Overcoming the Three Barriers Pouring Cold Water on Heat Pump Water Heaters

Tucked away unceremoniously in the mechanical rooms of our commercial buildings and the basements of our residences lays a powerful tool for combating the climate crisis. This lowly tool’s ubiquitousness is key for helping utilities meet emissions targets, reduce energy waste, and increase demand flexibility in a time of load growth — meet the water heater. Once a boring home appliance, today’s electrified water heaters are internet-enabled thermal batteries that are three times more efficient than their predecessors. Moreover, through grid integration, they can optimize their charging cycle to sponge excess solar capacity at midday while still meeting the comfort needs of their occupants. This is especially prescient as scientist from the University of Cork in Ireland have recently determined that US rooftops could host enough capacity to slightly outpaces the country’s current total energy demand1. However, we need to overcome three principal barriers before unlocking the enormous potential energy stored in hot water. 

Efficiently electrifying our Domestic Hot Water supply 

The barriers to efficiently electrifying our hot water supply coincide nicely with Nick Brod’s Three clean energy challenges we must solve. Currently, about 55 million homes nationally use electricity to heat hot water. These households’ opportunities are moving them from inefficient electric resistance units to highly efficient hybrid heat pump water heaters (HPWH). According to AO Smith, the average electric resistance water heater demand when running is 4.45kW—for a heat pump, it’s 0.97kW, making it four and a half times more efficient. Additionally, ancillary make-ready costs, such as panel upgrades, can largely be avoided since the customer has the necessary circuiting in place. Furthermore, a study by the Brattle Group found that a typical 50-gallon HPWH can reduce CO2 emissions by 52% from an electric resistance baseline when the utility uses a fuel mix of coal and gas. 

Over 60 million homes currently use natural gas or propane for hot water heating. The opportunity for these customers is to fuel switch the load to electric, creating more capacity for the grid’s distributed thermal battery and further lowering emissions. These customers overwhelmingly live in cold or mixed humid climates typical of the Northeast and Midwest. Though data may make spotting the opportunity easy, the economics of decarbonization still need to work for these customers. In addition to material and labor, the electrification of hot water typically includes other customer make-ready costs associated with plumbing or electrical upgrades.

Today’s environmental electrification programs are mainly aspirational and have had a narrow customer impact. While many variables may be impacting market transformation, the total cost of efficient electrification is typically much higher for the end-user than installing baseline gas technology. Therefore, policymakers and regulators should consider an incentive layering strategy to buy down more of the customer share to accelerate energy waste reduction and decarbonization efforts.

Upskilling the Trade Alley Base 

For customers with existing infrastructure, the economics of HPWH work out nicely. Energy Star estimates that installing a HPWH would save a typical home $330/year. The economics can even work for fuel switching customers who may invest in electrical upgrades to install EV or PV infrastructure. However, the uptick of the technology has been stubbornly slow, despite generous utility incentives designed to achieve market transformation. While many issues are at play, one perennial barrier is a trade ally base that is reluctant to advocate for new technology. Plumbers and HVAC Techs are risk-averse. Recommending a newer version of the existing equipment is a common tactic to limit callbacks and complaints. Customers are particularly reliant on their trade ally to aid their decision-making process as people do not think about their water heaters until they take a cold shower. Utilities should strongly consider directly educating their customer base on the advantages of HPWHs. Educated customers are more likely to nudge the reluctant Trade Ally to offer a more efficient solution. Increasing customer demand will create a snowball effect that sees distributors and wholesalers change their stocking practices, allowing utilities to implement cost-effective midstream programs at scale.

Unlocking the Idle Energy in Hot Water Through Controls

Moving the nation’s hot water supply to electricity is critical to meeting our climate commitments because 18% of the energy consumed by a typical household comes from heating water. However, efficient electrification alone will not significantly move the decarbonization needle. Instead, electrification needs to occur alongside the build-out of a controls network that shifts load away from high-priced periods of thermal generation and into periods of renewable abundance.

The first opportunity is with the currently installed 55 million units primarily clustered in the South and Southwest. Another way of stating this is to say that we have 55 million batteries sitting idle during a climate crisis. These are typically medium-sized electric resistance units, around 50 gallons. These units need retrofitting with an internet-enabled water heater controller that automates the load shift functions by reacting to a grid-triggered signal, such as an emissions alert or pre-loading TOU rates into the device’s firmware to optimize charging to times of abundance. Furthermore, individual units can be grouped in the Cloud to provide grid operators a flexible resource for balancing intermittency in renewables. Trever Swanson, a Program Manager at APS, has been working with DNV’s Technology Team to develop customer solutions that protect occupant comfort, lower costs, and helps APS better manage peak. According to Trevor:

“I see controlling water heaters to shift load to off-peak times can be a great benefit to a customer on a time-of-use plan…Additionally, when grouped, as in an apartment complex, it can also benefit the utility. A true win-win measure.” – Trevor Swanson, Program Manager, APS

One non-energy advantage of these controllers is that they collect voltage data, which helps predict when heating elements will fail. As a result, units with failing heating elements should be prime targets for early replacement with a more efficient HPWH.

 While on the topic, HPWHs now come equipped with a CTA-2045 port. This standard enables plug-n-play grid functionality through a USB-style interface, eliminating the need to install a retrofit controller and hiring a qualified electric professional. Here, the homeowner only needs to connect the device to a local network, and the grid can manage the complexity in the background without disrupting comfort. This is possible through advancements in machine learning and the predictable schedule of most households. 

The Takeaway

Water heaters are invisible, ubiquitous batteries that can make a meaningful dent in building decarbonization efforts. Thermal batteries can be optimized to charge during periods of renewable abundance and then hold that charge through periods of high prices. This strategy helps lower customer’s energy cost and provides grid operators with a flexible resource that can produce MWs of capacity when aggregated. States with high levels of existing electric water heaters should immediately begin scaling programs that install internet-enabled controllers that are grid and price responsive. Longer-term, they should pursue customer education and workforce development to facilitate HPWH market transformation efforts. States with low levels of existing electric water heaters should immediately adopt fuel switching policies that provide stackable incentives to help reduce the economic burden on customers. To obtain the maximum benefit, they should mandate that subsidized units be grid-responsive to maximize the potential of this distributed energy resource.