Article by Jen Loomis and Ellen Steiner
Heat pump technology is not new, and neither are programs incentivizing heat pump units. Heat pump adoption has been slow in the United States despite technological advances that have increased efficiency and enabled heat pump use in cold climates. More than a decade after the first ductless mini-split heat pump programs launched; however, the market is poised for a sharp increase in the adoption of heat pump technologies over the next five years. In areas with existing heat pump programs, such as Maine, the market shift is already underway.
While programs incentivizing heat pump technologies have existed throughout the US for a more than a decade, recent updates to federal, state, and local decarbonization goals and policy are driving many utilities across the country to plan programs for the first time. Given the opportunity to learn from those who have blazed these trails, there is no need for utilities with emerging heat pump markets to move forward without a map.
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At Opinion Dynamics, we recently completed a comprehensive heat pump market characterization study on behalf of the California Public Utilities Commission (CPUC) to inform decision-making and goal-setting for nascent heat pump programs. As part of our California Heat Pump Market Characterization Study, we took a close look at six heat pump programs in six different states: Maine, New York, Oregon, Vermont, Washington, and a southwestern state (staff in this program asked that we not identify the state in which they run programs). Combined, these states include six of the eight IECC climate zones in US, which allowed us to compare programs, their challenges, and successes across climate zones.
Our key findings from these in-depth interviews include insight on program design, essential components critical to success, and effective strategies to build customer awareness of (and demand for) heat pump technologies. Below, we share key findings and foundational lessons learned from the program managers and implementers of mature heat pump programs.
A quick look at the how and why:
Midstream and Upstream Program Design
The majority of mature heat pump programs reviewed employ an upstream or midstream program design (five of six, 83%).
Traditional energy efficiency programs incentivize technology utilizing a downstream program design model. By focusing on customers, these programs aim to increase the demand for efficient technologies and consequently, transform the market. All but one of the six heat pump programs we reviewed; however, implemented midstream or upstream program design models. These models target manufacturers (upstream) and distributors (midstream) to influence heat pump technology adoption earlier in the supply chain.
As the program managers we interviewed highlighted, midstream and upstream programs employ a holistic approach to market transformation. These programs are generally able to reach a larger share of the market because they intervene earlier in the supply chain. By working with manufacturers, upstream programs may design heat pump units that are easier for a contractor to install and then explain proper usage to customers. Whereas midstream programs influence distributor stocking habits and enable access to contractor networks and training resources to promote heat pump technology. Consequently, these models have the potential to achieve greater savings than traditional downstream programs.
Limit Distributor Partnerships
Programs are more effective if they work with a limited number of distributors.
Half of the heat pump programs we reviewed emphasized distributor relationships in their program design. Three of the most mature programs have leveraged distributor relationships in their program implementation and have seen progress in market transformation. In their experience, working with a limited number of distributors has been more effective than casting a wide, but shallow net.
One heat pump water heater program we reviewed specifically targets the largest distributors in the area and uses a tiered bonus structure, based on the number of heat pumps unit sold annually, which pays out at the end of the year. While targeting is limited to the largest distributors in the area, the program manager noted they would do it differently if they could go back in terms of program planning. Specifically, they would have been even more targeted in their approach and identified just a few distributors and manufacturers as champions of the technology, instead of working with as many distributors as possible.
Essential Components to Success
Developing a strong contractor network is critical to success.
While heat pump technologies have been around for a long time, their relatively limited use means contractors may not have much experience with them and are less likely to recommend them. To overcome this barrier, all the programs we reviewed prioritized contractor education and training. After all, sustained market transformation requires that there are enough qualified contractors to install the number of heat pump units incentivized through the program.
Heat pump program managers we interviewed generally found that distributors were already holding trainings for installers or were better suited to hold more technical trainings than program implementers. Rather than spend the time and money creating their own curriculum, they partnered with distributors to offer trainings in their area.
Program managers suggested taking a “deep dive” approach with a limited number of high-volume installation companies. This targeted recruitment of contractors enables programs to focus program efforts and develop quality relationships with contractors who are well-trained to install heat pumps and actively invested in the program as well as promoting heat pump technology to their customers.
One program has developed a contractor network with various trade groups focusing on a specific technology including ductless heat pumps, air to water heat pumps, and centrally ducted heat pumps. Contractor networks of this type can promote the program, train contractors on technical concepts, inform contractors of best practices for energy efficiency, and educate contractors on effective selling strategies for end-use customers.
One Size Does Not Fit All
A multifaceted approach to incentivizing contractors is needed.
Contractor reluctance is one of the main barriers program managers face to heat pump adoption. This hesitancy largely stems from concerns about the risk of callbacks if a unit is incorrectly installed. The availability of training and education previously discussed can alleviate this anxiety, but even when comprehensive trainings are available, contractors may not attend. As a result, program managers offer a range of incentives to contractor who participate in trainings.
Offering continuing education credits to contractors and partnering with distributors to offer more technical trainings have proven to be successful motivators for some of the programs we reviewed. One ductless heat pump program we reviewed employs a highly successful creative solution: offering contracting companies a free unit to install in their own homes to gain first-hand experience with both installation and performance. When considering the cost-effectiveness of this type of incentive, it’s worth noting that this company is discontinuing its heat pump program due to their success. Almost all the distributors in their region are very active in the ductless heat pump market and 96% of contractors who they surveyed reported that they install ductless heat pumps.
Effective Strategies to Build Consumer Awareness and Demand
Customer-Targeted Marketing Campaigns
While customers are not the primary focus of a midstream or upstream program, it is still important to have a customer-facing educational component that raises awareness about heat pump technologies. Through customer awareness campaigns, programs can market the benefits of heat pump technologies to customers, build name recognition of heat pump technology, and drive demand.
The one downstream program in our sample is a ductless heat pump program that was started ten years ago. A central focus of this program is customer education and outreach. They specifically focus their customer outreach efforts on educating customers to maximize the benefits or their heat pump in cold climates, debunking performance myths, and provide user tips with each installation. Additionally, they purchase digital advertising and attend in-person community events and home energy fairs.
One of the midstream programs we studied has started doing direct outreach to customers as the market shifts. Since incorporating customer outreach, they have started to see heat pumps replace greenhouse gas emitting appliances as the standard, or “go-to unit” in their region.
Goals and Metrics for Measuring Success
While the specific goals and definition of success varied, all of the heat pump programs we studied tracked two metrics: MWh savings and the total number of incented units. Beyond these metrics, we found five additional commonly tracked key performance indicators: contractor participation, distributor participation, customer awareness, contractor training and certification, and greenhouse gas and carbon emissions reduction. The important thing to know is that “what gets measured gets done.” When program administrators create performance indicators they want to measure, then attention gets paid to those items, and the goals related to them are more likely to be fulfilled. Program administrators should ask themselves what they want to achieve and create metrics around those goals. For instance, there may be other measures of program success important to the utility, such as non-energy impacts, workforce development targets, strategic partnerships formed, or equity-related outcomes. Without measuring something, a program administrator won’t know what they’ve accomplished. We recommend thinking broadly and holistically about a heat pump program’s goals and developing metrics for each of them.
Emerging heat pump programs would do well to follow in the path blazed by those with mature programs. Based on the findings from our research on mature heat pump programs, a midstream program, focused on incentivizing a limited number of distributors and a tiered incentive structure will build a network to champion the technology. In addition to motivating distributors, an effective heat pump program needs a network of contractors who install the equipment and are comfortable and confident recommending the technology. If contractor reluctance is a significant barrier in a given area, offering a free heat pump for contractors to install in their home is a novel approach to improving their familiarity with the heat pumps without the need for them to travel or take time away from work for a training.
The final piece of an effective heat pump program is customer education. Just as contractors who have familiarity with heat pumps are more likely to recommend them, customers who are aware of heat pump technologies are more likely to inquire about and consider purchasing them.
The lessons learned provide insight into not just whether heat pump programs are successful, but also how and why. At the same time, no two services areas are identical and the programs that serve them shouldn’t be either. All heat pump programs, but especially burgeoning programs, will want to track key metrics to understand the impacts their intervention strategies are making and advise on necessary program adjustments specific to their area and customer needs. As more jurisdictions begin incorporating heat pump programs into their portfolios, the lessons learned from existing programs, can help ensure these new programs are designed with tried and true methods. These learnings, along with the comprehensive state of the heat pump market in California and other findings, are available in the full California Heat Pump Market Study Report.
Dive Deeper into the data
Our clients face unique challenges, and our staff at Opinion Dynamics are always looking for unique ways to tackle these challenges and be at the forefront of problem-solving solutions. Our resident experts provide insights into their finding in a variety of mutlimedia featured below. The full report is also available via PDF download.
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