. Reclaimed Refrigerants Reported Under Section 608 of the Clean Air Act ................................. 32 Figure 8. Global Warming Potential (GWP) Comparison of Common Refrigerants ................................... 33 Figure 9. Refrigerant Recycle vs. Reclamation Rates .................................................................................. 35 Figures City of Austin HVAC Contractor Study: Contractor Engagement Plan iv Executive Summary This report presents recommendations for transforming Austin’s residential heating, ventilation, air conditioning, and refrigeration (HVAC-R) market towards high-efficiency heat pumps (HPs) and heat pump water heaters (HPWHs) and low-global warming potential (GWP) refrigerants, as called for in the Austin Climate Equity Plan. Consumers typically can choose between electric and natural gas space and water heating options. Because of the long lifespan of household appliances like heating and cooling systems and water heaters, there is a large emissions reduction benefit when a consumer selects a high-efficiency electric option over a fossil fuel-fired appliance. Installing a natural gas furnace or water heater can lock in fossil fuel emissions for 15 to 20 years. Heat pumps are an energy-efficient, low-carbon alternative to traditional space and water heating and cooling technologies. Austin is a leader in Texas in residential HP installations, but opportunity remains to overcome barriers that can impede choice for low-carbon heating and cooling technologies. The report offers 20 recommendations to increase HP and HPWH installations in Austin’s single-family homes and multifamily communities and transform the residential market towards low-GWP refrigerants. The recommendations are based on barriers and opportunities identified by local HVAC-R contractors and national best practices. These insights were gleaned via an online survey and interviews that occurred from October 2023 through January 2024, a follow-up webinar held with study participants in April 2024, and online research from Fall 2023 through Spring 2024. Table 1 includes a summary of recommendations with links to the relevant report section. The observed barriers and recommended solutions focus on residential HP replacements, though some of the recommendations also apply to HPWHs, new construction, and commercial buildings. The recommendations are organized in three categories: • Residential (primarily single-family) HPs • Unique considerations for multifamily HPs • Lowering the climate impact of refrigerants The biggest barrier is the upfront cost of installing HPs and HPWHs. This includes equipment cost, potential space modifications to accommodate the equipment, and electrical upgrades (e.g., panel upsizing, wiring). Recommendations for addressing the upfront cost barrier include adjustments to Austin Energy’s incentives—with the potential for complementary incentives or funding support provided by the Office of Sustainability, providing unbiased HP cost-benefit information, and stimulating increased sales to drive down costs through bulk purchasing programs and public education and marketing campaigns. Additional recommendations are offered to overcome barriers related to contractor resistance and limited experience with electrical upgrades that can be required with HPs and HPWHs, a longer sales cycle, and concerns about HP performance in cold temperatures. A subset of recommendations targets unique constraints in multifamily—and especially affordable housing—settings. These include the City offering affordable housing providers fundraising support and free, onsite training to mitigate higher HP and HPWH maintenance costs as maintenance staff adapt to City of Austin HVAC-R Contractor Study 1 the newer technology. The report also includes suggestions to update Austin Energy’s incentive structure and support services to better align with multifamily property constraints. Lastly, the report includes recommendations to address the climate impact of high-GWP refrigerants and encourage a transition to low-GWP refrigerants as local supply becomes available. Suggestions include additional incentives for equipment that uses low-GWP refrigerants and for the destruction (rather than resale) of high-GWP refrigerants, contractor and public education, and reducing the local supply of high-GWP refrigerants through carbon offsets and purchasing reclaimed refrigerant. Table 1. Summary of Recommendations Category Barrier Solution(s) High Upfront Cost All Residential 1) Increase/modify incentives. 1a) Increase rebate levels. 1b) Offer a short-term loan to cover the delay in receiving a federal tax credit(s). 1c) Implement a GHG-based incentive structure. 2) Provide unbiased cost-benefit information. 2a) Create a public report documenting the lifecycle costs and benefits. 2b) Offer training on how to use a customer decision support tool to drive sales. 3) Stimulate bulk purchasing discounts. 3a) Partner with a 3rd party to administer an aggregation program. 3b) Launch city council district contests. Applicable Technology HP, HPWH HP, HPWH HP, HPWH 4) Require 200-amp panel sizing for new construction and major renovations. HP, HPWH 5) Increase positive messaging. 5a) Offer networking opportunities. 5b) Encourage contractors to share their personal experience. 5c) Partner with manufacturers and distributors as trusted messengers. 5d) Partner with early career education and training providers. HP, HPWH Contractor Resistance 6) Phase out cooling-only systems where HP options are available. HP City of Austin HVAC-R Contractor Study 2 Category Barrier Solution(s) Applicable Technology Longer Sales Cycle Poor Cold Temperature Performance Limited Contractor Experience with Electrical Upgrades 4) Require 200-amp panel sizing for new construction and major renovations. HP, HPWH 7) Provide marketing support to drive HP sales. 7a) Run a public marketing campaign. 7b) Offer (co-branded) marketing materials. HP, HPWH 8) Provide unbiased local cold temperature performance data. HP 9) Provide publicly available tools and guidance on electrical upgrades. 9a) Provide a publicly available load assessment tool. 9b) Pair the tool with options that do not require panel upgrades. 9c) Complement the tool with HP sizing guidance and/or requirements. HP, HPWH 10) Offer networking and electrical skill building opportunities. 10a) Offer hands-on learning opportunities with the tool. 10b) Provide networking opportunities for HVAC-R contractors and related trades. HP, HPWH High Maintenance Costs 11) Offer fundraising support for affordable housing providers. HP, HPWH Multifamily Austin Energy Incentive Design 12) Redesign multifamily incentives to rebate individual HP system components and labor. HP 13) Offer rebate project management support for multifamily customers. HP, HPWH Lack of Maintenance Staff Training 14) Provide free onsite training for affordable housing maintenance staff. HP, HPWH City of Austin HVAC-R Contractor Study 3 Category Barrier Solution(s) Applicable Technology Limited Local Influence on Refrigerant Choice Refrigerants Contractor Resistance to Refrigerant Destruction 15) Offer incentives for use of low-GWP refrigerants. HP, HPWH 16) Provide contractor education on the climate costs of high-GWP refrigerants. HP, HPWH 17) Offer incentives for the destruction of high-GWP refrigerants. HP, HPWH 18) Encourage the purchase of local high-GWP destruction carbon offsets. HP, HPWH 19) Administer a public education campaign on the climate costs of high-GWP refrigerants. HP, HPWH 20) Purchase reclaimed high-GWP refrigerants to reduce local supply. HP, HPWH City of Austin HVAC-R Contractor Study 4 Background & Purpose As part of its Climate Equity Plan, the City of Austin (“City”) is committed to equitably reaching net-zero community-wide greenhouse gas (GHG) emissions by 2040 with a strong emphasis on cutting emissions by 2030. Austin’s efforts also support the federal 2050 net-zero GHG emissions goal.1 Achieving net-zero emissions at the local and national level requires reducing combustion to nearly zero, in part, through strategic electrification of buildings and transportation. Heating, ventilation, cooling, and refrigeration (HVAC-R) systems, followed by water heaters, are typically the largest electricity users in a home.2 Because of their long lifespan, there is a high emissions reduction benefit when a high-efficiency electric option is selected over a fossil fuel-fired appliance. Installing a natural gas furnace or water heater can lock in fossil fuel emissions for 15 to 20 years. Heat pump technology is currently among the most efficient options for residential space and water heating and cooling3,4,5,6 and the lowest emissions option in most cases.7,8 Therefore, it’s crucial to address outstanding barriers to installing residential high-efficiency heat pumps (HPs) and heat pump water heaters (HPWHs). In the next three years (2024-2026), the U.S. needs to install an additional 4.5 million HPs and 542,000 HPWHs above business-as-usual market projections to electrify every home in America and help achieve the national net-zero emissions target by 2050.9 To meet its net-zero emissions target a decade earlier, Austin will need to move even faster to electrify its housing stock to take advantage of the increasingly low-carbon electricity supply provided by community-owned Austin Energy. The City’s Office of Sustainability seeks to provide residents with more options for participating in this community emission reduction effort, in part by expanding the choices available to heat and cool homes and power residential equipment and appliances. For more insight into these opportunities, the Office of Sustainability engaged Terra Lumina Consulting to better understand local residential HVAC-R 1 United States Department of State and the United States Executive Office of the President, 2021. The Long-Term Strategy of the United States: Pathways to Net-Zero Greenhouse Gas Emissions by 2050, November. Available: https://www.whitehouse.gov/wp-content/uploads/2021/10/US-Long-Term-Strategy.pdf 2 U.S. Energy Information Administration, 2023. “Use of energy explained: Energy use in homes,” December 18. Available: https://www.eia.gov/energyexplained/use-of-energy/electricity-use-in-homes.php 3 U.S. Department of Energy, n.d. Heat Pump Systems, Energy Saver. Available: https://www.energy.gov/energysaver/heat-pump-systems 4 Davis, Lucas, 2023. The Economic Determinants of Heat Pump Adoption, Energy Institute WP 337R, Haas School of Business at University of California, Berkeley, July. Available: https://haas.berkeley.edu/wp- content/uploads/WP337.pdf 5 Bailes, Allison A., III. 2022. “Is a Heat Pump More Efficient Than a Furnace?,” Green Building Advisor, January 27. Available: https://www.greenbuildingadvisor.com/article/is-a-heat-pump-more-efficient-than-a-furnace 6 Pecan Street, 2023. Heat Pump Primer: Understanding the Technology That Will Drive Decades of Residential Decarbonization, January. Available: https://www.pecanstreet.org/publications/heat-pump-primer/ 7 McKenna et al., 2020. “It’s Time to Incentivize Residential Heat Pumps,” RMI, June 8. Available: https://rmi.org/its-time-to-incentivize-residential-heat-pumps 8 Rewiring America, n.d. “Heat Pump Air Conditioner/Heater.” Available: https://www.rewiringamerica.org/app/ira-calculator/information/heat-pump-air-conditioner-heater 9 Rewiring America, 2023. Pace of progress: November 2023 Baseline Report. Available: https://www.rewiringamerica.org/pace City of Austin HVAC-R Contractor Study 5 contractors’ awareness, limitations, and opportunities for supporting transformation of the local residential market to HPs and HPWHs and low-global warming potential (GWP) refrigerants and climate- smart refrigerant practices. The focus of this study is on HP replacements and use of low-GWP refrigerants in existing single-family and multifamily homes in Austin, though some of the recommendations also apply to HPWHs, new construction, and commercial applications. Contractor Engagement Approach Terra Lumina designed an English and Spanish online survey and interview guide with the goal of engaging 25-30 Austin area HVAC-R professionals to understand their perspectives, needs, and ideas related to HP technology and refrigerant practices. The survey was promoted through email, phone, and social media and distributed to more than 800 local HVAC-R professionals representing more than 200 businesses. Terra Lumina compiled a target contractor distribution list from the following sources: ● Austin Energy participating contractor list ● Texas Air Conditioning Contractors Association Greater Austin Chapter’s licensed contractor list ● Texas Department of Licensing & Regulation database of licensed contractors ● Recommendations from multifamily housing providers Austin Energy, the Office of Sustainability, the National Comfort Institute (NCI), and the Austin Career Institute (ACI) also promoted the survey. Other than NCI and ACI, local industry associations and training providers were either non-responsive or unwilling to share the survey with their membership without financial sponsorship. Survey respondents were also invited to participate in a 30-minute phone interview to understand more nuanced perspectives and to make sure we heard from smaller businesses and contractors that serve lower-income households and households where English is not the primary language. To encourage participation, a $50 gift card was offered to one randomly selected survey respondent and to interview participants. Additionally, Terra Lumina participated in two small group discussions with participants of a refrigerant management course and instructors and administration of an HVAC-R training program. Table 2 summarizes Terra Lumina’s contractor engagement approach with target and actual results. City of Austin HVAC-R Contractor Study 6 GOAL 1 online survey Table 2. Contractor Engagement Approach ACTUAL Survey ran Oct. 6-Dec. 13 29 responses (28 English, 1 Spanish) 10 phone interviews 10 completed: • 8 HVAC contractors • 1 OEM • 1 affordable housing provider 5 group feedback sessions 2 completed: • National Comfort Institute refrigerant class • Austin Career Institute HVAC-R faculty & administration Table 3 summarizes target and actual results for engaging underrepresented HVAC-R businesses. We received a robust cross-section of responses from larger, established HVAC-R businesses and smaller, underrepresented businesses. While we sought to engage individuals representing a variety of roles and years of experience, we primarily spoke with business owners and managers with greater than ten years of industry experience. Speaking with HVAC-R training providers helped to balance this more mature perspective with insights from working with upcoming and early career HVAC-R professionals. Table 3. Contractor Engagement Representation GOAL ACTUAL Engage 25-30 HVAC professionals • 29 survey respondents • 10 interviewees • • • 3 national industry stakeholders ~25 refrigerant class attendees ~12 HVAC-R faculty and administration 5 small & medium-sized businesses • 48% (14) of survey respondents and 20% (2) of 3 minority- & women-owned businesses interviewees work for businesses with < 30 employees. • 34% (10) of survey respondents and 30% (3) of interviewees work for businesses with < $5M annual revenue. • 31% (9) of survey respondents and 40% (4) of interviewees are minority-owned. • 7% (2) of survey respondents and 10% (1) of interviewees are woman-owned. City of Austin HVAC-R Contractor Study 7 GOAL ACTUAL 2 businesses that primarily serve customers not in English • 59% (17) of survey respondents and 40% (4) of interviewees serve customers in a language other than English (primarily Spanish). While Terra Lumina also sought feedback from local plumbers about HPWH installations, only two survey respondents answered the HPWH questions. With such a small sample size, the perspective of those two individuals was not deemed a reliable indicator of the local water heater market. Therefore, this report primarily includes findings and recommendations related to heat pump HVAC systems (HPs). Findings & Recommendations Twenty percent of Texas households10 and 14%11 to 16%12 of homes nationally use HPs to heat and cool their homes. The distribution of HPs differs from other residential climate technology solutions like rooftop solar panels and electric vehicles (EVs). Whereas higher-income households have higher solar and EV ownership rates, HP adoption appears to be relatively evenly distributed across income levels (Figure 1). HP adoption is also relatively uniform among owners versus renters and single-family and multifamily households. This suggests that HP incentives are more likely to be widely distributed across incomes, making them less likely to cause distributional inequities than other low-carbon technologies. 13 Figure 1. Heat Pump Adoption by Household Income, 2020 Source: Davis, Lucas, 2023. The Economic Determinants of Heat Pump Adoption. 10 Davis, The Economic Determinants of Heat Pump Adoption. 11 Davis. 12 Rewiring America, Pace of progress: November 2023 Baseline Report. 13 Davis. City of Austin HVAC-R Contractor Study 8 Survey responses provide some indicative data on Austin area HP installation rates. More than three- quarters of survey respondents indicated that at least 15% of new and replacement HVAC system installations are HPs (Figure 2). This adoption rate places the Austin residential HP market early in the Early Majority phase of Everett M. Rogers’ Innovation Adoption Curve (Figure 3). This rate is comparable to national HP adoption rates, though one HP manufacturer interviewed for this study indicated Austin is ahead of other parts of Texas in terms of HP installations. Figure 2. Percent of Austin HVAC System Installations that are Heat Pumps Figure 3. Everett M. Rogers’ Innovation Adoption Curve Source: Rogers, Everett M. Diffusion of Innovations, 5th ed., Free Press, 2003. While technology adoption is a blend of push and pull, customer demand (pull) seems to be driving local HP installations slightly more than manufacturer/distribution/installer promotion (push). To accelerate the transition to high-efficiency HPs, we recommend a combination of strategies that 1) continue to spark customer demand while 2) supporting contractors and distributors to increase the number of local HP installations and 3) grow contractors’ skill and confidence servicing HPs. City of Austin HVAC-R Contractor Study 9 The next section outlines barriers uncovered from the surveys and interviews and offers recommendations to help overcome the barriers. These barriers and proposed solutions are organized by topic: • Residential (primarily single-family) HPs • Unique considerations for multifamily HPs • Lowering the climate impact of refrigerants While contractors reported differences in HP adoption barriers among single-family and multifamily customers, the cited barriers did not notably differ based on the size or ownership of contractor firms who participated in the survey and/or interviews. Residential Heat Pump Barriers Local HVAC-R contractors and related stakeholders shared barriers they face when installing residential HPs and recommendations for ways the City and/or Austin Energy can help counter these obstacles. We offer some additional solutions and observations from our work nationally. While the recommendations primarily focus on HPs, we’ve noted where the approaches may also support HPWH installations. Additional considerations for HP installations in multifamily settings are discussed in the Multifamily HP Barriers section. Table 4 summarizes the residential HP recommendations by identified barrier. Table 4. Summary of Residential Heat Pump Barriers and Solutions Barrier: High Upfront Cost 1) Increase/modify incentives. 1a) Increase rebate levels. 1b) Offer a short-term loan to cover the delay in receiving a federal tax credit(s). 1c) Implement a GHG-based incentive structure. HP, HPWH 2) Provide unbiased cost-benefit information. 2a) Create a public report documenting the lifecycle costs and benefits. 2b) Offer training on how to use a customer decision support tool to drive sales. HP, HPWH 3) Stimulate bulk purchasing discounts. 3a) Partner with a 3rd party to administer an aggregation program. 3b) Launch city council district contests. HP, HPWH 4) Require 200-amp panel sizing for new construction and major renovations. HP, HPWH City of Austin HVAC-R Contractor Study 10  Barrier: Contractor Resistance 5) Increase positive messaging. 5a) Offer networking opportunities. 5b) Encourage contractors to share their personal experience. 5c) Partner with manufacturers and distributors as trusted messenger. 5d) Partner with early career education and training providers. HP, HPWH 6) Phase out cooling-only systems where HP options are available. HP Barrier: Longer Sales Cycle 4) Require 200-amp panel sizing for new construction and major renovations. HP, HPWH 7) Provide marketing support to drive HP sales. 7a) Run a public marketing campaign. 7b) Offer (co-branded) marketing materials. Barrier: Poor Cold Temperature Performance HP, HPWH HP, HPWH HP, HPWH 8) Provide unbiased local cold temperature performance data. HP Barrier: Limited Contractor Experience with Electrical Upgrades 9) Provide publicly available tools and guidance on electrical upgrades. 9a) Provide a publicly available load assessment tool. 9b) Pair the tool with options that do not require panel upgrades. 9c) Complement the tool with HP sizing guidance and/or requirements. 10) Offer networking and electrical skill building opportunities. 10a) Offer hands-on learning opportunities with the tool. 10b) Provide networking opportunities for HVAC contractors and related trades. Barrier: High Upfront Cost As shown in Figure 4, contractors noted many factors that could influence their decision to recommend HPs to customers. The top two considerations are related to cost, which contractors reported as the largest barrier to customer uptake of HPs, not just the per-unit cost of HPs compared to other heating and cooling equipment, but also ancillary costs such as electrical upgrades and potential space modifications to accommodate the equipment. This is consistent with recent research on what drives consumer adoption of residential energy efficiency technologies. Antonopoulos et al. (2024) found that “[u]pfront cost was the largest barrier for all [U.S.] regions, and unclear cost/benefit, contractor and City of Austin HVAC-R Contractor Study 11 material availability all posed barriers in approximately 30% of households.”14 Local contractors report that emotional appeals (e.g., “be part of the climate solution”), the federal tax credit, and existing Austin Energy rebates are not enough to overcome this cost barrier for many. Figure 4. Contractor Perspectives on What Motivates Them to Sell Heat Pumps Solution(s): High Upfront Cost Table 5 outlines potential solutions to overcome the upfront cost barrier associated with HP technology. Each recommendation is discussed in more detail following the table. Table 5. Recommended Solutions to HP Upfront Cost Barrier Solution(s) 1) Increase/modify incentives. 1a) Increase rebate levels. 1b) Offer a short-term loan to cover the delay in receiving a federal tax credit(s). 1c) Implement a GHG-based incentive structure. Applicable Technology HP, HPWH 2) Provide unbiased cost-benefit information. 2a) Create a public report documenting the lifecycle costs and benefits. 2b) Offer training on how to use a customer decision support tool to drive sales. HP, HPWH 3) Stimulate bulk purchasing discounts. 3a) Partner with a 3rd party to administer an aggregation program. 3b) Launch city council district contests. HP, HPWH 4) Require 200-amp panel sizing for new construction and major renovations. HP, HPWH 14 Antonopoulos, Chrissi A. et al., 2024. “Regional assessment of household energy decision-making and technology adoption in the United States,” Energy Policy, Volume 185, February. Available: https://www.sciencedirect.com/science/article/pii/S0301421523005256 City of Austin HVAC-R Contractor Study 12 1. Increase/Modify Incentives Seventy-six percent of survey respondents reported that Austin Energy’s rebates make them more likely to encourage customers to choose HPs. Yet many support raising incentive levels and/or modifying the incentive structure to make them more effective in encouraging HP technology.15 Austin Energy/the City could consider the following options: a. Increase rebate levels. As of March 2024, Austin Energy’s single-family HP incentives are $450 to $1,200 per unit, with notably higher incentive levels if HP replacements are bundled with whole-home energy upgrades. Austin Energy’s HP incentive levels are $50 to $150 more per unit than rebates for cooling-only HVAC systems. Austin Energy does not currently offer any additional single-family incentives for associated electrical upgrades or for low-income single- family customers installing HPs.16 The Center for American Progress (CAP) and Rewiring America recommend a national average residential rebate package of $5,000 (all households) to $8,500 (low to moderate income [LMI] households) to overcome the upfront cost barrier of HPs, as shown below: • Appliance rebate: $1,500 for HPs • Electrical upgrade rebate: 50% coverage up to $1,000 (all households) to 100% • coverage up to $2,000 (LMI households) Installation rebate: 50% coverage up to $2,500 (all households) to 100% coverage up to $5,000 (LMI households) 17 Table 6 compares Austin Energy’s existing single-family HP and HPWH incentives with other municipally owned utility peers: CPS Energy, Los Angeles Department of Water & Power (LADWP), Sacramento Municipal Utility District (SMUD), and Seattle City Light. Seattle City Light and SMUD only offer single- family incentives for HP HVAC systems, whereas CPS Energy does not offer differentiated single-family incentives for HPs versus other HVAC systems, i.e., there is $0 delta between CPS Energy’s rebates for HPs and cooling-only systems (which is also the case for Austin Energy’s multifamily HVAC rebates). CPS Energy does not offer incentives for any type of water heater; the remaining utilities only incentivize HPWHs. SMUD offers $2,500 to offset electrical—including panel—upgrade costs associated with HPs or HPWHs. Multifamily incentives are summarized in Table 14 in the next section, and incentive details are provided in Appendix B. Peer Municipally Owned Utility Heat Pump and Heat Pump Water Heater Incentives. 15 Austin Energy increased rebate levels for HP and non-HP HVAC systems after the survey and interviews were conducted, so contractor feedback does not reflect incentive levels in place at the time the report was published. 16 https://savings.austinenergy.com/residential/offerings/cooling-and-heating/ac 17 Higgins, Trevor et al., 2021. To Decarbonize Households, America Needs Incentives for Electric Appliances, Center for American Progress and Rewiring America, June. Available: https://www.americanprogress.org/wp- content/uploads/sites/2/2021/06/America-Needs-Incentives-for-Electric-Appliances4.pdf City of Austin HVAC-R Contractor Study 13 Table 6. Summary of Single-Family Heat Pump and Heat Pump Water Heater Incentives from Peer Municipally Owned Utilities1 Utility HP HPWH Delta with Non-HP System Delta with Non-HP System Multi- Measure Bonus $450/unit - $750/unit (single measure) $800/unit - $1,200/unit (whole home) $90/ton - $310/ton Austin Energy $50-$150 $800/unit CPS Energy $0 None LADWP2 $300/ton $180-200/ton $1,500/unit SMUD2 Seattle City Light3 $750 - $3,500/unit + $2,500 electrical $400/unit - $600/unit4 N/A (don’t incent non-HPs) N/A (don’t incent non-HPs) $500 - $3,000/unit + $2,500 electrical $500/unit Y (when paired with whole home upgrades) N N N N N/A (don’t incent non-HPs) N/A (don't incent any WHs) N/A (don’t incent non-HPs) N/A (don’t incent non-HPs) N/A (don’t incent non-HPs) 1 See Appendix B. Peer Municipally Owned Utility Heat Pump and Heat Pump Water Heater Incentives for details on each utility’s rebate offerings. 2 The State of California offers additional HP and HPWH rebates through TECH Clean California. See https://switchison.org/contractors/incentive-resources/. 3 The State of Oregon offers additional HP and HPWH grants and rebates. See https://www.oregon.gov/energy/Incentives/Pages/heat-pumps.aspx. 4 The City of Seattle's Office of Environment & Sustainability offers an additional $2,000 incentive on qualifying Mitsubishi HPs that replace oil heating systems. See https://ductlesshomecomfort.com/no-more-oil-heat/. Except for CPS Energy, the peer utilities’ incentives (Table 6) are complemented by state level incentives that, combined, generally offer a more generous financial package to single-family customers than what Austin Energy currently offers. Until state incentives are available through the State Energy Conservation Office in Summer 2025 (estimated),18 Austin Energy and/or the Office of Sustainability could increase local incentives to more adequately address the upfront cost barrier of HPs. 18 State Energy Conservation Office, n.d. “Inflation Reduction Act Rebates and Tax Credits.” Available: https://comptroller.texas.gov/programs/seco/funding/ira/ City of Austin HVAC-R Contractor Study 14 Of note, the City of Seattle's Office of Environment & Sustainability has partnered with Mitsubishi to offer a $2,000 incentive on qualifying Mitsubishi HPs that replace oil heating systems.19 This incentive is in addition to rebates offered by Seattle City Light. The City could provide a similar stacked incentive, with Austin Energy providing a baseline HP and/or HPWH incentive that the Office of Sustainability could complement with a bonus incentive to drive customers to select HPs and/HPWHs that generate the greatest avoided carbon benefit and/or buy down the technology cost further for income-qualified households. Another option is Austin Energy rebating the HP technology that will net the biggest avoided energy cost, while the Office of Sustainability could offer complementary incentives for other measures that promote whole- home decarbonization (e.g., electrical upgrades, HPWHs, electric inductions stoves and cooktops, electric dryers, appliances that use low-GWP refrigerants). To fund the additional incentives, the City could explore federal funding opportunities, including a Climate Pollution Reduction Grant implementation grant, or manufacturer partnerships. While we do not recommend promoting a single manufacturer’s product, the City could issue a request for qualifications or other appropriate solicitation method to identify vendors that meet the City’s requirements, such as a minimum efficiency threshold, HPs and HPWHs that use low- GWP refrigerants, or 120-volt HPWHs that can avoid costly panel upgrades. b. Offer a short-term loan to cover the delay in receiving a federal tax credit(s). Most survey respondents are aware of the Inflation Reduction Act federal tax credits (88%) and believe the tax credit helps improve HP economics (90%). However, some contractors reported that the lag between paying for HP installation and receiving the financial benefit in the form of a reduced tax liability months to more than a year later can soften the appeal of the tax credit for residents. This deferred benefit is also cited as a barrier to residential electrification by CAP and Rewiring America.20 To alleviate this timing concern, one contractor suggested that the City/Austin Energy could provide the value of the tax credit in the form of a short-term, ideally no-interest loan that the resident would repay upon receipt of their tax return (or reduced tax payment). Austin Energy is not able to provide this type of loan through its existing loan loss reserve program with Velocity Credit Union. Austin Energy/the City could pursue another lending partner. c. Implement a GHG-based incentive structure. Though not identified by contractors, Austin Energy is exploring GHG emissions-based incentives as a complement or alternative to its energy-based incentive structure. This approach could better align with the City’s climate equity goals while maintaining customer choice to select their preferred low-carbon technologies. LADWP offers a model with its Comprehensive Affordable Multifamily Retrofits Program. The program provides GHG-based incentives for energy efficiency, electrification, and solar energy for income-qualified multifamily properties in disadvantaged communities. 19 https://ductlesshomecomfort.com/no-more-oil-heat/ 20 Higgins, To Decarbonize Households, America Needs Incentives for Electric Appliances. City of Austin HVAC-R Contractor Study 15 2. Provide Unbiased Cost-Benefit Information Some contractors reported educating customers on HPs’ many benefits, including improved indoor air quality, noise reduction, and lower carbon footprint, to counter concerns about upfront installation and ongoing maintenance costs. However, some contractors noted difficulty in finding clear, unbiased information on HP costs and benefits to share with residents. To build confidence and ensure cost- effective incentive levels, the City and/or Austin Energy could consider the following options: a. Create a public report documenting HP and HPWH lifecycle costs and benefits. The City/Austin Energy could partner with a local university or research organization to assess the financial and non-financial lifecycle costs and benefits of HP and HPWH technology specific to Austin’s climate, building stock, and utility emissions and rates. Affordable housing design firm Redwood Energy partnered with the University of California, Berkeley and Beyond Efficiency to complete a similar study to inform residential electrification plans. b. Offer training on how to use a customer decision support tool to drive HP and HPWH sales. One example is Lumina Decision Systems’ Heat Pump Calculator that is currently used by the City of Fort Collins Utilities, the City of Longmont Power & Communications, and California local government electricity aggregator Central Coast Community Energy. Another option is RMI’s Green Upgrade Calculator that presents the financial and carbon payback of home and transportation electrification projects, including HPs and HPWHs. The City/Austin Energy could use the tools in tandem with the education and marketing campaigns discussed under Recommendation 3.b. Launch City Council District Contests. 3. Stimulate Bulk Purchasing Discounts One way to drive down HP equipment and installation costs is through aggregated, or bulk, purchasing. Using Rogers’ innovation diffusion theory (Figure 3), the City can leverage the peer influence of HP Early Adopters and Early Majority individuals to aggregate customer demand for HPs through neighborhood-level—or even city council district—energy upgrade challenges. These aggregation programs can be delivered more equitably by offering enhanced incentives and/or requiring discounted contractor installation rates for participants in low-income neighborhoods and multifamily communities. The City/Austin Energy could consider the following options: a. Partner with a third party to administer a HP and HPWH aggregation program. Aggregation is a proven model for reducing customer costs at a neighborhood or community scale for residential solar energy installations (e.g., Solar Switch), battery storage and/or EV chargers paired with solar (e.g., Solarize Santa Barbara – contractor website, community webinar), and energy efficiency upgrades (e.g., Claremont Home Energy Retrofit Project [CHERP]). The San Francisco Environment Department is also planning a mass energy upgrade campaign to install energy efficiency upgrades and HPWHs in 200 homes in 200 days in disadvantaged communities.21 b. Launch city council district HP and HPWH contests. The City/Austin Energy could follow its own lead in leveraging councilmembers’ constituent networks and public visibility to promote climate action. For example, former Councilmembers Chris Riley and Bill Spelman hosted an interoffice carbon footprint reduction contest in 2012 to spark awareness of the City’s personal 21 https://www.energy.gov/eere/buildings/articles/buildings-upgrade-prize-buildings-phase-1-winners City of Austin HVAC-R Contractor Study 16 carbon footprint calculator.22 Similarly, Austin Independent School District (Austin ISD) partnered with the City of Austin in 2015-2016 to host a zero waste challenge where Crockett Early College High School and Navarro Early College High School (formerly Lanier Early College High School) and their surrounding communities in city council districts 4 and 5 sought to out- recycle and compost each other. The contest included a pep rally and press conference at City Hall to boost public awareness and connect students with their local government (Figure 5). The City could partner with trusted organizations like the Austin Area Urban League’s home repair program, the Austin Youth Climate Equity Council, and the Austin Common to adapt these examples for public-facing community campaigns to scale HP installations and drive down costs. Figure 5. Austin ISD-City of Austin Pep Rally for School- and Community-Based Zero Waste Challenge Navarro Early College High School (formerly Lanier Early College High School) students pump up the community with a pep rally at Austin City Hall to promote their zero waste challenge with Crocket Early College High School. Image Credit: Jennifer Cregar 4. Require 200-Amp Panel Sizing for New Construction and Major Renovations The electrical service panel is where incoming electricity from the grid, solar panels, and/or battery system is distributed to different electricity end uses throughout a home. Panel sizing is determined by a formula in the National Fire Protection Association’s National Electrical Code (NEC). The NEC can be amended by state and/or local codes and standards, and utilities may have additional requirements. The City and Austin Energy do not appear to have existing minimum panel sizing requirements. While the Texas Department of Housing and Community Affairs (TDHCA) previously required minimum 100-amp (A) service for all homes that are rehabilitated through TDHCA single-family programs and 200A service for all-electric homes participating in its programs,23 TDHCA currently defers to local code requirements.24 There appears to be no state-level panel size minimum. 22 Staff Writer, 2012. “Spelman and Riley competing to cut carbon; plans for artwork at Seaholm, Austin American- Statesman, September 1. Available: https://www.statesman.com/story/news/local/2012/09/01/spelman-and- riley-competing-to-cut-carbon-plans-for-artwork-at-seaholm/9807623007/ 23 Texas Department of Housing and Community Affairs, 2015. Texas Minimum Construction Standards, January 1. Available: https://www.tdhca.state.tx.us/single-family/training/docs/14-TMCS.pdf 24 Pena, Manuel, Jr., email message to author, January 23, 2024. City of Austin HVAC-R Contractor Study 17 Although newer technologies are emerging that can enable home electrification below 200A, 200A is typically considered the minimum panel size to support electric equipment like HPs, electric vehicles, and stove/oven ranges that use larger amounts of electricity.25 Based on an analysis of 263 Texas homes (most of which are located in Mueller or other parts of Austin), Pecan Street found that 59% of homes had panels less than 200A and 41% had panels more than 200A.26 Contractors who participated in this study noted that the time and expense associated with upgrading electric panels can be a deterrent for customers to choose, and contractors to promote, HPs. The City could mandate 200A service for new construction and major renovations to remove this as a cost and time barrier to HP installations and other high-efficiency electric technologies. Barrier: Contractor Resistance Eighty-five percent of survey respondents indicated they encourage customers to consider HPs, while 11% do not install them at all (Figure 6). Interviews revealed that contractors generally promote the technology they have—or want to have—in their home. Contractors report that this pattern holds true for customers who typically want to replace their existing HVAC systems with the same technology. Unless residents have existing HP systems and/or their contractor encourages them to consider HPs, they are likely to stick with separate heating and cooling units, which locks in that technology and fuel source for another 15+ years. Figure 6. Contractor Promotion of Heat Pumps We also noticed a proclivity for earlier career professionals to be more excited about new technologies, including HPs. Some are marketing their businesses as being part of the climate action movement 25 Pecan Street, 2021. Addressing an Electrification Roadblock: Residential Electric Panel Capacity: Analysis and Policy Recommendations on Electric Panel Sizing, August. Available: https://www.pecanstreet.org/publications/addressing-an-electrification-roadblock-residential-electric-panel- capacity/ 26 Pecan Street, 2023. Home Load Control: Extending Smaller Electric Panels as Electrification Expands, November. Available: https://www.pecanstreet.org/publications/home-load-control/ City of Austin HVAC-R Contractor Study 18 and/or a leading-edge technology provider. In some cases, this positioning appears to be influenced by manufacturer/distributor messaging. Solution(s): Contractor Resistance Table 7 outlines potential solutions to overcome the contractor resistance barrier associated with HP technology. Each recommendation is discussed in more detail following the table. Table 7. Recommended Solutions to Contractor Resistance Barrier Solution(s) 5) Increase positive messaging. 5a) Offer networking opportunities. 5b) Encourage contractors to share their personal experience. 5c) Partner with manufacturers and distributors as trusted messenger. 5d) Partner with early career education and training providers. Applicable Technology HP, HPWH 6) Phase out cooling-only systems where HP options are available. HP 5. Increase Positive Messaging About HPs and HPWHs Some contractors, many of whom are earlier in their careers and/or are building their businesses, are interested in positioning their businesses on the leading edge of technology and/or empowering customers to take climate action for their families and community. The City can support these contractors who view HPs and HPWHs as a key part of the climate tech revolution to spread positive messaging and exert peer influence to drive HPs as the heating and cooling technology of choice in Austin. Contractors with less enthusiasm for HPs and HPWHs may resist the technology transition in part due to unfamiliarity with HP technology. Increasing opportunities to engage with HPs and HPWHs and proactively addressing contractor concerns may reduce resistance. The City and/or Austin Energy could consider the following options to overcome resistance: a. Offer networking opportunities among HVAC-R professionals and with other trade allies that can help unlock whole-home decarbonization. For example, some contractors expressed interest in building relationships with electricians to help with electrical system upgrades and plumbers who can install HPWHs or cap gas lines for customers who fully electrify their homes. Solar installers may be another key ally, as increasing residential electrical load can drive increased solar sales for customers interested in powering their newly electrified homes with pollution-free solar energy or upsizing existing solar photovoltaic (PV) systems to match the increased load. Similarly, solar installers can provide leads to HP and HPWH installers for customers motivated to take climate action by upgrading to HP technology. b. Encourage contractors to share their personal HP and HPWH experience. Given the propensity to promote the technology that contractors trust in their own homes, Austin Energy can City of Austin HVAC-R Contractor Study 19 leverage its existing contractor training and Green by Design professional development series and relationships with industry associations and training providers to integrate “show and tell” opportunities for contractors to showcase HP and HPWH installations and maintenance in their own homes (and, with permission, those of customers, too). c. Partner with manufacturers and distributors as trusted messengers. Many contractors look to their preferred manufacturer and/or distributor for training and educational resources, not just on their products, but also on technology and policy changes like federal and state incentives for HPs and the phase out of high-GWP refrigerants. Therefore, the City/Austin Energy could foster relationships with manufacturers and distributors to be allies in promoting accurate, compelling information on HPs and HPWHs. The Building Decarbonization Coalition and others can help build these relationships. d. Partner with early career education and training providers. To spark early career interest, the City/Austin Energy could look to partnerships with Austin ISD’s Career & Technical Education program, Austin Career Institute, Austin Community College, the National Comfort Institute, and others to provide early exposure to HPs and other low-carbon technologies. Working with training and education providers to position HPs and HPWHs as part of an evolving suite of emerging technologies can help upcoming HVAC-R professionals develop a positive self-image as being part of the high-tech, low-carbon evolution of home heating and cooling technologies and provide a framework for adapting to new technologies that may succeed HPs and HPWHs as their careers advance. 6. Phase Out Cooling-Only Systems Where HP Options Are Available Austin Energy and the City could also overcome early contractor resistance to HPs by using Austin Energy Green Building as a tool for growing confidence in HPs, low-carbon refrigerants, and other climate-friendly technologies. Austin Energy could also reduce or, like some of its peers have done, eliminate incentives for air conditioning-only systems to help normalize the market to offer HPs as the default HVAC system. As the local contractor base gains familiarity with installing and servicing HPs, the City could update code to gradually phase out technologies that only provide heating or cooling in new construction, where HP options exist. Barrier: Longer Sales Cycle Contractors interviewed for this study confirmed that most HVAC repairs and replacements occur on failure when expediency is the priority to get cool/warm air fast. Contractors also reported that HP sales cycles are longer than conventional HVAC sales, which works against the customer’s desire to quickly restore comfort when their existing system fails. A like-for-like replacement can be completed in hours, whereas replacing existing air conditioner and furnace units with a HP system can take days due to the potential for electrical upgrades and sometimes more limited equipment availability. In addition to the time cost, there is an opportunity cost of jobs not completed while working on the HP conversion. For example, one contractor shared that, in four hours, he can complete a like-for-like replacement, earn $10,000, and move onto the next job. Alternatively, he can work on a conventional HVAC-to-HP replacement that typically takes multiple days to complete and results in about $4,000 in incremental sales but at the cost of foregoing three additional customers. Converting to HPs home-by-home is neither fast nor convenient. City of Austin HVAC-R Contractor Study 20 For customers with a less urgent replacement schedule, the HP sales cycle can be longer to allow time for customers to make the decision to convert to a different technology. While contractors noted that customers often look to them for guidance, some customers conduct their own research before deciding. If they’re not replacing on failure, customers may complete their research before contacting a contractor, but often they want to consider the information and pricing that contractors provide before agreeing to the HP replacement. This can take days, weeks, or months if the need is not urgent. Solution(s): Longer Sales Cycle Table 8 outlines potential solutions to overcome the longer sales cycle barrier associated with HP technology. Each recommendation is discussed in more detail following the table. Table 8. Recommended Solutions to Longer Sales Cycle Barrier Solution(s) 4) Require 200-amp panel sizing for new construction and major renovations. HP, HPWH Applicable Technology HP, HPWH 7) Provide marketing support to drive HP sales. 7a) Run a public marketing campaign. 7b) Offer (co-branded) marketing materials. 4. Require 200-Amp Panel Sizing for New Construction and Major Renovations As previously mentioned for the upfront cost barrier, upgrading electric service panels and wiring presents a time and financial barrier to HP installations. The City could mandate 200A service for new construction and major renovations to remove this as a cost and time barrier to HP installations and other high-efficiency electric technologies. 7. Provide Marketing Support To shorten the customer decision-making process and reduce contractor marketing burden, the City and/or Austin Energy could consider the following options: a. Run a public HP and HPWH marketing campaign to promote the benefits of HPs, address concerns, provide information on typical costs and incentives, and offer Austin home electrification case studies. This marketing campaign could complement Recommendation 3. Stimulate Bulk Purchasing Discounts to simultaneously address the upfront cost and long sales cycle barriers. Some contractors noted that they leverage the availability of the federal tax credit to help counter lower sales at the end of the year. Promoting the credit late in the year reduces the time residents must wait to see the benefit of the credit due to proximity to tax season. One contractor noted that the City/Austin Energy could help amplify this message by promoting HPs, other tax credit-eligible upgrades, and Austin Energy participating contractors during this typically slower season. City of Austin HVAC-R Contractor Study 21 b. Offer (co-branded) marketing materials to increase consistency in HP and HPWH messaging and reduce contractor expense designing their own materials. Austin Energy’s EV Buyers’ Guide and Plug In EVerywhere campaign offer a great model that could be applied to HPs and home electrification. Other examples include: Marketing Campaigns Educational Guides • Building Decarbonization Coalition’s Switch is On campaign • Energy Smart Eastside “Make the Switch” campaign, a partnership among the cities of Bellevue, Issaquah, Kirkland, Mercer Island, and Redmond, Washington • Affordable housing design firm Redwood Energy’s A Pocket Guide to All Electric Retrofits of Single Family Homes • Rewiring America’s Guide to Electrifying Everything in Your Home Barrier: Poor Cold Temperature Performance Every HP has a delta between the indoor and outdoor air temperature at which the HP will no longer keep up with the heating load. While some HP systems can maintain performance in HP mode down to single digits or even negative temperatures,27,28 many HP systems use a back-up heating source, most notably electric resistance heating or a natural gas or propane furnace, to supplement the heating capacity of the system in colder temperatures. This threshold when back-up heat activates varies by unit and generally is improving over time, but the perception exists that HPs don’t work well or at all in cold temperatures, and contractors may be reinforcing that message. Most contractors we spoke with indicated this threshold is reached below about 40° F. Pecan Street data shows the threshold may be lower. Data from a representative Austin home built to green standards in 2011 with a central ducted HP system found that back-up heat is not needed until the temperature dips below 30° F.29 Solution(s): Poor Cold Temperature Performance Table 9 outlines a potential solution to overcome the poor cold temperature performance barrier associated with HP technology. The recommendation is discussed in more detail following the table. Table 9. Recommended Solutions to Poor Cold Temperature Performance Barrier Solution(s) 8) Provide unbiased local cold temperature performance data. Applicable Technology HP 27 Northeast Energy Efficiency Partnerships, Cold Climate Air Source Heat Pump Specification & Product List. Available: https://neep.org/heating-electrification/ccashp-specification-product-list 28 Alliance to Save Energy, 2021. Myth-Busting Common Misconceptions About Heat Pumps, November 2. Available: https://www.ase.org/blog/myth-busting-common-misconceptions-about-heat-pumps 29 Pecan Street, Heat Pump Primer: Understanding the Technology That Will Drive Decades of Residential Decarbonization. City of Austin HVAC-R Contractor Study 22 8. Provide Unbiased Cold Temperature Performance Data As part of Recommendation 2a. Create a Public Report Documenting Lifecycle Costs and Benefits, the City/Austin Energy could partner with Pecan Street to include cold temperature performance data, including from Austin homes during recent winter storms. While some contractors recommend dual fuel systems—electric HPs with a backup gas or propane furnace—to alleviate cold performance concerns, we do not recommend the City/Austin Energy incentivize these dual fuel systems. According to contractors, dual fuel systems are targeted towards “luxury” homes and homes where natural gas is not available, which tend to be in higher-income parts of Austin Energy’s service area (e.g., Westlake, Lakeway). Offering a rebate to these customers has the potential to exacerbate resource inequities. Barrier: Limited Contractor Experience with Electrical Upgrades Some contractors have limited experience determining load requirements and assessing existing panel and electrical system capacity to accommodate HPs and other high-efficiency electric technologies. While some have licensed electricians in-house or trusted relationships with others outside their firm who can perform these assessments and complete any needed upgrades, many do not. Some contractors do not appear to be confident in knowing whether upgrades are needed. Some could use assistance building their network with electrical trades and (longer term) growing in-house capabilities. Solution(s): Limited Contractor Experience with Electrical Upgrades Table 10 outlines potential solutions to overcome the electrical upgrade experience barrier associated with HP technology. Each recommendation is discussed in more detail following the table. Table 10. Recommended Solutions to Electrical Upgrade Experience Barrier Solution(s) 9) Provide publicly available tools and guidance on electrical upgrades. 9a) Provide a publicly available load assessment tool. 9b) Pair the tool with options that do not require panel upgrades. 9c) Complement the tool with HP sizing guidance and/or requirements. Applicable Technology HP, HPWH 10) Offer networking and skill-building opportunities. 10a) Offer hands-on learning opportunities with the tool. 10b) Provide networking opportunities for HVAC-R contractors and related trades. HP, HPWH 9. Provide Publicly Available Tools and Guidance The following elements are the primary drivers of panel sizing: • How many electric (versus natural gas or propane) appliances exist in a home • Nameplate electric load of a home’s appliances (how much power they draw) • Square footage (as a proxy for lighting and smaller plug loads like computers, phones, etc.) City of Austin HVAC-R Contractor Study 23 • Number of dedicated branch circuits To help contractors evaluate these factors, Austin Energy and/or the City could consider the following options: a. Provide a publicly available load assessment tool. The tool would help contractors and homeowners determine whether an existing electric service panel needs to be upgraded prior to switching to a HP and other high-efficiency electric appliances. To help avoid unnecessary panel upgrades and expense, Austin Energy could require customers and/or contractors to provide the output from the tool as a condition for receiving a HP or other high-efficiency electric appliance rebate, similar to the existing requirement to complete the Austin Energy Solar Education Course before receiving a solar PV rebate. The panel sizing tool also could be integrated with Recommendation 7. Provide Marketing Support and as a first step for contractors seeking to offer whole-home electrification services. Example tools include: o NEC Standard Electrical Load Calculation Sheet for Single Family Dwellings o Zero Carbon Home planning tool (requires setting up a free account to access) b. Pair the tool with information on home decarbonization options that do not require panel upgrades. For example, Redwood Energy offers a Watt Diet Calculator to help customers determine the best electrification options for their home with or without panel upgrades. c. Complement the tool with HP sizing guidance and/or requirements. Contractors noted that it is not just sizing of the equipment, but also proper sizing of line sets for HP systems, that is critical to ensure optimal performance and reduce maintenance costs. The panel sizing tool mentioned in Recommendation 9a could include calculations—or be paired with a separate tool—to determine proper HP sizing that contractors must use to qualify for HP rebates. HP sizing is important because electric resistance heat, which is commonly used as a back-up power source for HPs in low-temperature conditions, is a primary driver of peak electrical loads that influence panel sizing. Under-sizing HP systems can trigger unnecessary back-up resistance heating use,30 which is far less efficient than normal HP operations and gas heating systems. This unnecessary energy use can increase emissions and trigger costly panel upgrades. Over-sizing, improper control settings (e.g., temperature when back-up heat is activated, condenser settings), and not addressing other home performance factors—like air sealing and duct system modifications—can diminish the efficiency and emissions benefits of HP systems.31,32 10. Offer Networking and Skill-Building Opportunities To help contractors gain experience with panel upgrade assessments, Austin Energy and/or the City could consider the following options: 30 Pecan Street, Home Load Control: Extending Smaller Electric Panels as Electrification Expands. 31 Pecan Street, Home Load Control. 32 Turner, Tom. 2023. “Heat Pumps – The Good, The Bad, and The Ugly,” PowerPoint presentation, September. City of Austin HVAC-R Contractor Study 24 a. Offer hands-on learning opportunities with the tool. This would allow interested contractors the ability to develop load/panel sizing skills in house. b. Provide networking opportunities for HVAC-R contractors and related trades. In addition, the City/Austin Energy could develop—or offer financial or other support for partner organizations to provide—networking opportunities for contractors who do not wish to offer in-house electrical services to build relationships with trusted partners to complete these services prior to completing HP and other high-efficiency appliance installations. Multifamily Heat Pump Barriers We identified some multifamily-specific barriers and opportunities, primarily from conversations with a local multifamily affordable housing provider and an HVAC-R contractor that regularly serves multifamily properties. We offer their insights below, but caution that their perspective may not be representative of the multifamily sector as a whole. Table 11 summarizes the multifamily-specific HP recommendations by identified barrier. Table 11. Summary of Multifamily Heat Pump Barriers and Solutions Barrier: High Maintenance Costs 11) Offer fundraising support for affordable housing providers. 11a) Apply for a CPRG implementation grant. 11b) Encourage the State to Accept Federal Funding for HP and HPWH Rebates. HP, HPWH 11c) Establish a Climate Equity Fund. Barrier: Austin Energy Incentive Design 12) Redesign multifamily incentives to rebate individual HP system components and labor. HP 13) Offer rebate project management support for multifamily customers. HP, HPWH Barrier: Lack of Maintenance Staff Training 14) Provide free onsite training for affordable housing maintenance staff. HP, HPWH Barrier: High Maintenance Costs While upfront costs are the largest barrier for all residential HP installations, the affordable housing provider that we spoke with reported being doubly affected by high installation and maintenance costs with HPs. Their maintenance staff report that third-party contractors are applying a higher markup on turnkey installation and maintenance packages for HP systems compared to non-HP systems, on which they are more likely to offer installation- or service-only options. The housing provider does not City of Austin HVAC-R Contractor Study 25 have an opportunity to recoup these higher costs through utility bill savings because their properties are individually metered. While this helps reduce costs for their low-income tenants, it makes the economics of energy improvement projects difficult. Because they are buying and servicing units at a larger volume, they are reporting more challenges with HP technology. They have more than a decade of experience with HPs and are finding that the older non-HP HVAC systems last longer than the more recently installed HP systems. They posit that this shorter lifespan may be partially attributed to maintenance staff’s lack of training and relatively more limited experience with HPs than non-HP systems. If they had funding and time for staff to participate in training, they could mitigate the cost impact of faster equipment turnover, but for now the added expense is a burden. They’ve also noticed that the rapid pace of HP technology improvements has made it harder to find replacement parts on earlier generation variable refrigerant flow (VRF) HP systems, and they’ve experienced a lot of warranty claims on HPs and HPWHs. While those issues currently are addressed at no cost under warranty, they are concerned about the long-term cost impact once the units fall out of warranty. They also noted the time and difficulty of scheduling third-party contractors to come out to address the warranty claims. Solution(s): High Maintenance Costs Table 12 outlines a potential solution to overcome the high maintenance cost barrier for affordable multifamily properties. The recommendation is discussed in more detail following the table. Table 12. Recommended Solutions to Affordable Housing High Maintenance Cost Barrier Solution(s) 11) Offer fundraising support for affordable housing providers. 11a) Apply for a CPRG implementation grant. 11b) Support the State in offering HP and HPWH rebates that meet local needs. 11c) Establish a Climate Equity Fund. Applicable Technology HP, HPWH 11. Offer Fundraising Support for Affordable Housing Providers The affordable housing provider we spoke with needs additional staff and financial resources to expand their sustainability initiatives, including the installation and maintenance of HPs and HPWHs and use of low-GWP refrigerants. They offered that the City could support the equitable adoption of HPs, HPWHs, and other low-carbon technologies by helping to secure additional government and philanthropic funding for affordable housing providers and others that help reduce energy inequities. Examples of fundraising activities that the City could participate in include: a. Apply for a CPRG implementation grant. The City could include HP and HPWH incentives in the regional Priority Climate Action Plan and apply for a CPRG implementation grant that covers HP and HPWH installation, maintenance, and supportive services (e.g., workforce training, electrical upgrade costs). City of Austin HVAC-R Contractor Study 26 b. Support the State in offering HP and HPWH rebates that meet local market needs. In early 2024, the State Energy Conservation Office (SECO) announced it would be submitting an application to receive Inflation Reduction Act (IRA)-funded Home Efficiency Rebates and/or Home Electrification and Appliance Rebates to offer state-level HP and HPWH rebates.33 If approved, SECO could use the IRA funding to provide rebates of up to $8,000 for HPs, up to $1,750 for HPWHs, and up to $2,500 for electrical wiring, among other uses. Depending on state design, the rebates can be accessed directly by single-family and multifamily residents, multifamily property owners, and project aggregators (including local governments). The City could offer guidance to SECO and its selected implementation contractor on designing state rebates to align with local barriers and opportunities uncovered in this study. For example, contractors noted that electrical upgrade costs (e.g., panel upsizing, wiring) present a cost barrier that is not already explicitly rebated by Austin Energy. The City may also wish to encourage a project aggregator model to support Recommendation 3a. Partner with a 3rd party to administer an aggregation program to drive more local HP and HPWH installations. c. Establish a Climate Equity Fund to aggregate public and private sources of funding dedicated to implementation of the Austin Climate Equity Plan. Having a dedicated funding source that provides options for governmental and non-governmental entities and individuals to contribute could help transform the residential market to HPs, HPWHs and low-carbon refrigerants, among other community priorities. This type of public-private partnership could also make collaborative projects more attractive to funders and enable community-led decision-making about the distribution of funds. The Austin Ed Fund and Austin Parks Foundation provide similar local models of dedicated public-private funds. Barrier: Austin Energy Incentive Design Multifamily interviewees shared that the current Austin Energy rebate program doesn’t reflect real- world multifamily property conditions. Due to cost constraints and the desire to minimize tenant disruption, it is atypical to replace a full HVAC system at once. Instead, many property owners/managers replace individual components (e.g., condenser, air handler) on failure. Austin Energy offers an HVAC tune-up rebate that incentives maintenance, cleaning, and replacement of some HVAC components such as capacitors and contactors. For HVAC replacement, Austin Energy requires the entire HVAC system be replaced simultaneously to receive a rebate (for HP and non-HP systems). While this approach may ensure higher performance, one contractor offered there may be a missed opportunity to achieve incremental energy savings by incentivizing higher-performance system component replacements as property owner budget allows. A multifamily contractor we spoke with also noted that current incentive levels are insufficient to cover high labor costs associated with multifamily installations. For example, additional time—and conduit, though material costs are not the driver—is required to wire HP and other HVAC systems to individual units and communicate with tenants about service disruptions and access to their units. Austin Energy multifamily rebates do not currently cover wiring and related electrical costs. 33 State Energy Conservation Office, “Inflation Reduction Act Rebates and Tax Credits.” City of Austin HVAC-R Contractor Study 27 Additionally, the affordable housing provider we spoke with suggested reducing the paperwork burden for HVAC system replacements. This provider indicated they are generally moving to HPs where viable at a scale of six to 12 HVAC to HP replacements per property per year. They find the HVAC replacement rebate process burdensome compared to other Austin Energy multifamily rebates for lighting, smart thermostats, and HVAC tune-up. Austin Energy should seek ways to reduce the level of coordination and paperwork required for multifamily property owners to participate in its HVAC replacement rebate program. Solution(s): Austin Energy Incentive Design Table 13 outlines potential solutions to overcome the multifamily incentive design barrier. The recommendations are discussed in more detail following the table. Table 13. Recommended Solutions to Austin Energy Multifamily Incentive Design Barrier Solution(s) Applicable Technology 12) Redesign multifamily incentives to rebate individual HP system components and labor. HP, HPWH 13) Offer rebate project management support for multifamily customers. HP, HPWH 12. Redesign Multifamily Incentives Austin Energy could review its existing multifamily incentives to offer additional flexibility to rebate individual HP system components, including equipment and labor costs. Table 14 provides a summary comparison of Austin Energy’s and peer municipally owned utilities’ multifamily HP and HPWH incentives as of March 2024. Appendix B. Peer Municipally Owned Utility Heat Pump and Heat Pump Water Heater Incentives includes incentive details by utility. SMUD’s multifamily incentive structure may offer some inspiration, as SMUD offers rebates that are offered for specific system components, as well as electrical design and labor costs. Alternatively, as proposed in Recommendation 1c. Implement a GHG-based Incentive Structure, Austin Energy could explore a GHG emissions-based incentive structure that would encourage full-system replacements that result in greater energy savings and therefore greater avoided emissions while allowing flexibility for property owners to replace individual system components and make incremental upgrades as budget and other conditions allow. LADWP administers a GHG-based incentive program for income-qualified multifamily properties located in disadvantaged communities. City of Austin HVAC-R Contractor Study 28 N/A (don't offer differentiated HVAC incentive) N/A (don't offer differentiated HVAC incentive) Equity Bonus Cover up to 100% (rather than 80%) of eligible costs for income- qualified properties Offer GHG based incentive for income- qualified properties in disadvantaged communities 50%+ higher incentive levels for income- qualified properties Delta with Non-HP System N/A (don't incent any WH technology) N/A (don't incent any WH technology) N/A (don’t incent non-HP technology) N/A (don’t incent non-HP technology) Table 14. Summary of MultiFamily Heat Pump and Heat Pump Water Heater Incentives from Peer Municipally Owned Utilities1 Utility HP HPWH Delta with Non-HP System Austin Energy $300/ton - $400/ton $0 None CPS Energy None None None LADWP2 $5,400/MTCO2e - $7,750/MTCO2e $5,400/MTCO2e - $7,750/MTCO2e N/A (don't offer differentiated WH incentive) Varies widely by application, technology, etc. N/A (don’t incent non-HP technology) $1,800/unit - $2,000/housing unit SMUD2 Seattle City Light3 Unknown4 Unknown $0.24/kWh None 1 See Appendix B. Peer Municipally Owned Utility Heat Pump and Heat Pump Water Heater Incentives for details on each utility’s rebate offerings. 2 The State of California offers additional HP and HPWH rebates through TECH Clean California. See https://switchison.org/contractors/incentive-resources/. 3 The State of Oregon offers additional HP and HPWH grants and rebates. See https://www.oregon.gov/energy/Incentives/Pages/heat-pumps.aspx. 4 Seattle City Light incents HPs for multifamily properties through its midstream program where it works with distributors to offer targeted discounts. The specific incentive amounts and qualifying technologies are not publicly available. City of Austin HVAC-R Contractor Study 29 13. Multifamily Rebate Project Management Support The affordable housing provider also noted that it would be valuable for the City/Austin Energy to provide a project management service like what Austin Energy’s HVAC Tune Up program administrator currently provides. This would enable resource-constrained affordable housing providers to better manage the administrative paperwork to pursue rebates across their portfolio. Having third- party support could facilitate a larger volume of HP installations and help identify additional energy upgrade opportunities. Barrier: Lack of Maintenance Staff Training The affordable housing provider reported that the new technology learning curve is steep with HPs and HPWHs. Affordable housing providers commonly use in-house maintenance staff to service HPs at their properties, in addition to non-HVAC related functions. This broader portfolio can limit interaction with HVAC equipment manufacturers and distributors, who are frequently cited as a source of education and training on emerging technologies like HPs. Furthermore, in-house staff at nonprofit housing providers often work more than 40-hour weeks while earning below-market wages. This leaves little time to participate in training programs, and funding is scarce for travel to offsite training opportunities. Lower pay can lead to higher turnover, so maintenance staff that develop skills and experience with HP and newer technologies may take that knowledge with them to higher-paying opportunities. Solution(s): Lack of Maintenance Staff Training Table 15 outlines a potential solution to overcome the lack of maintenance staff training barrier. The recommendation is discussed in more detail following the table. Table 15. Recommended Solutions to Maintenance Staff Training Barrier Solution(s) 14) Provide free onsite training for affordable housing maintenance staff. Applicable Technology HP, HPWH 14. Provide Free Onsite Training for Affordable Housing Maintenance Staff The City and/or Austin Energy could offer free onsite training opportunities to affordable housing maintenance staff and contractors that serve low-income communities. The City could address the concern that HPs and HPWHs in multifamily settings increase maintenance costs by providing an unbiased source of information on HP benefits and costs, including education on the year-round heating and cooling services that HPs provide compared to their single-season heating or cooling equivalents. City of Austin HVAC-R Contractor Study 30 Low-GWP Refrigerant Barriers Refrigerants are potent GHGs that are emitted throughout the lifecycle of HVAC-R equipment.34 For safety and environmental reasons, the U.S. Environmental Protection Agency (EPA) regulates the handling and use of refrigerants under Section 608 of the Clean Air Act. At the state level, there is not an active State of Texas rule or regulation that applies to individuals who handle and use refrigerants.35 The EPA is phasing down the use of high-GWP refrigerants under the American Innovation and Manufacturing (AIM) Act. The EPA estimates that, among installed appliances, unitary air conditioning and HPs are expected to have the greatest volume of high-GWP refrigerants in 2025, when AIM Act requirements for HVAC products and systems begin to take effect. It is paramount, therefore, that Austin seeks local solutions to the climate change impacts of refrigerants. To better understand local opportunities for reducing the GWP of refrigerants, this study captured contractor and other industry stakeholder feedback on refrigerant choice and refrigerant management practices. Table 16 summarizes the low-GWP refrigerant recommendations by identified barrier. Table 16. Summary of Low-GWP Refrigerant Barriers and Solutions Barrier: Limited Local Influence on Refrigerant Choice 15) Offer incentives for use of low-GWP refrigerants. HP, HPWH Barrier: Contractor Resistance to Refrigerant Destruction 16) Provide contractor education on the climate costs of high-GWP refrigerants. HP, HPWH 17) Offer incentives for the destruction of high-GWP refrigerants. HP, HPWH 18) Encourage the purchase of local high-GWP destruction carbon offsets. HP, HPWH 19) Administer a public education campaign on the climate costs of high-GWP refrigerants. 20) Purchase reclaimed high-GWP refrigerants to reduce local supply. HP, HPWH HP, HPWH Barrier: Limited Local Influence on Refrigerant Choice Contractors and other industry stakeholders reported that refrigerant type is generally not a consideration for contractors nor customers. Contractors promote their preferred manufacturer’s 34 U.S. Environmental Protection Agency (EPA), 2016. Transitioning to Low-GWP Alternatives in Residential and Commercial Air Conditioning and Chillers, EPA-430-F-028. Available: https://www.epa.gov/sites/default/files/2021- 02/documents/transitioning_to_low-gwp_alternatives_in_res_and_com_ac_chillers.pdf 35 Texas Occupations Code Section 1302.352 previously required individuals who purchase, sell, or use a refrigerant in Texas to comply with the Clean Air Act and applicable federal rules, but the section was repealed in 2013. City of Austin HVAC-R Contractor Study 31 HVAC equipment, regardless of the refrigerant or refrigerant blend used. Manufacturers and industry stakeholders report that federal regulations drive the choice of refrigerants that HVAC equipment is designed to use. The EPA has been phasing down the use of different types of refrigerants for many decades in compliance with the Montreal Protocol and the Kigali Amendment to the Montreal Protocol. These regulatory actions influence what refrigerants can be produced, imported, and used in air conditioning and other refrigerant systems. Contractors noted that R-22 (HCFC-22) and R-410A are the most common refrigerants in use locally, which is consistent with national EPA data on reclaimed refrigerants reported under Section 608 of the Clean Air Act.36 In Figure 7, refrigerants shown in shades of blue and gray are refrigerants known as Ozone-Depleting Substances (ODSs), which are being phased down under the Montreal Protocol, and refrigerants in green are hydrofluorocarbons (HFCs) that replaced ODSs and are now being phased down under the Kigali Amendment to the Montreal Protocol and the AIM Act. Figure 7. Reclaimed Refrigerants Reported Under Section 608 of the Clean Air Act Source: EPA, https://www.epa.gov/section608/summary-refrigerant-reclamation-trends Low-GWP refrigerant blends (also called A2L refrigerants) and low-GWP pure refrigerants (also called natural refrigerants) will replace HFC refrigerants, which replaced ODS refrigerants. At the state level, Texas Health and Safety Code Section 382.551 enables the use of non-HFC refrigerants that are being developed to replace these older, higher-GWP refrigerants. Examples of A2L refrigerants include R-32 and R-454B. Examples of natural refrigerants include ammonia, propane, and carbon dioxide (CO2). It may seem counterintuitive to promote propane and CO2 as low-GWP options, but their heat-trapping ability is orders of magnitude lower than today’s commonly used HFC refrigerants and refrigerant blends. As shown in Figure 8, one pound of CO2 (GWP = 36 EPA, 2023. “Summary of Refrigerant Reclamation Trends,” Stationary Refrigeration, December 13. Available: https://www.epa.gov/section608/summary-refrigerant-reclamation-trends City of Austin HVAC-R Contractor Study 32 1) contributes hundreds of times less to climate change than a pound of R-32 (GWP = 675) and thousands of times less than R-410A (GWP = 2,088).37, 38 Figure 8. Global Warming Potential (GWP) Comparison of Common Refrigerants GWP = 2,088 GWP = 1,810 GWP = 465 GWP = 675 GWP = 1 Source: California Air Resources Board, https://ww2.arb.ca.gov/resources/documents/high-gwp-refrigerants EPA will begin restricting the production and import of air conditioner and HP products and systems that use HFCs in January 2025, with a one-year delay to January 2026 for VRF systems and a one-year grace period for distributors and installers to sell down existing inventory of high-GWP systems.39 Survey results and interviews show that contractors generally do not encourage customers to replace HVAC equipment to transition to a low-GWP refrigerant ahead of the federal schedule. HVAC industry professionals also reported that manufacturers are unlikely to have HVAC systems using low-GWP refrigerants available ahead of the regulatory date. Solution(s): Limited Local Influence on Refrigerant Choice Table 17 outlines a potential solution to overcome the limited local influence on refrigerant choice barrier. The recommendation is discussed in more detail following the table. 37 EPA, 2023. GHG Emission Factors Hub, EPA Center for Corporate Climate Leadership, September. Available: https://www.epa.gov/climateleadership/ghg-emission-factors-hub 38 California Air Resources Board, n.d. “High-GWP Refrigerants.” Available: https://ww2.arb.ca.gov/resources/documents/high-gwp-refrigerants 39 EPA, 2023. Fact Sheet: Final Rule - Phasedown of Hydrofluorocarbons: Restrictions on the Use of Certain Hydrofluorocarbons under Subsection (i) of the American Innovation and Manufacturing Act of 2020, Office of Air and Radiation, Technology Transitions Program, December. Available: https://www.epa.gov/system/files/documents/2023-10/technology-transitions-final-rule-fact-sheet-2023.pdf City of Austin HVAC-R Contractor Study 33 Table 17. Recommended Solutions to Limited Local Influence on Refrigerant Choice Barrier Solution(s) 15) Offer incentives for use of low-GWP refrigerants. 15. Low-GWP Refrigerant Incentives Applicable Technology HP, HPWH Once low-GWP residential HVAC systems are available locally (likely not until 2025), Austin Energy and/or the City could consider rebating equipment based on energy efficiency gains, plus a second or bonus GHG-based rebate for use of low-GWP refrigerants. Based on peer municipally owned utilities, this approach does not appear to be commonplace, especially for residential applications. SMUD ran a pilot program to test the use of natural refrigerants in commercial applications,40,41 but SMUD does not currently offer a residential or commercial incentive for natural refrigerants. Austin Energy could explore lessons learned from SMUD’s experience to inform a local pilot. For renters and others who are restricted to temporary or portable cooling options, Austin Energy/the City could also consider offering incentives for window unit and portable air conditioners that use low-GWP refrigerants and/or HP technology as options become available. Barrier: Contractor Resistance to Refrigerant Destruction HVAC-R professionals who work with refrigerants are subject to provisions in Section 608 of the Clean Air Act and must pass an exam to receive Section 608 Technician Certification. Certification is required to purchase and handle refrigerants and also applies to end-of-life refrigerant management practices.42 Before disposing of a refrigerant-containing HVAC system, certified HVAC-R professionals are required to recover any remaining refrigerant to be destroyed or reused in other systems. After unused refrigerant is recovered (i.e., removed from the old system and stored in an approved pressurized container), it can be 1) recycled for reuse on the job site; 2) reclaimed, where it undergoes a more thorough cleaning process for resale through a supply house; or 3) destroyed. Destroying refrigerant removes the potential for the refrigerant to contribute to climate change and can be used to generate carbon offsets.43 Half of survey respondents reported recycling the refrigerant for use onsite, and 46% reported selling the recovered refrigerant to a supply house (Figure 9). 40 SMUD, n.d. “Natural Refrigerant Incentive Program,” Innovation 2020. Available: https://www.smud.org/- /media/Documents/Corporate/About-Us/Energy-Research-and-Development/Innovations/Natural- refrigerant.ashx 41 North American Sustainable Refrigeration Council, 2017. “SMUD Launches Natural Refrigerant Incentive Program,” June 12. Available: https://nasrc.org/articles1/2017/6/12/smud-launches-natural-refrigerant-incentive- program 42 EPA, 2023. “Section 608 Technician Certification,” Stationary Refrigeration, November 1. Available: https://www.epa.gov/section608/section-608-technician-certification 43 For example, see the Climate Action Reserve’s Ozone Depleting Substances Protocols for quantifying and monitoring the GHG reductions from ODS destruction. City of Austin HVAC-R Contractor Study 34 Figure 9. Refrigerant Recycle vs. Reclamation Rates Despite proper training and best practices, some venting of refrigerant gases is likely during refrigerant recovery, processing, and storage. Therefore, taking high-GWP refrigerants out of circulation can reduce the climate impact of these gases. However, contractors do not tend to sell refrigerants recovered from older HVAC systems for destruction. As the supply of high-GWP refrigerants shrinks, the price of these older refrigerants increases. Because contractors continue to service existing HVAC systems that use the older ODS and HFC refrigerants, high-GWP refrigerants are an increasingly valuable commodity. In fact, many contractors reported difficulty finding adequate supply of ODS refrigerants, and some suggested the City could provide refrigerant reclamation services to increase supply. However, this would be contrary to the City’s net-zero carbon goal. Allowing high-GWP refrigerants to continue to get more expensive as supply dwindles could encourage customers to replace older HVAC systems with more efficient HP systems that use lower-GWP refrigerants. Solution(s): Contractor Resistance to Refrigerant Destruction Table 18 outlines potential solutions to overcome contractor resistance to refrigerant destruction. The recommendations are discussed in more detail following the table. Table 18. Recommended Solutions to Contractor Resistance to Refrigerant Destruction Barrier Solution(s) 16) Provide contractor education on the climate costs of high-GWP refrigerants. HP, HPWH 17) Offer incentives for the destruction of high-GWP refrigerants. 18) Encourage the purchase of local high-GWP destruction carbon offsets. Applicable Technology HP, HPWH HP, HPWH City of Austin HVAC-R Contractor Study 35 Solution(s) 19) Administer a public education campaign on the climate costs of high-GWP refrigerants. Applicable Technology HP, HPWH 20) Purchase reclaimed high-GWP refrigerants to reduce local supply. HP, HPWH 16. Provide Contractor Education on the Climate Costs of High-GWP Refrigerants Contractors are confused about the timing and operational impacts of the federal phase down of HFC refrigerants. Although the refrigerant transition regulations for HVAC products and systems don’t start taking effect until January 2025, some contractors are confused by earlier timelines that apply to producers and importers of HFCs (rather than HFC-containing equipment like HVAC systems).44 Some also expressed concerns about new code requirements and safe handling and storage practices. For example, some contractors are concerned that they will have to retrofit their warehouses with sprinkler systems and retrofit or replace existing refrigerant piping when they install A2L systems to meet ventilation requirements. They would like the City to provide clear, timely information on new code requirements related to the use of A2L refrigerants. The City could use this as an opportunity to not only provide code-related education, but also information about the climate change benefits of new low-GWP refrigerants and the negative climate change impacts of older refrigerants. The City may wish to partner with manufacturers and distributors, as they are trusted sources of information for contractors. 17. Offer Incentives for High-GWP Refrigerant Destruction Similar to the earlier recommendation to offer a dual incentive structure that rebates HVAC equipment (including HPs) for higher efficiency performance and for use of low-GWP refrigerants, the City and/or Austin Energy could offer an additional rebate to contractors who destroy the recovered refrigerant. These multiple rebates would need to be well coordinated to make the paperwork process as simple and efficient as possible to ensure high participation. 18. Encourage Carbon Offsets from Local High-GWP Refrigerant Destruction Projects The City’s Office of Sustainability could encourage City departments, such as the Department of Aviation and Austin Convention Center Department, and other local organizations that use carbon offsets to meet their climate goals to purchase offsets derived from projects that capture and destroy high-GWP refrigerants locally. This would require coordination with carbon offset registries and refrigerant reclaimers and possibly City involvement to manage the monitoring and verification process to ensure carbon offset verification and certification of the destruction of locally derived refrigerants. 19. Administer a Public Education Campaign on the Climate Costs of High-GWP Refrigerants The City could piggyback off Recommendation 3b. Launch City Council District Contests and Recommendation 7a. Run a Public Marketing Campaign to encourage individuals and businesses to 44 EPA, 2024. “HFC Allowances,” January 11. Available: https://www.epa.gov/climate-hfcs-reduction/hfc- allowances City of Austin HVAC-R Contractor Study 36 destroy high-GWP refrigerants that may be unknowingly venting into the atmosphere. Drug take back and firearm surrender programs offer a parallel model. The Office of Sustainability could partner with Austin Resource Recovery to accept refrigerants at the Recycle and Reuse Drop-off Center and possibly through residential bulk collection or other distributed collection events. The City would need to seek EPA certification to process the refrigerants or partner with an existing EPA-certified reclamation facility. This could also support Recommendation 18. Encourage Carbon Offsets from Local High-GWP Refrigerant Destruction Projects. 20. Purchase High-GWP Refrigerant Supply The EPA phase down of HFC refrigerants uses an allowance system. The EPA issues an increasingly smaller number of allowances for permitted HFCs and HFC-containing products and equipment until the desired level of circulating HFCs is reached.45 The City could accelerate this phase down locally by purchasing reclaimed HFC and other high-GWP refrigerants from local supply houses. This would reduce the availability of these legacy refrigerants available to serve older HVAC systems and exert price pressure on the remaining supply. As it becomes more expensive to maintain older HVAC systems that use high-GWPs, the replacement rate should increase. Coupled with recommendations to increase HP installations, this approach could have the dual benefit of increasing the use of HP and other high- efficiency HVAC systems that use lower-GWP refrigerants, although the equity impact of customer price increases should be mitigated, for example, through financial incentives. Conclusion The Austin residential heating and cooling market is a decarbonization leader in Texas, but more City support is needed to equitably reach the community’s net-zero GHG emissions goal by 2040. This report provides background and recommendations for ways the City can partner with HVAC-R contractors, industry stakeholders, and community members to accelerate the pace of transformation and help Austin realize its vision of a low-carbon Austin, equitably. 45 EPA, “HFC Allowances.” City of Austin HVAC-R Contractor Study 37 Appendix A. Survey Results Terra Lumina Consulting administered an online survey from October 6, through December 20, 2023. The survey solicited feedback from heating, ventilation, air conditioning, and refrigeration (HVAC-R) and plumbing professionals on their experience with and perspectives on heat pumps, heat pump water heaters, and refrigerants. The survey was administered in English and Spanish. Twenty-eight people completed the English survey, and one completed the Spanish survey (n=29). Respondents were invited to answer questions on “HVAC”, “Plumbing,” or “Both.” Twenty-seven respondents answered the HVAC questions, and two respondents answered the plumbing questions. The survey responses are organized in three categories below: • About Questions • HVAC Questions • Plumbing Questions City of Austin HVAC-R Contractor Study A-1 About Questions City of Austin HVAC-R Contractor Study A-2 What is your role within your company?Note: Some respondents selected multiple optionsCount%Owner/Manager2483%Installation technician310%Maintenance & repair technician27%Apprentice/trainee13%Sales13%Other517%→Which of the following apply to your business?Count%Fewer than 30 employees1448%Less than $5 million in annual revenue1034%Minority-owned931%Woman-owned27%Locally owned1552%Currently participate in Austin Energy's rebate programs2069%Serve single-family properties1966%Serve multifamily properties1448%Serve affordable housing properties1034%Serve customers in a language other than English1759%→None13%Count%Spanish1757%ASL13%German13%Pashtu13%How familiar are you with the City of Austin’s goals to reduce emissions from building energy use and reducing refrigerant leakage?Count%Very familiar - I followed the development of the goals and have changed my business practices to help achieve them!828%Somewhat familiar - I’ve heard about them, but haven’t really looked closely.724%Familiar - I’m aware of the goals, but that’s about it.1241%Not familiar - I am not aware of the City’s emissions reduction goals.27%What best describes your business?Count%Plumbing00%HVAC2276%Both Plumbing & HVAC310%Other414%How many years have you been in the industry?Count%Less than one27%1-5 years310%5-10 years27%More than 10 years2172%What languages do you serve customers in other than English?Other: N/A, QA/QC Specialist, Energy advisor, HR Administration, TestingHVAC Questions City of Austin HVAC-R Contractor Study A-3 Are you proactively promoting the installation of heat pump HVAC systems to customers?Count%Yes, I encourage customers to consider heat pumps.2385%No, but I install them if customers ask for them.14%No, I don’t install them at all.311%For *existing* systems, what percentage of your total replacement installations are heat pump HVAC systems?Count%Less than 5%313%5-15%313%15-25%833%More than 25%1042%For *new* systems, what percentage of your total new installations are heat pump HVAC systems?Count%Less than 5%14%5-15%417%15-25%522%More than 25%1357%When installing heat pump HVAC systems, what types of electrical upgrades are needed?Thermostat wiring from indoor unit to outdoor unit (straight cool does not have enough wires) - this can be very difficult in apartment complexesStable voltage between 200-245 VAC, Single Phase, Typically a surge protector is added. Lakeway area has high voltage so a buck booster may be offered.Thermostat wire, and thermostatNone usuallyLittle to noWiringNone if gas remains as the second heat source, possibly low voltageDedicated high voltage electrical circuit , new low voltagejust dependsHa ha, typically less amperage required but sometimes need to rerun low voltage wiringNone.High and low voltageSometimes additional power is needed for indoor unitTypically the electrical and the breakers20 amp breaker 200 amp panel upgraded groundingNormally up grade to power to the indoor unit.Pulling new low voltage wire, updated the electrical to 208/230 for the AHU, we really push the duel fuel system so you don’t have to do the electrical upgrade.If traditional split system, upgrade circuit to indoor unit. This could also result in panel upgrade. If Mitsubishi air handler then no electric upgrade needed.40 amp dedicated circuit and smart disconnectFew, the newer equipment uses less electrical.NoneNew circuits new breakers24 V control wiringHVAC Questions (cont.) City of Austin HVAC-R Contractor Study A-4 Count%Yes2292%No28%What types of weatherization or energy efficiency recommendations do you make?Count%Air sealing2091%Insulation22100%Weatherstripping1986%Duct sealing22100%Solar shading screens1464%Smart thermostat2195%Other418%→OtherBlower Door Test, Duct Blast, Temperature Management, Dehumidifier, FoliageIAQDuct modifications/replacementDuct ReplacementsWhat has been your experience with the maintenance costs of heat pumps vs. traditional HVAC systems?Count%More expensive730%About the same1461%Less expensive29%What has been the overall customer satisfaction you see with heat pumps? Do customers continue to like the technology, or do they have regrets about the decision?Count%Very satisfied - no regrets1771%Somewhat satisfied417%Neutral313%Somewhat unsatisfied - regret transitioning00%Very unsatisfied - replaces with traditional system00%When installing heat pump HVAC systems, do you recommend any other weatherization or energy efficiency upgrades to customers that would make the equipment you install perform better, or if the home is inefficient or leaky?HVAC Questions (cont.) City of Austin HVAC-R Contractor Study A-5 What are the most common praises?No specific praises. AC works is what they mostly care about.Quiet, Lower E-costs (no strip heat), Electrification, Stable E-billsLess electricity usageVery economical50% energy savings, quiet, generally more comfortEfficiencyworks as expectedLower utility costEasier to operateQuiet and efficientNothing in particular, but little to no downsides.Keeping set point during winterMostly happyMore comfortable heating and cooling. Lower operating costsNo longer using gas in the home.Energy Savings. Not overheating the Home.Cost effective, low maintenance.Variable capacity provides greater comfortEquipment Last longerComfort and efficiencyWhat are the most common complaints?None providedAre you aware of the new federal income tax credits for heat pump technology in the Inflation Reduction Act of 2022?Count%Yes2188%No313%Do these tax credits improve the economics of heat pump technology?Count%Yes1990%No15%Unsure15%Has the availability of tax credits increased sales of heat pump HVAC systems?Count%Yes1152%No733%Unsure314%HVAC Questions (cont.) City of Austin HVAC-R Contractor Study A-6 Are you aware of Austin Energy’s rebates for heat pump HVAC systems?Count%Yes2292%No28%Do you participate in Austin Energy’s rebate program?Count%Yes2195%No15%→What has kept you from participating?Haven’t had time to look into it0Rebate isn’t enough to persuade customers1Paperwork is too burdensome1Other0Do Austin Energy’s rebates make you more competitive than your peers?Count%Yes1257%No419%Unsure524%Do Austin Energy’s rebates make you more likely to promote heat pumps to customers?Count%Yes1676%No524%HVAC Questions (cont.) City of Austin HVAC-R Contractor Study A-7 Which of the following would make you more likely to recommend/offer heat pumps as an option to your customers?Count%Training on the technology and installation process725%More customer demand932%Being confident that it will keep customers comfortable and happy1036%Being confident that it will reduce customers’ energy bills1139%Increased incentives1657%Lower cost of the equipment1139%Changes to permitting process311%------------------------------------------------------------------------------------------------------------------->None311%Other311%→OtherConsistencyFor apartments - ability to get incentive for whole complex change out of outdoor unit only - not all indoor units need replacement and this can be hard on tenants. Most apartments are electric strip heat. This is bad during the winter. But HP outdoor units are about 2x the cost of straight cool units, making it unlikely they will choose a HP if it is an OD only change out.Submit pictures in lieu of site visitAlready drank the Kool Aide?n/aDo you consider the type of refrigerant that a system uses when choosing which HVAC systems to offer to customers? Why or why not?Follow the specifications of the unit for what refrigerant to useCount%No. Age and condition are the biggest factors.No1867%No, No control over that aspect.Yes622%YesNo. It has nothing to do with itYesNoNoOnly when replacing componentsYesyesNo, just R-22, R-410. No RefrigerationNo, currently everything is 410an/aNo because 410A is cheapestNot yet, we all will late next yearNot really because we have not had many options to choose from when it’s comes to refrigeration. We only have a kind available not only because cost also availabilityYesIs not a concernNo, as there is only 410A right now but that will be changing in 2025YesNot at this time based on product availabilityNot really.No. The systems are designed to work with the refrigerants federally mandated. S selection guidelines does not consider the refrigerant.We work most with multi family.No always use 410AAs of today straight cooling ir heat pumps use 410a refrigerantWhat changes to the permitting process would you like to see?HVAC Questions (cont.) City of Austin HVAC-R Contractor Study A-8 How do you deal with refrigerants when replacing an HVAC system with a new system?Count%Capture & recycle the refrigerants onsite1452%Capture & recycle the refrigerants via a supply house1348%Other14%→Othern/aWhat additional support could the City of Austin provide to encourage uptake of heat pump technology and/or improved refrigerant management?Improve the economyHire John Chavez to promote heat pump technology, Work Ecoer Smart SystemsYesAdvertisingWe recycle all refrigerantRecommend Specific, Vetted, OEMs, Not all HPs are worthyBetter rebatesUnderstanding that most people will not tear up their homes to run power to the indoor unitnonelatest updatesHave a City Owned HVAC Recycling PlantIncreased incentives, more public education about heat pumpsThanks for all you do!Info to city of Austin customersGrid reliability during peak timesMore educationMore or up rebate levels for heat pumpsNANaConvince the state of Texas to approve the additional heat pump electrification rebateGive more incentives to contractorsHigher rebate incentivesEducate customers on all climate heat pumps they think they’re onlyKeep contractor informed of heat pump rebatesSupport with tank exchange program could be beneficial. Federal mandates require reclamation but it isn't easy in stone cases because the supply houses don't make money from it. It's an expensive burden for companies.Consider how apartments want to purchase systems. Code requires HP to replace full system straight cool, but if one component is being changed out, you can go with like for like. Need incentive to move to HP even if only changing out OD unit. Also, most apartments have furred down fan coils that won't allow for higher efficiency match ups, so they don't qualify for efficiency incentives. Apartments should be encouraged to change out their old, crappy 8 SEER R-22 straight cool outdoor units for new HP condensers that even at minimum SEER and mis-matched match up have better AC efficiency (better seer) and better heating efficiency (strip heat with <100% BTUH conversion to HP with >300% BTUH conversion)Improve clear and consistent communication with the developers, builders and educate them on the benefits of Clean Energy while growing the bottom line communicationPlumbing Questions City of Austin HVAC-R Contractor Study A-9 Are you proactively promoting the installation of heat pump water heaters to customers?Count%Yes, I encourage customers to consider heat pumps.150%No, but I install them if customers ask for them.00%No, I don’t install them at all.150%For existing systems, what percentage of your replacement installations are heat pump water heaters?Count%Less than 5%00%5-15%1100%15-25%00%More than 25%00%For new systems, what percentage of your total new installations are heat pump water heaters?Count%Less than 5%1100%5-15%00%15-25%00%More than 25%00%When installing heat pump water heaters, what types of electrical upgrades are needed?Electric disconnectCount%Yes00%No1100%What has been your experience with the maintenance costs of heat pump water heaters vs *gas storage* water heaters?Count%More expensive1100%About the same00%Less expensive00%What has been your experience with the maintenance costs of heat pump water heaters vs *tankless* water heaters?Count%More expensive00%About the same1100%Less expensive00%What has been your experience with the maintenance costs of heat pump water heaters vs *electric resistance* water heaters?Count%More expensive1100%About the same00%Less expensive00%When installing heat pump water heaters, do you recommend any other weatherization or energy efficiency upgrades to customers that would make the equipment you install perform better, or if the home is inefficient or leaky?Plumbing Questions (cont.) City of Austin HVAC-R Contractor Study A-10 Count%Very satisfied - no regrets1100%Somewhat satisfied00%Neutral00%Somewhat unsatisfied - regret transitioning00%Very unsatisfied - replaced with traditional gas tank or tankless00%What are the most common praises?Lower utility costWhat are the most common complaints?None providedAre you aware of the new federal income tax credits for heat pump water heaters in the Inflation Reduction Act of 2022?Count%Yes1100%No00%Do these tax credits improve the economics of heat pump technology?Count%Yes1100%No00%Unsure00%Has the availability of tax credits increased sales of heat pump water heaters?Count%Yes1100%No00%Unsure00%Are you aware of Austin Energy’s rebates for heat pump water heaters?Count%Yes1100%No00%Do you participate in Austin Energy’s rebate program?Count%Yes1100%No00%What has been the overall customer satisfaction you see with heat pump water heaters? Do customers continue to like the technology, or do they have regrets about the decision?Plumbing Questions (cont.) City of Austin HVAC-R Contractor Study A-11 Do Austin Energy’s rebates make you more competitive than your peers?Count%Yes00%No1100%Unsure00%Do Austin Energy’s rebates make you more likely to promote heat pump water heaters to customers?Count%Yes1100%No00%Which of the following would make you more likely to recommend/offer heat pump water heaters as an option to your customers?Count%Training on the technology and installation process0%More customer demand150%Being confident that it will keep customers comfortable and happy0%Being confident that it will reduce customers’ energy bills0%Increased incentives150%Lower cost of the equipment150%Heat pump water heater loaner program for replacement on burnout2100%Changes to permitting process0%None0%Other0%Additional marketing with contractor participationAdditional marketing with contractor participationWhat additional support could the City of Austin provide to encourage uptake of heat pump technology and/or improved refrigerant management?Appendix B. Peer Municipally Owned Utility Heat Pump and Heat Pump Water Heater Incentives ** All incentives are current as of March 5, 2024. Table 19. CPS Energy Heat Pump Incentives – Single-Family Early Replacement HVAC (all technologies; no HP-specific incentives) Tier 1 (13.8-15.1 SEER2) Tier 2 (15.2-16.1 SEER2) Tier 3 (16.2-17.0 SEER2) Tier 4 (17.1-19.9 SEER2) Tier 5 (≥ 20.0 SEER2) Delta with Non-HP System $115/ton $130/ton $175/ton $250/ton $310/ton $0 (all tiers) Replace on Burnout HP (all technologies; no HP-specific incentives) Tier 1 (13.8-15.1 SEER2) Tier 2 (15.2-16.1 SEER2) Tier 3 (16.2-17.0 SEER2) Tier 4 (17.1-19.9 SEER2) Tier 5 (≥ 20.0 SEER2) Delta with Non-HP System $90/ton $120/ton $150/ton $225/ton $275/ton $0 (all tiers) Source: https://resi-savenow.cpsenergy.com/cps-energy/savings/hvac-rebates-specifications/ Notes: - CPS Energy does not offer single-family incentives for any water heating technology, nor any differentiated HP or HPWH incentives for multifamily. City of Austin HVAC-R Contractor Study B-1 Table 20. Los Angeles Department of Water and Power (LADWP) Heat Pump and Heat Pump Water Heater Incentives – Single-Family HP HPWH HP (≥ 7.7 HSPF2, ≥ 15.2 SEER2) Delta with Non-HP System HPWH Delta with Non-HP System $300/ton $180-$200 $1,500 N/A Source: https://www.ladwp.com/residential-services/programs-and-rebates-residential/consumer-rebate-program Notes: - LADWP does not offer differentiated HP or HPWH incentives for non-income-qualified multifamily properties. However, they offer GHG emissions- based incentives for measures including HPs and HPWHs for multifamily properties for which ≥ 66% of households have ≤ 80% of the area median income and are located in a disadvantaged community (as reported in CalEnviroScreen). There are alternate eligibility options for properties located outside of disadvantaged communities. See https://ladwpcamr.com/. - The State of California offers additional rebates through TECH Clean California. See https://switchison.org/contractors/incentive-resources/. • HP (SF): $1,000 per outdoor unit, up to 2 units ($2,000) per SF home • HP (MF): a uniform incentive is not yet available statewide • HPWH (SF): up to $7,300 (up to $10,385 for equity eligible customers) • HPWH (MF unitary): up to $7,300 (up to $10,385 for equity eligible customers) • HPWH (MF central): up to $1,100/kWh, up to $300K per project (up to $1,200/kWh, up to $300K per project for equity eligible customers) - The State of California will likely use its Inflation Reduction Act Home Efficiency Rebates (HOMES) and/or Home Electrification and Appliance Rebate (HEEHRA) funding to offer additional residential HP and HPWH rebates later in 2024. See https://www.energy.ca.gov/programs-and- topics/programs/inflation-reduction-act-residential-energy-rebate-programs-california. City of Austin HVAC-R Contractor Study B-2 Table 21. Sacramento Municipal Utility District (SMUD) Heat Pump and Heat Pump Water Heater Incentives – Single-Family Gas to Electric HP Electric to Electric HP 2-stage package HP (≥ 15 SEER2) variable-stage HP 2-stage or variable-stage HP Delta with Non-HP System up to $4,500 ($2,000 per unit + $2,500 for electrical/panel upgrade) up to $6,000 ($3,500 per unit + $2,500 for electrical/panel upgrade) $750 N/A (all units) Gas to Electric HPWH Electric to Electric HPWH HPWH (50 gal+) HPWH (65 gal+ HPWH (80 gal+) HPWH Delta with Non-HP System $4,500 ($2,000 per unit + $2,500 electical/panel upgrade) $5,000 ($2,500 per unit + $2,500 electical/panel upgrade) $5,500 ($3,000 per unit + $2,500 electical/panel upgrade) $500 N/A (all units) Source: https://www.smud.org/en/Rebates-and-Savings-Tips/Rebates-for-My-Home/Heating-and-Cooling-Rebates Notes: - The State of California offers additional rebates through TECH Clean California. See https://switchison.org/contractors/incentive-resources/. • HP (SF): $1,000 per outdoor unit, up to 2 units ($2,000) per SF home • HP (MF): a uniform incentive is not yet available statewide • HPWH (SF): up to $7,300 (up to $10,385 for equity eligible customers) • HPWH (MF unitary): up to $7,300 (up to $10,385 for equity eligible customers) • HPWH (MF central): up to $1,100/kWh, up to $300K per project (up to $1,200/kWh, up to $300K per project for equity eligible customers) - The State of California will likely use its Inflation Reduction Act Home Efficiency Rebates (HOMES) and/or Home Electrification and Appliance Rebate (HEEHRA) funding to offer additional residential HP and HPWH rebates later in 2024. See https://www.energy.ca.gov/programs-and- topics/programs/inflation-reduction-act-residential-energy-rebate-programs-california. City of Austin HVAC-R Contractor Study B-3 Table 22. Sacramento Municipal Utility District (SMUD) Heat Pump and Heat Pump Water Heater Incentives – Multifamily Inverter; ≥ 17 SEER, single head unit or ducted Unitary HP Common Area HP Multi-Apartment HP Additional mini-split heads Inverter, through-the- wall DX HP, ≥ 15 SEER + smart thermostat Package & split, 1- or 2- stage Inverter, variable capacity Package & split, 1- or 2- stage inverter, variable capacity Delta with Non-HP System $2,700/ compressor $600/ head/unit $1,400/ compressor $1,950/ system $1.50/ sf served $2.50/ sf served $1,500/ unit served $2,500 N/A (all units) Apartment HPWH Common Area HPWH Central HPWH ≥ NEEA Tier 3 Common Area HPWH < 15 gal per bedroom served ≥ 15 gal per bedroom served Delta with Non-HP System $1,800/unit $1,800/unit $1,500/unit served $2,000/unit served N/A (all units) Electrical Upgrades Electrical Engineering + Permitting Electrical Upgrades HPs with natural refrigerant with GWP ≤ 750 $750/project Up to $650/unit or $50,000 20% bonus/applicable HP measure Source: https://www.smud.org/en/Business-Solutions-and-Rebates/Business-Rebates/Multi-Family-go-electric-incentives Notes: - - The State of California offers additional rebates through TECH Clean California. See https://switchison.org/contractors/incentive-resources/. SMUD increases incentive levels 50%+ for properties with > 50% of tenants participating in its Energy Assistance Program Rate. • HP (SF): $1,000 per outdoor unit, up to 2 units ($2,000) per SF home • HP (MF): a uniform incentive is not yet available statewide • HPWH (SF): up to $7,300 (up to $10,385 for equity eligible customers) • HPWH (MF unitary): up to $7,300 (up to $10,385 for equity eligible customers) • HPWH (MF central): up to $1,100/kWh, up to $300K per project (up to $1,200/kWh, up to $300K per project for equity eligible customers) - The State of California will likely use its Inflation Reduction Act Home Efficiency Rebates (HOMES) and/or Home Electrification and Appliance Rebate (HEEHRA) funding to offer additional residential HP and HPWH rebates later in 2024. See https://www.energy.ca.gov/programs-and- topics/programs/inflation-reduction-act-residential-energy-rebate-programs-california. City of Austin HVAC-R Contractor Study B-4 Table 23. Seattle City Light Heat Pump and Heat Pump Water Heater Incentives – Single-Family and Multifamily SEER/HSPF-rated HP SEER2/HSPF2-rated HP HPWH Mini-split SEER 16/HSPF 9.5 Mini-split SEER 16/HSPF 11 Ducted SEER 15/HSPF9 Ducted SEER 15/HSPF 10 Delta with Non-HP System $400 $600 $300 $500 N/A (all units) SEER2 15.2/HSPF2 8.1 SEER2 15.2/HSPF2 8.5 SEER2 16.0/HSPF2 9.5 Delta with Non-HP System $400 $600 N/A (all units) $300 HPWH $500 Notes: Delta from non-HPWH HPWH (120 gal+) Delta with Non-HP System N/A $0.24/kWh N/A Source: https://www.seattle.gov/city-light/residential-services/home-energy-solutions, https://www.seattle.gov/city-light/business-solutions/landlord-owner- agents/multifamily-building-energy-solutions - The City of Seattle's Office of Environment & Sustainability has separately partnered with Mitsubishi to offer an additional $2,000 incentive on - qualifying Mitsubishi HPs that replace oil heating systems. See https://ductlesshomecomfort.com/no-more-oil-heat/. Seattle City Light incents HPs for multifamily properties through its midstream program where it works with distributors to offer targeted discounts. The specific incentive amounts and qualifying technologies are not publicly available. See https://www.seattle.gov/documents/Departments/CityLight/HVACProgramFS.pdf. - The State of Oregon administers two programs to incent the installation of HPs. One program offers grants to local/regional administrators to offer local incentives of up to $7,000 in HP installation costs and up to $4,000 in upgrades to enable use of a HP. The other program offers a combination of rebates and grants to contractors to directly install HPs. Rebates vary from $2,000-$7,000 per unit and $2,000-$4,000 in grants to provide complementary upgrades. See https://www.oregon.gov/energy/Incentives/Pages/heat-pumps.aspx. City of Austin HVAC-R Contractor Study B-5