What Does The Emergency DPA Funding Mean For Heat Pump Sales?

The U.S. federal government’s unprecedented financial initiatives make it possible to upscale heat pump manufacturing, in a huge step toward building decarbonization and full electrification by 2050.

With its record-breaking temperatures, July’s heatwaves are a stark reminder of the urgent need to address the climate crisis. Meanwhile, the war on Ukraine and increased energy costs remind us of how vulnerable we are when energy relationships become volatile. The world continues to lurch from one crisis to another. 

Yet we are facing a unique window of opportunity to make real progress toward decarbonization goals and social equity. 

In a display of determination, the Biden Administration has authorized the use of the Defense Production Act (DPA) to accelerate the availability of greener energy technologies. This will encourage manufacturers to produce more two-way energy-efficient heat pumps over the traditional one-way air conditioning units. The move promises to:

• Reduce energy costs for the average homeowner
• Advance on decarbonization goals
• Promote energy independence and American manufacturing
• Create new jobs

Reducing America’s dependence on gas and oil is critical to U.S. national security

Dr. Kathleen Hicks – Deputy Secretary of Defense

Decarbonization is critical in addressing the climate crisis

The Biden administration aims to cut the U.S.A’s greenhouse gas emissions by at least half by 2030 to mitigate the worst effects of the climate crisis. Building decarbonization plays a major role in meeting these goals, as residential and commercial energy use contributes nearly 40 percent of the U.S.A.’s CO2 emissions. 

To provide an idea of the scale of intervention needed, New York will need to decarbonize 400 buildings per day for thirty years to meet 2050 climate goals.

Related Reading: What is net zero?

On average, more than 50% of a household’s energy use comes from the heating and cooling of spaces. Poorly weatherized homes and dependence on outdated technologies, such as air conditioners can exacerbate this. In fact, The US Energy Information Administration claims that air conditioning accounts for 18% of U.S. residential electricity use annually, more than in any other nation on the planet.

The new funding incentivizes heat pump manufacturing and availability

Heat pumps are not new, but are gaining in popularity thanks to technological advances, which now make them more efficient than gas furnaces and air conditioning units. 

The name ‘heat pump’ can be misleading. It suggests the device simply pumps heat, which may have deterred homeowners from adopting the technology. Actually, with its reversible switch, a heat pump can combine heating and cooling technologies into one system, making it a much more competitive option than having two separate systems.

Related reading: Heat pumps in Europe: How the U.S can catch up

As part of the green energy transition, demand for green technologies is expected to skyrocket by 400-600% over the next several decades. In the U.S.A. 40% of new single-family homes now use heat pumps for primary heating and cooling, or in addition to an existing fossil fuel system.

But until now, this has only made up 7% of residential thermal control demand, with the remainder of homes running on existing fossil fuel systems. The bigger challenge is replacing existing systems in older homes.

With operational lifespans of 15-20 years, opportunities to replace fossil fuel systems do not come around often. The heatwave provides this necessary window of opportunity, as most furnaces and air conditioning units are replaced in an emergency. Incentivizing manufacturers now means that more heat pumps will be on the shelves in response to the emergency demand for cooling.

This is not only about installing efficient new stuff but also uninstalling inefficient old stuff. It’s not just in with the good, it’s also out with the bad.

Amory Lovins – Writer, Scientist, and Co-founder of the Rocky Mountain Institute

Heat pumps can replace or supplement fossil fuel systems, and lower energy bills

Heat pumps are easy to install, requiring almost the same installation process as an air conditioning unit. What’s more, a heat pump does not have to replace an existing thermal regulation system but can complement it. This means that there is a backup system if it is needed. 

It also means that the consumer has a choice in fuel consumption, a lack of which can be a concerning issue for some homeowners. Such a hybrid system would allow homeowners to develop trust in the technology, making the transition to complete electrification possible by 2050. 

Although electricity prices are high, heat pumps are so efficient that they make electrification competitive against fossil fuels. A study by CLASP found that a supplementary heat pump system could cut fossil fuel use by 39% and save homeowners $154 per year in energy costs. 

Increasing sales will eventually drive down the cost of a heat pump. This will benefit lower-income households, which are often denied access to efficient cooling and heating due to socio-economic injustices. Meanwhile, as electricity grids switch to sustainable energy sources, energy will again become both cheaper and greener. 

With increased manufacturing and installation needs, the incentive will also provide much-needed job opportunities.

Education and financial support are critical factors in successfully switching to heat pumps

Educating contractors and homeowners on modern heat pump efficiency will be key in driving take-up. Previous negative experiences with the technology, coupled with suspicion towards climate crisis incentives have historically hindered enthusiasm towards heat pumps. 

Additionally, weatherization is crucial to ensure maximum energy efficiency and reduced bills. A weatherized home could even mean that the homeowner needs a smaller and less costly heat pump. 

However, heat pumps and weatherization solutions may be out of reach for low-income households. These are the most vulnerable households, typically living in older, inefficient building stock where the effects of urban heat islands pose a serious threat to health.

Related reading: Energy efficiency funding is critical to combat energy poverty. Is Biden’s Justice40 $3.1B enough?

We need heat pumps to make sure that individual families get the full benefits of the clean energy transition.

Alexander Gard-Murray – Political Economist and Climate Change Analyst

There are many individuals and organizations taking the lead in overcoming these barriers. 

Programs such as HVAC 2.0 educate and empower contractors in encouraging homeowners to make the switch. Platforms such as MyHEAT reveal wasted energy in homes and educate residents on energy efficiency improvements. Meanwhile, climate justice organizations such as BlocPower provide electrification services and financial support to the communities that need it most. 

The allocation of DPA funds sends a clear message. Building decarbonization is a key priority for the country towards reducing the worst impacts of the climate crisis and providing a cleaner, healthier future for its citizens.

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Sources and additional reading

• Matt Malinowski, Max Dupuy, David Farnsworth, Dara Torre, Combating High Fuel Prices with Hybrid Heating: The Case for Swapping Air Conditioners for Heat Pumps
• CLASP, 2022, https://www.clasp.ngo/research/all/ac-to-heat-pumps/
• IEA.org, Heat Pumps, https://www.iea.org/reports/heat-pumps