Item 3- Briefing Heat Pump & AC Rebate Programs — original pdf

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High-Efficiency Central Air Conditioning and Heat Pump Rebate Programs October 20, 2026 © Austin Energy Hammad Chaudhry, Energy Efficiency Services Director Overview Decades of air conditioning and heat pump programs and building codes have produced substantial megawatt demand reductions today. Many long-standing barriers persist, and new ones have emerged, creating program limitations. Despite barriers, Austin Energy is pushing air conditioning and heat pump programs across all markets to meet the Resource Generation Plan to 2035 Goals. What is a heat pump? Heat Pump Heat Pumps (HP) move heat rather than create heat — using refrigeration cycle to transfer thermal energy. Heat Pumps provide both cooling and heating using the same equipment. Air Conditioner Air Conditioners (AC) only cool, but with the same refrigeration cycle as a heat pump in cooling mode. Heating can be provided with a gas furnace or electric resistance. Both Both use “heat pump” technology for cooling using Energy Efficiency Ratios (EER) / Seasonal Energy Efficiency Ratios (SEER) to measure efficiency. 3 Air Conditioning (AC) & Heat Pump (HP) Residential Rebates Single Family Heating Types in Austin Austin’s residential energy code has restricted the use of electric resistance heating in new homes since 1989. Offered high-efficiency central AC & HP rebates since the 1980s. Electric Resistance Heat Pumps 13% Current AC & HP rebates range from $600 to $1,600 per unit. 13% Other 1% 73% 27,500+ Homes rebated in last 10 years 22.5 MW Saved in last 10 years Gas Heat Energy Conservation Audit and Disclosure (ECAD) Data 4 AC Rebates HP Rebates 3,420 3,462 645 616 2,775 2,846 2,697 486 2,211 2,035 387 2,004 395 1,648 1,609 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2021 2022 2023 2024 2025 5 SEER2 minimum baseline increase 1/1/2023 EPA bans systems using R-410A refrigerant 1/1/25 Residential AC & HP Rebates 5 Air Conditioning (AC) & Heat Pump (HP) Multifamily Rebates Multifamily Heating Types in Austin Residential energy code applies to multifamily four stories or less. Multifamily Green Building rating prescriptive requirement requires heat pumps if using electric heat (this addresses taller multifamily). Rebates up to $400 per ton of cooling. 71,500+ Units retrofitted in the last 10 years 32.8 MW Saved in the last 10 years Gas Heat 17% 83% Energy Conservation Audit and Disclosure (ECAD) Data All-Electric 6 12,000 10,000 8,000 7,812 6,000 3,224 4,000 2,000 0 11,062 7,669 9,008 4,780 8,675 4,283 7,310 1,358 5,952 4,588 4,392 3,393 4,228 2021 2022 2023 2024 2025 MF Income-Qualified MF Standard Multifamily Units Per Year Retrofits complementary to heat pump installation 7 Multifamily Barriers to Heat Pumps Split Incentive While the initial rebate goes to the property owner, monthly energy savings go to the tenant. Electric Infrastructure Heat pumps may require modified electrical infrastructure. Electric Resistance Electric resistance equipment has lower upfront costs and easy to swap out. Risk Aversion Installation and maintenance of electric resistance can be simpler than HP. On-site maintenance techs often have limited training. 8 Inflationary Effects on AC & HP Programs 1 4 Loss of Tax Credits $2,000 per heat pump unit tax credit no longer available. Section 179D Tax Deduction for MF expired 6/30/26. Gas and Diesel Increases costs for contractor fleets, bulk freight, and plastics. 2 5 SEER2 Modern systems now require larger internal coils, variable- speed compressors, smart control boards. Tariffs Tariffs placed on metals and electronics. Premiums passed on to customers. 3 6 Refrigerant Phase out of R-410A has driven crunch on equipment availability. Commodity Costs Copper, aluminum, steel, and plastic costs have increased 42% since 2020. 9 New Opportunities Increased Rebates & 0% Velocity Loan AC & HP rebates increased in FY26. 0% Velocity Loan will continue through FY27. New Construction Programs Promotes single-family and multifamily properties to go all- electric with heat pumps. Federal Programs Federal Home-Owner Managing Energy Savings (HOMES) and Home Electrification and Appliance Rebates (HEARS) programs could provide funds to overcome split incentive when launched in Texas. 10 Conclusion Austin Energy has a long history of AC and HP rebate programs and building codes that provide significant electricity demand reduction. Despite rising barriers, Austin Energy will continue to leverage all opportunities with AC & HP programs to meet Resource Generation Plan to 2035 Goals. 11 ©Austin Energy. All rights reserved. Austin Energy and the Austin Energy logo and combinations thereof are trademarks of Austin Energy, the electric department of the City of Austin, Texas. Other names are for informational purposes only and may be trademarks of their respective owners.