Electrification: Changes, Challenges, and Opportunities

Posted on:

September 8, 2023

On August 16, 2022, the Inflation Reduction Act (IRA) became law, which includes tax credits and rebates for electric HVAC equipment in homes. This federal legislation reflects changes happening at the state level. According to Inside Climate News, in 2021, “…five states (Illinois, Massachusetts, Oregon, North Carolina, and Rhode Island) passed laws requiring a shift to 100 percent carbon-free electricity or net-zero emissions,” joining six other states (California, Hawaii, New Mexico, New York, Virginia, and Washington) as well as Puerto Rico and Washington, DC, that had previously passed similar laws. In addition, cities and counties in nine states have passed or proposed natural gas bans in an effort to lower carbon emissions, according to the August 2021 An Overview of Natural Gas Bans in the U.S. report from the Institute for Energy Research. Other states, like Michigan, aren’t outright banning natural gas, but are introducing incentives to encourage customers to electrify.

Conversely, some state legislatures are passing legislation that prevents municipalities in the state from enacting local energy limitations, like natural gas bans, often arguing in favor of consumer choice. ACCA’s official stance is that contractors should have access to whatever fuel source makes the most sense to them from a business perspective and has supported such fuel-choice bills.

Many of these electric regulations affect new construction or extensive renovations, but on the commercial side, “What could be much more transformative are these building performance standards that we’re seeing,” says Mark Lessans, senior director for sustainability and regulatory affairs at Johnson Controls (headquartered in Cork, Ireland. Lessans is based in Washington, DC). These regulations generally limit a building’s carbon emissions per square foot with potentially hefty fines for noncompliance. He predicts more retrofits happening in the commercial space, naming Washington, DC, and New York City as two forerunners in these regulations.

“Electrification doesn’t show any signs of slowing down,” says Lessans, and two things are happening in tandem: “One is that heat pump technology, especially in colder climates and in various applications, has been getting better. And two, the accelerated response to climate change, coupled with the decarbonization of the electric grid, is now driving us to heat pumps because they’re so efficient and they run on electricity, which is a critical solution that we’re going to rely on to decarbonize the built environment.”

What does all this mean for an HVAC contractor?

What Contractors Need to Know

For one, “Customers are paying much more attention to the mechanical systems in their home and are asking about electrification,” says Allison Hale, operations manager at SOS Mechanical in Round Rock, Texas. “Customers don’t always have a full-fledged idea of what they want or need,” she says, so HVAC contractors need to be prepared to have a conversation with “an educated approach to home comfort.” A customer may be interested in switching over to electric for their heating and cooling but haven’t thought through what that means for gas-powered water heaters, stoves, etc., or even understand how such a switch will affect their utility bills and home comfort level.

Contractors need to be familiar with heat pumps, especially if they haven’t worked with them much in the past. Heat pumps used to require some type of auxiliary heat and the heating capacity of the heat pump decreased as it was colder outside, explains Ed Lehr, president of Jack Lehr Heating, Cooling & Electric in Allentown, Pennsylvania, and vice chair of the ACCA codes subcommittee. More recently, he says that heat pumps can “provide a relatively constant heat capacity down to low outdoor temperatures.”

According to Canary Media, the states with the most heat pumps per household are largely in the South (and Arizona), with the Carolinas leading — 46% of housing units in South Carolina and 42% in North Carolina used heat pumps in 2022. This means that HVAC contractors and businesses should expect a lot more interdisciplinary work, says Hale — after all, gas is plumbing, and heat pumps are electric. “We’ve been looking at our staff and saying, who could get an electrical license? Who could do an apprenticeship?” she says.

HVAC contractors and businesses also need to be clear on which local, state, and federal regulations affect their area. “Know what your inspector is going to look for versus what the state says you need,” says Hale, and to become familiar with the incentives available to customers. The IRA includes “a large amount of money directed to the states to each formulate their own plan for distributing rebates to homeowners at certain income thresholds,” says Lehr, although those details are still being worked out and it’s unknown how long the money will last. Hale has also noticed that the propane and gas industries have started offering or reintroducing their own rebates as part of their pushback against electric.

Challenges to Electrification

One major challenge with using heat pumps is that they’re still not always the best choice for every case. Across the U.S., but even within states, the climate varies considerably. Additionally, different houses and buildings have different heating and cooling needs, the electric grid has different capabilities in different neighborhoods, and different customers have different personal preferences. Customers in more rural areas, says Hale, may be uncomfortable with switching to electric and prefer the self-reliance of propane or natural gas. And in considering all these factors, contractors should provide customers with a realistic estimate of expectations for upfront vs. operating costs, comfort, etc., as well as whether the existing electrical system is even compatible with a heat pump — such a switch could require upgrades within the house or to the utility, says Lehr.

Finding good information is also a challenge. “Right now, manufacturers are providing most of that information, but it is still coming off as very self-serving,” says Hale, since manufacturers are primarily interested in selling their own equipment. “We need to make sure that we have a source of information that is available so that we can help our customers make the best decisions and we can make the best decisions for our businesses.” She also notes that customers often view HVAC companies as their sources of information. When the Electric Reliability Council of Texas sends out a warning asking everyone to set their A/C unit at 78°, we get calls from customers asking why or if they must follow the warning, she says. “They’re looking to us for advice in how to manage their personal electric usage through their HVAC system.”

Hale is also concerned about how manufacturing and the supply chain will keep up with demand, especially as regulations change. Although, “ironically the hardest thing to get right now is a gas furnace,” she adds with a laugh.

Alternative Methods to Heat Pumps

Reducing the U.S.’s carbon footprint is the main proponent for pushing electrification, but other methods also work toward this goal. Hale says that by using dual fuel (or hybrid heat), combining a heat pump with an alternative method of heating and cooling, “We can cut gas usage in homes by anywhere from a half to a third.” Shifting some of the HVAC load to a heat pump can also help stabilize operating costs. “In Texas, propane has always been very price volatile, so reducing a home’s reliance on propane for heating can have real impacts on the operating cost of a system,” says Hale.

Looking at the home’s insulation can have a big effect too, says Hale, asking, “How are we keeping the heat out of the house, instead of just focusing on removing it?” A more creative solution can reduce overall energy use, such as pairing a dehumidifier with a smaller A/C unit for a home in a humid climate. “Energy efficiency, in all forms, is still the most effective way to reduce your energy use and carbon footprint,” says Lessans.

Commercial Considerations

On the commercial side, buildings aren’t just going electric — but also getting smarter. “We’re not that far from Johnson Controls managing a commercial building that happens to have a heat pump with thermal storage, a solar array, a battery system, and a bunch of electric vehicles hooked up to chargers,” says Lessans. In Austin, the RiverSouth building is already being touted as “the smartest building in Texas” and is the first in the state to earn a SmartScore Platinum certification for, among other things, “the ability to monitor, report, and optimize energy usage for sustainability purposes,” according to a July 20, 2022, blog post by Stream Realty Partners, the building owners. Interdisciplinary work and partnering with professionals in other industries will become especially important for HVAC businesses working with commercial clients. These contractors will need to understand how that piece of equipment might then integrate with a larger building management system and they will need to become familiar with building automation, control systems, and even additional digital interfaces that might work with those systems, says Lessans.

Lessans notes that while a national goal of net-zero carbon emissions by 2050 is admirable, we’ll only achieve that if we think through the individual steps, follow science, and determine what makes sense in each scenario. Regardless of what the future holds, the national conversation about electrification does pose a one value-proposition opportunity for the HVAC industry. “The more we can do to familiarize ourselves with the broader array of technologies that are out there and how to respond to various customer requests or various opportunities that arise, the better that will be for all of the players in this industry,” he says.