Demand for heat pumps in Bay Area rises amid bans on gas appliances

The temperature of public interest in heat pumps is rising, fueled by increased government action against natural-gas appliances and more incentives to help homeowners, builders and businesses with the cost of the transition.

At Bay Area Regional Energy Network, or BayREN, the adviser phone line to help residents, contractors and business managers navigate the myriad federal, state, regional and local incentive programs has been more active than a year ago. And a key topic on the calls is the heat pump.

“We’re seeing more interest than ever,” said Jeffrey Liang, program manager for single-family homes. The 10-year-old organization, run by the Association of Bay Area Governments, is tasked by the California Public Utilities Commission with administering energy-efficiency programs in the nine-county region.

“For first time we’re more concerned about bringing more contractors in to meet demand than about generating demand,” Liang said. “Typically, we’ve done homeowner workshops to let people know, ‘Hey, here’s what you can do. Here’s the rebates that you can get. Now people are inundating our adviser line. And so now our goal is to bring in as many contractors so that we can have a smoother market transformation.”

In the first three months of last year, the adviser line fielded under 400 calls, but the volume has more than doubled in the first quarter of 2023, to 850.

Liang said key drivers of the increased interest are last year’s passage of enhanced federal tax credits, and recent decisions by state and Bay Area agencies to restrict natural gas appliances.

The Inflation Reduction Act of 2022 included a $3,200 tax credit for energy efficiency measures. The Biden administration in particular called out heat pumps as a key efficiency tech.

Then last year the California Air Resources Board banned new sales and installations of natural gas furnaces, stoves and water heaters starting in 2030.

And that was followed by the ruling from the Bay Area Air Quality Management District last month to require only zero-emission water heaters be sold or installed in the region starting in 2027. That would be followed by a ban on gas furnaces in 2029 and gas commercial water heaters in 2031.

Heat-pump technology is how refrigerators chill what’s inside. The process involves moving heat from inside to the outside, leaving the inside cooler. And newer tech uses that principle to move what heat is outside — even on cold days — to the inside to warm a home or business, or raise the temperature of water in a tank.

While electric furnaces and water heaters have been around for decades, they have employed a resistance heating, similar to how incandescent light bulbs illuminate via electricity running through a filament. Heat-pump water heaters and furnaces can be roughly three times as efficient as the resistance-type systems.

High cost of systems

But the latest heat-pump systems aren’t cheap, and that’s what’s behind the layers of incentive programs.

For example, a one-head ductless system mounted high on an outside wall, meant to heat and cool a bedroom or an accessory dwelling unit, can cost around $8,000, and system that reuses a gas furnace’s ducts in a two-bedroom, two-bath home can run $11,000, according to John Sutter, whose Santa Rosa-based Applied Building Systems specializes in residential energy-efficiency retrofits.

John Roncone, residential sales estimator with Simpson Sheet Metal & HVAC, said the call volume has picked up but most all the inquiries in the past six months have been about installing heat-pump systems and capping natural gas service.

Already, major makers of gas furnaces such as Carrier and Lennox have told the Santa Rosa-based contractor to prepare for less availability in the California market when the bans on such appliances kick in six years from now.

“From a sales point, it’s like, ‘Hey, we got something for you: It’s going to cost twice as much, and you have to run it all day long,” Roncone said. “If you don’t have solar, your electricity bill is gonna be through the roof, and it’s not going to keep you as warm.”

He’s told customers to think of the heat pump heating and cooling systems like baseboard heating that warm rooms gradually, rather than forced-air furnaces that push hot air into a space and can raise the temperature quickly.

And there are other conversion costs to consider, Roncone said. He had to break the news to a potential customer on a fixed income that her home’s electrical panel didn’t have capacity to add a heat pump unit without an upgrade. Systems with a compressor unit outside and with electric resistance heating elements to warm air that gets too cold can call for 220-volt, 50-amp electrical connections. Wall-mounted mini-split heat pumps have smaller

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