Finding Customers Who Will Save With a Heat Pump

October 11, 2022

According to a recent study, almost three out of four potential electrification customers in Northern California won't save much on their bills. They might even pay more under current rate structures. 

The key to making electrification policy work right now is identifying and targeting the other 25 percent. 

California is aggressively pushing to electrify its building stock. Unless carefully targeted, however, these initiatives will likely not save most customers money under current rate structures, according to recent research presented at the 2022 ACEEE Summer Study. In fact, electrification could increase energy bills for tens of thousands of households if poorly suited customers are recruited to participate.

Learn more: Watch the webinar on using advanced targeting to ensure that electrification is equitable.

In their paper,  “Meter-Based Targeting for Beneficial Electrification at Scale,” researchers from Recurve, Ardenna Energy, Energy Solutions, and East Bay Community Energy analyzed the energy consumption of almost 350,000 customers in Northern California. The research was conducted as part of the TECH Clean California electrification program.  

The analysis found that even though electric heat pump HVAC systems are much more efficient than natural gas furnaces, because of higher electricity rates, 30 percent of customers would see their bills go up after switching. 

Another 46 percent would save only an average of $40 per year — a margin too small to be worth the upfront investment. 

That left 24 percent of customers who would be prime candidates for saving money with a switch. These are customers who would save on average $200 per year. Finding and targeting those customers is key to making sure electrification policy is effective and avoids bad outcomes that could harm it in the long term.

Equity Implications

Eliminating gas furnaces and other fossil fuel appliances is critical for stopping the worst effects of climate change. Electrifying homes offers many other benefits as well, including reduced pollution and improved indoor air quality. However, rapid electrification also poses short- and long-term financial risks for historically marginalized communities. 

In the long term, low- and middle-income customers who can’t afford or don’t have access to electric appliance upgrades early on may, over time, find themselves paying more and more for gas as a result of a shrinking gas user base

Providing financial support for lower-income communities to electrify could help more people switch. However, this could subject many families to increased energy bills in the short term if poorly suited customers are actively recruited to participate.

Currently, in many places the cost of electricity per unit of energy is substantially higher than that of natural gas. This means that even though electric heat pumps are much more energy-efficient than gas furnaces, some customers who switch could still see significantly higher costs for heating — a potentially devastating impact for the one-third of low-income households who struggle with energy bills often or constantly.

The Answer: Meter-Based Targeting

While the electrification study did show that most of the studied customers were not likely to see bill savings from electrification, 24 percent were projected to save more than $200 a year on their bills.

What was the difference between these customers?

It turns out that customers who use a lot of air conditioning are more likely to save from upgrading to an efficient heat pump because heat pumps also double as efficient air conditioners. 

Customers who use a lot of air conditioning are more likely to save from upgrading to an efficient heat pump because heat pumps also double as efficient air conditioners. 

In other words, targeting customers with high air conditioning costs greatly increases the chances both of saving energy overall and ensuring that the electrification reaches those customers who would see real bill savings. Non-targeted outreach, by contrast, has “a high chance of picking mediocre to poor participants.”

TECH Clean California Data Analysis                            

As part of the TECH Clean California initiative, Recurve will analyze and evaluate a representative sample of all California residential customer energy meters using the open-source CalTRACK methods. This represents the largest meter data analysis in history. The results will be published and publicly available.

Outputs of this analysis will include metered heating and cooling distributions, which will be valuable to future program and rate designers. Recurve will also measure the metered impacts of electrification for all participants in TECH Clean California, revealing the real-world impacts of electrification results at a scale previously unavailable in the industry. 

Insights from these results will allow the program to maximize the individual, grid, and societal benefits of program funding while minimizing harm to vulnerable populations. Delivering more positive outcomes for early adopters also increases the chances of a successful long-term market transformation. 

Read the full study here.  

Have questions about electrification and equity? Reach out to us on LinkedIn or Twitter.

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