Mainstreaming Electric Homes — Episode 178 of Local Energy Rules

Steve Pantano:

There’s billions of dollars today being reaped in profits by oil and gas companies. There’s billions of dollars being invested in gas infrastructure. There is money in the world going in the opposite direction, right? So I think IRA is a great first step, but we need some of that tide to shift more broadly in the economy, more people to pay attention to this issue, states and utilities to step up and put more money on the table to help people make this electrification transition.

John Farrell:

Stop setting up inflated expectations. You’re ducking those of us in the field. There’s no way to recover from this. Consumers think we are scamming them. So started a Nate Adams Twitter thread about heat pump cost estimates that set up this conversation with Steve Pantano, head of research at Rewiring America. To be honest, Nate, also known as the CEO of HVAC 2.0, used a different word than ducking. Now while emotions had cooled  by the time Steve, Nate, and I spoke, the passion for switching out fossil fuel home heating equipment hadn’t cooled one bit. When we spoke in February, 2023, we talked about the Church of the Kitchen table as the decision making place for new furnaces or heat pumps and the many challenges that must be overcome to give Americans more comfortable homes with electric technology. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance and this is Local Energy Rules, a podcast sharing powerful stories of communities taking on concentrated power to transform the energy system. Steve and Nate, welcome to Local Energy Rules.

Steve Pantano:

Thanks John.

Nate Adams:

Thanks for having us.

John Farrell:

Nate, as I referenced in the intro, you had some issues with some of the numbers that you saw that Rewiring America was putting out about the cost of heat pumps and other HVAC equipment in this process of electrification or providing low carbon heating and cooling. I know you had something you wanna say first and then we’ll kind of dive into this conversation about those cost estimates and about this broader challenge of trying to get folks to use electric appliances to do their heating and cooling.

Nate Adams:

So I actually wanted to start by apologizing to Steve. It was actually for last year when I totally took your head off <laugh> over the Heat Pumps for Peace program. So what, what I did incorrectly there is I came at you publicly before coming to you privately, so that was breaking my code and I apologize for that.

Steve Pantano:

Well, thank you Nate.

John Farrell:

Thanks Nate. So Nate, do you wanna just maybe just give a brief overview of like what your critique was in that Twitter thread, sort of, you know, what you were taking issue with and then I’d love to toss it over to Steve to talk a little bit about how does Rewiring America develop its cost estimates for HVAC equipment. It’s a complicated business of course, cuz there’s a lot of new stuff moving from federal legislation. But why don’t we dive in there? So Nate, why don’t you just give us an overview. What was some of the concerns that you had when you saw the numbers that were being circulated over social media?

Nate Adams:

So we refer to the buying transaction of HVAC as the church of the kitchen table. We, we think that all of us should basically worship at that church when it comes to electrification. Like, I’m not gonna say otherwise, you know, whatever, but this one thing, it’s so important that the transaction be positive between the two parties and there needs to be trust, but this is not a high trust transaction ever. Like, it’s just really complicated. Contractors are generally viewed as crooks.

And so when you get a third party arbiter like Rewiring America, and it definitely could have been delineated better, but there was a cost estimate for Cleveland, Ohio with 1300 square foot house for a heat pump at $7,500 installed. Now I have a heat pump sitting in the shed at our house in Ohio where the equipment alone was $7,000. And it’s not a top of the line piece of equipment, it’s pushing it, top of the line’s closter to 10 grand now wholesale cost for the equipment. But it’s also funny that it was set as a 1300 square foot house in Cleveland because I did an electrification on a 1300 square foot house <laugh> in Cleveland. And back in 2015 when we did that, it was $15,000 installed then. And that included a duct system, which probably would be more like 25, 28 thousand today, something like that. So when you get these really low cost estimates from a third party, you come in and you destroy any trust that might have been there to begin with. And then you’re also focusing the conversation on price and product selection before you get around to figuring out what do they wanna fix and building value.

So the curse is like everybody’s trying to figure out how do we reduce the costs of installed heat pumps? And the answer is basically we don’t. Like we can remove the fear factor from it. If installers are afraid of heat pumps, they’re just gonna pump the price up some we can, we can remove that. And with HVAC 2.0 that’s a lot of what we do is if you understand what the house really needs, you can remove the fear of sizing aggressively and make it easier. But the rest of it, the equipment’s more expensive, it’s far more finicky on install. Particularly when you get to the cold climate stuff.

Like I’m sitting in the game house here, which is an Airbnb that we electrified, I proposed an electrification standard for Airbnb and I did this house to that standard, but I screwed up the commissioning on this so I didn’t set it up right. And at Christmas Eve we’re up in Ohio and I noticed that this thing’s hammering resistance. The heat pump it shut off cuz I hadn’t found the setting that made it so when it went below 15 degrees, it didn’t shut the heat pump off. So now I’ve learned and figured out it’s the first time I’ve used the equipment. So first time you use something, there’s always a learning curve and that’s what it was. But you can really screw up a furnace install, put it in badly, not commission it right, you know, really botch it and it’ll still heat the house where heat pumps are super finicky.

So if you’re talking a full electrification scenario, hybrids aren’t that finicky, but full electrification is. So it’s really challenging. Like there’s no good way to get the cost out. It takes longer to install, which costs money. The equipment’s more expensive, which costs money. It’s riskier, which makes it more expensive. There’s all of these things. So fundamentally we have a value building problem to solve. If price is a problem, you can either reduce price, which puts you outta business in this case, or you can increase value. And so when we get third party arbiter putting out numbers that are too low, but not like a small margin, I mean half on the low end and a quarter on the high end of what reality is, it makes our lives in the field extremely difficult, frankly impossible. Like you can’t recover that relationship is the problem. So yeah, it’s a, to call me frustrated would be, uh, a British understatement <laugh>.

But here we are having a conversation, and just as a quick way of introduction, Steve and I have worked together. So the hybrid heat homes policy proposal and then the HEATR act through Senator Klobuchar. So Steve project managed hybrid heat homes did a fantastic job. So we’re friends and that’s part of why I’m apologizing because I don’t like that I dinged that relationship, but that was a policy idea that can actually be helpful here. So I’m glad to at least know some people – and then I’ve also talked to Sage at Rewiring as well, who’s the new federal policy manager if I’m saying her title right. So, we’re turning the ship. So if it required me totally losing my temper in the middle of the night to turn the ship, that’s good <laugh>

John Farrell:

Well thanks Nate for the introduction and kind of the context around this. Steve, I’d love you to just take a moment and talk about kind of like where did these cost estimates come from. One of the things that I really admire about Rewiring America, as someone who works in this policy field, is that it’s hard for a lot of the rest of us who work just sort of generally on, or in my case, you know, I focus on things like distributed solar, rooftop solar, that kind of installation is a little more standardized. The panels are commodities. The installation, you know, there are some complications, but it’s largely the same from house to house. You don’t have duct work to deal with, for example. How are you trying to help people understand the costs? Like what are the things that go into the cost estimates that you do? And you also have the complication obviously of recently passed federal policy to try to incorporate as well.

Steve Pantano:

Nate raised a bunch of good points in his comments, which we’ll come back to I’m sure through the conversation in general. I mean we’re always open to constructive criticism about our data and our messaging and it’s, we’re also taking steps to improve these things. This isn’t the first time someone’s disagreed with us. We’ve made changes before and we’ll continue to make changes. The fact is, I mean there’s a lot of dynamic stuff happening in the market right now. There’s a lot of new interest in electrification, there’s a lot of people talking about it who’ve not talked about it before. So I completely agree that it’s important to set realistic expectations. But to some degree we’re all learning and refining as we go, right? So our goal as an organization among other things is to build demand and educate consumers to set realistic expectations and also to sort of maximize the amount of attention and resource that’s going to address this opportunity around the country.

Going back to that particular data point, I mean the fact is that up until recently and even now data on actual equipment and install costs is pretty hard to come by. There’s a lot of disparity around the country in terms of both equipment and installation costs and how those are quoted through to consumers by contractors who may or may not be familiar with different ways of optimizing installations and the like. It has a lot to do with the specifics of somebody’s home, whether there’s duct work that needs to be changed, et cetera. Whether or not someone’s choosing topical line equipment or looking for a more cost effective path, the capability of the installer overall and where they live labor costs also change around the country. So, you know, at the time that low end estimate was produced — it was in the context of a guidebook that had low, medium and high end estimates — Just happened to be that we pulled data the best that we had at the time from consumer websites and our, you know, we thought our low end estimate was representative. Nate pointed out that it’s probably too low for that particular circumstance in Cleveland and we’re taking steps to change that.

So one thing I’ll say is, fortunately we have in the time since that document was published, the tech program in California has published much more comprehensive data set of actual equipment and installation costs. There’s more than 9,000 data points in there about HVAC installs in the state of California. And we’re in the middle of a pretty comprehensive statistical analysis of that to try to pull out the differences and give a true like confidence interval around pricing that’s representative of what people might see in the market based on home size and system capacity and also accounting for different labor costs in different parts of the country. We plan to publish that first benchmark report in the coming weeks and then update it every six months or 12 months as the market continues to develop. And as we come across more data, we’ve been coming up with ways for people to share their quotes with us. So we have some of our own ways of getting input directly from the market.

And then another thing we’re doing is working, now that the Inflation reduction Act has been passed, the Treasury department for the tax credits and the Department of Energy on the rebates side has requests for information out asking for public input into these processes. And we’re using that opportunity along with a bunch of others in the market to push for greater data transparency, better reporting from the federal and state agencies so that over time we have more of this information and we can be much more transparent about it.

So I mean, look, point taken, right? The estimate probably wasn’t the most representative and that’s obviously going to cause problems in terms of trust and that’s not something – that doesn’t serve anybody’s purpose in the market. So we’re, we’re doing with what we can and we have much better information now to come start putting together better estimates and, and really do it over time, right? Because the market will evolve and the more the better as far as this goes.

Nate Adams:

Yeah, to that point, I mean it’s a, I usually give a wide range because I see huge variance. So I say 15 to 30,000 oftentimes cuz that’s the range that I usually see and they cluster around 20, you know, sometimes they’re 18, sometimes they’re 23, but that’s where they tend to cluster cuz I, I get to see a fair number of quotes from all over the country and just knowing contractor business models and like all the challenges that they have now, like a service van a few years ago was 35 grand, now they’re 60 – if you can get one. I mean oftentimes they’re moving to pickup trucks rather than service vans because they can’t get a service van <laugh>. all of these things are crazy. Equipment costs are up about 50% in the last two years and there’s been a bunch of other big increases, like the unit I have here has gone up a lot since the IRA was introduced. I think this should qualify these Daikin Fits, but it’s, it’s challenging. So anyway, there isn’t like a great way to do it, but the, the range and the confidence in interval, like looking at it from more of a statistical perspective could be really useful. Curious founder is his handle –

Steve Pantano:

Michael Thomas?

Nate Adams:

Yeah, yeah. So, he pulled some data together and that was in the ballpark,  although unfortunately like prices are up 10, 20% even since then.

John Farrell:

One of the things I think it was so interesting about this issue of electrification of course is that the process of replacing HVAC equipment is so much more sort of a handholding exercise than a lot of the other kinds of things we talk about. You know, and you see stuff on ‘Energy Twitter’ as it were about induction ranges or you see stuff about replacing other appliances and like I can go to Best Buy and I can just shop for one, right? And they’ll come and install it and it’s, especially if I already have an electric stove, it’s a fairly trivial thing. I’m just switching technology, but not really the fuel source even for how I do this. And even with that, people are sometimes switching between electric and gas and, and this, that’s a pretty standard thing. Nate, one of the things that you talk about is sort of these two core issues in terms of getting widespread reductions in pollution from buildings.

One is that if we want to be successful with decarbonizing heat by 2050, we actually have to get there by 2030 because the nature of this equipment is that it lasts a long time and people are not gonna replace a three year old furnace. They’re gonna replace it as they usually do when it dies. And that’s the second thing is almost all of these replacements are emergencies that people are replacing a furnace cuz it’s not working anymore. So they don’t have a lot of time to do a lot of thinking about the decision. So I guess one, I’d love maybe Nate, for you to just start by talking a little bit about kind of how you think about this problem given those, those two issues.

And I’ll throw in a third thing is like how do we address issues of equity and access at the same time knowing that these decisions, like we’re trying to move fast and that replacements are made on an emergency basis and then a lot of the people who probably like pay the most for energy or suffer the most from indoor air pollution probably don’t have a lot of money or even aren’t even involved in the decision making process about their HVAC equipment, right? They’re renters. So maybe that’s a third thing to kind of throw in the mix, Nate, you just wanna give a little bit more context in terms of how you think about that. And then we’ve talked a little bit over email here about sort of the, maybe a laundry list is the appropriate term, of things that we’ve, you know, potential barriers to our success here. And we can talk about some of those specifically maybe back to the, the pricing but also about HVAC contractors and workforce and all those other kinds of things.

Nate Adams:

Rather even just give it a bunch of context, I’ll give you the answer, which is we shouldn’t have air conditioners on shelves anymore. We should have heat pumps. They’re fundamentally the same piece of equipment. They just have an extra couple of parts. It’s like two identical cars, one with the reverse gear and one without. So since 85% give or take of replacements are emergencies, if it’s not on the shelf, it doesn’t get installed. Period. So if we could change that, which is what the hybrid heat homes proposal sought to do, it tackles all the ones that you’re talking about. So I live in what’s called a holler in West Virginia. So it’s a valley that only has one way in and out and my neighbors are not wealthy <laugh> we’ll just put it that way. But about half of them have central air conditioning, but they’re heating with fuel oil or propane or resistance oftentimes.

And so as far as equity goes, there’s still a lot of central A/Cs for lower income folks and they would get at least a single stage heat pump. It’s not amazing, but it can easily offset on the very low end 30% of fossil fuel usage and on the high end a hundred depending on your climate in your house and where things are. But like, 50% is gonna be easy in most houses. So if we can change all those outs, that solves the problem. There’s, there’s a whole bunch of things in the IRA program design, like I’ll just, people, I hate it, it makes my life harder in the field, period. And I also don’t think it’s going to move things enough to actually shift things. So like, is it better than nothing? I don’t know. So that’s the challenge. Like if we don’t play it right, it will hurt things. That’s the challenge for all of this. But the goal is how can we have all air conditioners actually be heat pumps? Like without doing that, I don’t see another viable path.

John Farrell:

I would love to hear from you, Steve about this cuz you know, there were a lot of folks who obviously worked really hard on the IRA and were thinking, oh, you know, if we are able to provide these rebates and these tax credits and whatnot, it will, I think they envisioned it as being similar to on the electricity generation side of things, right? That if we make wind and solar cheaper, utilities will simply install that instead. Or public utility commissions will make them do it because it’ll be simply cheaper. In fact, Rocky Mountain Institute just put out a report in the past couple of weeks saying essentially there is no coal plant in the country that couldn’t be replaced more cheaply by wind and solar with the incentives that are in the IRA program. But here I hear of Nate telling me it’s actually not that helpful. And so I guess I’m, what were you, what, how have you been thinking about this at Rewiring? Are you more optimistic that those incentives at the point of sale will be useful and helpful or do you also, I mean it sounds like you also agree though that some of these upstream incentives focus on manufacturing might also be helpful.

Steve Pantano:

Yeah, I mean I think we need more of all of it. I mean it, there’s obviously changing all A/Cs to heat pumps. That’s something I believe strongly in and wrote that paper with Nate about. That’s obviously like a super easy putt that makes a big change in a very short amount of time for very little cost. I think that’s still quite valuable and hopefully there’s ways to get to that through different policy measures in the future and we’ll do what we can to help to make that happen. We’re working on state and local policy now as are many others to try to sort of reinforce what was done with the IRA.

We obviously wish there was far more money invested in the IRA so it would go far enough. I will take a strong stance that it is far better than nothing. I mean there’s tremendous track tax credits in there for everyone and really incentives that are targeted at low and moderate income consumers that need the most. Right. So you mentioned John, you mentioned equity and access upfront. Really those incentives are aiming to the people who otherwise wouldn’t be able to participate in this market primarily because of the cash flow requirements required around moving to electrical equipment and some of the work around rewiring your homes that needs to happen alongside that if you’re moving from a gas stove to electric or a gas water heater to a heat pump water heater. So we all wish, I think, that there was an unlimited amount of money available to make this transition happen. That’s not the case, but I think we can do a lot with as a country, with what is there and continue to build upon that, right?

So part of the hope here is that there’s a lot of uptake of those incentives and that there’s a lot of consumer demand and sort of public attention on the benefits as we go and that we can do everything else well at the same time, including building the workforce and training contractors so that people have good experiences with electrification. Nate can probably give you 150 examples of people who are more comfortable and happier in their homes after switching from furnace to heat pump. There’s no reason everyone shouldn’t be able to participate in that provided there’s, you know, sort of enough funding and attention on this issue as broadly as possible. You know, there’s billions of dollars today being reaped in profits by oil and gas companies. There’s billions of dollars being invested in gas infrastructure. There is money in the world going in the opposite direction, right? So I think IRA is a great first step, but we need some of that tide to shift more broadly in the economy, more people to pay attention to this issue, states and utilities to step up and put more money on the table to help people make this electrification transition. And I think, you know, it’s, it’s putting us on a path and there’s still huge amounts of work ahead of us to make this successful.

John Farrell:

Steve, I just wanna ask you one quick follow up, which is one of the things I’ve heard that in terms of Nate’s concern about the, like rebates or the tax credits and makes sense to me at least sort of just from a common sense standpoint would be if I’m a contractor and I know the consumer can get this benefit, I can raise my price a little bit. And Nate already mentioned the fact that being a contractor has become more expensive, some of their equipment is costing more money. Is there a danger that the consumer doesn’t actually see as much benefit as we hoped from the IRA because it actually gets captured upstream?

Steve Pantano:

Yeah, I mean, I don’t have any control over the broader inflationary aspects of prices in the economy. That’s, that just is, that’s not a policy we can address through the measures that we have. I think my answer to that would be we need more and better competition in the market among installers. We need there to be more people who can do this work so that people can reliably, you know, homeowners and others can reliably go out and get three quotes that they’re confident in and pay a fair market price for the work. Right? There’s a lot of work to be done on workforce development and training everywhere in the country, certainly in some places more than others. Nate’s got some great ideas for getting this done and there’s plenty of others out there as well. Hopefully as these programs are deployed through the states, there’s also mechanisms in place to make sure that the rebates carry through to the customer at the end of the day as well, right? We don’t want a bad outcome in that regard as well.

Nate Adams:

So our biggest objection to the programs in the IRA are that they’re downstream, so they end up moving the process around. I mentioned how electrification, it’s just more expensive. It just is upfront, it just is. But you’re going to get a better product at the end of the day. Your house can be awesome, but if we bring price and equipment selection things up front in the process, which is what downstream incentives end up doing, it usurps the value building process. And so it makes it a lot harder. And I’m seeing a whole bunch of questions in the HVAC forums with the contractors right now, and everybody’s just super confused about what to do. And some of this will come out over time, but, it adds friction to the kitchen table transaction. So it’s not good church of the kitchen table stuff.

And we’ve thought for years, how can we do a good downstream program? And I honestly don’t think it exists, that there is any kind of downstream program that doesn’t add friction to the sales transaction. And so that’s the hard part of all of this. Another piece that I haven’t talked about that much yet is I’m extremely concerned about dehumidification, extremely concerned. So 80% of Americans live in humid climates, all three of us do. And when we size towards heating, the bigger the equipment you put in, the less dehumidification it does. And then also, like  I’ve been watching the Energy Star 6.1 products, which is basically what CCE tier one is based on. They’re not identical, but they’re close. And right now it’s all mini-split based equipment that is effectively two stage. So the, like, this is technical, but they can’t vary the refrigerant temperature in there and run the coil colder and make it dehumidify well, and so the odds of us making people and houses sick are very, very high.

And I actually have a personal example. So I have one of these products or something similar, it’s a Bosch heat pump at our house here. I have a 20 seer heat pump, but my dehumidifier uses exactly as much power as my air conditioner <laugh> So it’s a good thing I have an efficient air conditioner because if I don’t run the dehumidifier, my relative humidity floats in the 70 to 80% range, which is deep into danger zone for mold and all sorts of issues. So I’m really concerned about that side of things.

Hopefully manufacturers will field things, but like my favorite product or one of my favorite products for this, the one that I’m gonna put in our house in Ohio, I don’t think it’s gonna qualify. And so yes, we’re gonna see changes coming, but like I’m just thinking about the people over the next couple of years that put these in and have problems like, we kind of own part of that. And so that’s the frustration of like performance cliffs and whatnot, that come from all of the, like, there’s so many issues with downstream that pushes everybody’s greed button, it creates cliffs. It’s hard on process there. There’s all of these things and I’m like, I honestly don’t know that there’s a good downstream program. We’ve thought about it for a decade. I have nothing.

John Farrell:

I’d like to pivot a little bit is we’ve been talking about the kitchen table conversation. One thing we haven’t really talked much about is, but you sort of alluded to about, you know, you’re in the HVAC forums, you’re chatting with other folks who do HVAC work. Obviously that kitchen table conversation is two-sided, right? So people could read the stuff on the Rewiring America website, get really excited about wanting to do an electrification project, they get a contractor in. What do you see, Nate, as some of the challenges in terms of making sure that HVAC contractors are prepared to do the work that we need to be done? I mean, you’ve gotten into some of the technical issues here, which maybe we can gloss over for a minute. But just about that idea of like familiarity with heat pumps, feeling comfortable offering that as a solution for when they come to them looking for an HVAC replacement. And then also, I’m kind of curious too, maybe, I don’t know if it’s a two part question or we sort of take it in stages here, but I’m thinking about like workforce training and capacity. There’s a ton of work. I think Steve alluded to this that we’re trying to accomplish here and they probably need a lot more people doing it.

Nate Adams:

We need an army, maybe the HVAC 2.0 Army.

John Farrell:

<laugh>

Nate Adams:

And seriously, like our, our program is not, electrification is not the explicit goal, but is a natural result. And that’s at scale, and what it ends up looking like. But to go back to your question about consumers and contractors. So, contractors politically lean pretty hard conservative, 80% are centrist or conservative. And so like climate arguments just piss them off and shut them down. It’s like, oh, that damned Al Gore, you know, here we go. Like, you just, you killed the conversation. I’m excited to see Rewiring like beginning to shift things, but what I consistently see from climate focused clients is if they haven’t thought about the value of why they want to electrify, they’d look for the least expensive path to get there. And they end up being just sucky clients to work with; cheap and critical. Like they’re just, it’s no fun.

So if we set incorrect expectations and then we send those people to contractors, we’re risking a really bad fire and ice. And if enough of those happen, we can totally stop electrification in its tracks.

John Farrell:

Steve, what are you thinking about in terms of Rewiring America’s approach? I mean, I think it’s interesting because I think it’s exciting in a way that people can be motivated by climate change and environmentalism to want to change their HVAC equipment. I mean, that is good, but how are you thinking about this idea of like reaching contractors, workforce development, kind of that other side of the conversation in doing this electrification work?

Steve Pantano:

Well, yeah, I mean, let me start by saying I don’t think there’s anything inherently political about electrification, right? There’s nothing, there’s nothing that makes it political, right? It gets turned political by people who wanna look at it a certain way, which is going to happen no matter what in our society, right? So that said, to go back to Nate’s original point about trust, I think a lot of the challenge that happens is because there’s this sort of gap in understanding and appreciation and like, true understanding of what needs to be done and what it’s going to take to get there on a home-by-home basis, right?

So a lot of people probably have like the home alone perspective of their furnace as like the scary thing in the basement that you wanna run away from and you keep hidden away and you never think about it, right? It’s, compared to an electric vehicle, there’s no prestige associated with getting a heat pump. Your neighbors can’t see it. It’s not like solar panels on your roof. You can’t show it off to anyone. You don’t typically invite people down into your basement to see your air handler, right? It’s just not something that people do. So as a result, everyone ends up ignoring their heating system until it breaks. Similarly, their water heater. Stoves are a little bit different. Stoves are obviously a little more accessible. So I think to get to that place of trust where there’s sort of a better conversation can happen between homeowner, contractor, Rewiring America, whomever is participating in this market, we need better understanding of what this process is. And a lot of what we’re doing and planning to do over the coming year is to provide people with accessible information that hopefully helps them get really well educated on the benefits.

Well beyond climate, climate’s one important piece, but comfort, health, et cetera, you name it, there’s a lot of benefits here. We want people to understand so that when they come to the conversation, they come in, wherever they’re coming from, they’re coming into the conversation, they can really understand what it is that has to happen. So we want, for example, people to understand that if they have a gas water heater and they want to move to a heat pump so that they’re not stuck in an emergency replacement situation, they probably need to have that wiring and their panel upgrade if they need one or whatever set of solutions in place before their water heater fails. So maybe the next time they have an electrician come to the house to do some other job like install their EV charger, they can also have the wiring run over to where their water heater is so that they’re not one of that 85% of people who has no choice but to stick with gas the next time around. Right?

We need people to be prepared, we need them to understand a process. And a lot of what we’re intending to do and what we’ll be rolling out over the coming year, like I said, is this, our planning tools and educational tools for consumers so they can be ready to participate in this process and not like running into all of these very common market barriers that tend to present themselves when it’s 12 degrees outside and your heat just went out or you’ve gotta get ready for a wedding and there’s no hot water for everyone to shower with, right? Those are not circumstances that are ever going to lead to people making better choices towards electrification. And I think overall over time as we continue to do this and we work with everybody in the market who’s got good ideas on how to do this, we’ll start to build that understanding and that trust and that dynamic will hopefully improve, right?

We’ve got, there’s, millions and millions of decisions that have to be made like this and we’ve gotta start somewhere. I think ultimately that’s the job here. I think it also exists equally as much on the contractor side. Nate’s obviously got a lot more insight into that world than we do, but we’re working towards that as well. And we hope to be engaging with contractor communities to understand what we can be doing or what industry associations or the like can be doing to help build that understanding and trust on the other side so that those conversations can happen on equal footing and people are prepared and people can make good choices and they’re well informed about what the benefits will be, what it’s gonna cost them to get there and exactly like what steps they need to take and when in order to make that happen.

John Farrell:

We’re going to take a short break. When we come back, we talk about upgrades to electrical panels reaching the mainstream yesterday and the first rule of heat pump Fight Club. You’re listening to a Local Energy Rules podcast with Steve Pantano, head of research at Rewiring America, and Nate Adams, the CEO of HVAC 2.0.

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John Farrell:

Steve, you kind of alluded to the idea about the like home electrical capacity, right? You know, maybe a panel upgrade that would be needed for some of these things. One of the things I’ve really been fascinated by as I think about transitioning my home in a cold climate is I have a hundred amp service right now, which is pretty common for houses of the age of mine. And it seems like I’m probably gonna need more capacity to be fully electric. Maybe I’ll do a hybrid system in the meantime, maybe I won’t. But I guess one of the things I’m curious about is that whole idea of like needing home upgrades. I know it’s part of the IRA, their incentives for panel upgrades. There’s also these smart panels that can manage load for you. So maybe it’s like, oh you turn off the car charger while you’re running the water heater or something like that. There’s a lot of pieces to that, right? There’s not just the actual electrical service, there’s how you manage the load in the home and then there’s also the role of a city in permitting that and allowing you to say, Hey, I can manage this load with a smart panel. I don’t need a service upgrade. Could you talk a little bit about the work that you’re doing to sort of address that particular barrier, knowing that that’s potentially one piece here as people transition their appliances?

Steve Pantano:

I think it’s highly variable across the country and kind of on a home by home basis I will say between smart panels, some new products like induction stoves that have built-in batteries so they can run on 120 volts and literally just plug into the wall, switches that get put in to switch sort of smartly between a EV charger and a closed dryer so you don’t have to add a circuit, there’s lots of opportunity like that and more for innovation to sort of address this problem and hopefully mitigate the number of people who actually need to upgrade their service. Cuz that can be, that can be costly and time consuming and it’s yet another big barrier to the challenge.

So that said, there is also work to be done on reform of the permitting process and streamlining and sort of making these things transparent and consistent around the country. There are probably as many local permitting rules as there are duct work configuration in homes that need to be addressed, but there are good solutions out there. So among other things, we’re working on state and local policy guides and playbooks to help people understand what barriers might exist, where they live, and how they can start pushing for policy reform around things like permitting. So that again, we start taking down some of these barriers. There’s a lot, I mean we’ve hit on in this conversation at least half a dozen, there’s probably at least a dozen more sort of logistical barriers to electrification and they all need to be addressed if we’re gonna do this well and cost effectively and hit some sort of 2030, 2035 target, to the point where everybody’s moving in this direction, right?

So it’s a lot of work, <laugh> and it, we’re not gonna do it ourselves. It’s gonna take everybody who’s interested in this, it’s gonna take everyone kind of pulling in the same direction and raising issues when they come up and bringing them to everyone’s attention so they can be addressed. So we’re a part of this as is everybody else working on these types of programs and we’ll try to prioritize and do our best to address these things as they arise.

John Farrell:

Yeah, I don’t know if you had anything to add there. I was thinking I could also ask you about whether or not there’s any like, specialized equipment that HVAC contractors need to install electric equipment. Because you kind of alluded to earlier that whole idea of like even the service vans that they need, they would buy to like move their stuff around have become more expensive.

Nate Adams:

For starters as far as equipment that they need, not really. They’re fundamentally the same piece of equipment. There’s a little bit more setup involved oftentimes, but install practices matter more because heat pumps will run a lot more, you know, an air conditioner like particularly in Minneapolis, like it’s gonna run what, three or four months a year? Cleveland, that might be five or six. Heat pumps can run 12. They may not run absolutely all the time, but they’re gonna run an awful lot. So the installs need to be better. So there’s, there’s little things like – we should graze with nitrogen so that you don’t get soot inside, which gets stuck inside the system and kills lifespan. You need to vacuum them down enough. But fundamentally we’re just talking best practices, but the equipment should all be on the truck for doing this work. So it’s a little more time but it’s not, not more equipment to the one hundred amp panel points.

Three of our electrifications in Cleveland, were on hundred amp panels. So I’ve done this <laugh> like it’s doable. The national energy code calculations could use some adjustments because they are really conservative, way more conservative than they need to be, especially if there’s some load management things. But I also, I want to turn this a bit too.

So the getting to 2030 thing, one of the big challenges that we see is if you know of the adoption curve, it’s just a bell curve. So your, your first couple of standard deviations are 16% of the market. That’s your early adopters. And then there’s a chasm where you have to have a whole product that’s good and better than what exists today and is also easy to buy. And those next two standard deviations are 68% of the market. Our challenge with electrification is we basically have to skip early adopters and go straight to mainstream if we wanna finish on time.

Like that’s, we’ve used the time for early adopters already. So a lot of the solutions we’re talking about are primarily early adopter and like that’s fine, but we have seven years, you know, <laugh> if we’re gonna finish by 2050 and realistically I think we are presently looking at 2060 to 2065 for home decarb completion. I think that’s where we are. I don’t know that 2050 is even on the table right now. I just don’t, I’m not gonna say it’s impossible, but it’s pretty low odds. So the, the challenge in all of this is how do we move to mainstream? Let me see, yesterday would be nice and that’s actually what we’ve been aiming to do with what we’ve been building in HVAC 2.0. Not to be self-serving but like that’s point blank what we’ve been trying to figure out, we know we can reach mainstream homeowners, not a problem.

The mainstream contractors has been incredibly difficult to figure out. Just incredibly difficult. Like we first played around with energy auditors, there’s not enough of them, it’s too specialized, there’s not enough money, it’s gotta be one man bands, there’s just not enough margin to have a good size company with that model. So we ended up at HVAC contractors, but a lot of them are afraid of heat pumps. So we have to find a way around that and then we need to give them a different business model so that they don’t get bit, we can lower their risk and also increase their margins because if it’s, if it’s not better than business as usual, they’re not going to move cuz there’s so much inertia in doing what they do today. So really a whole lot of my issues with what’s happening in electrification right now is everyone is having an early adopter discussion and it’s like we’ve, we’ve gotta get to mainstream and we have to get there now, which sucks, but that’s where we are.

John Farrell:

I’m kind of curious, and I’d love that Steve to toss this to you first, you mentioned that there’s nothing about electrification that’s inherently political and of course that doesn’t stop people from politicizing it as the recent brouhaha about gas stoves will prove. And I guess one of the things I’m thinking about though that’s so interesting is I feel like the gas stove thing exploded into the political realm or sort of the public knowledge because the arguments to switch are actually very, very compelling to people, which is there is a potential health risk to you and and safety risk to you and your family of using this kind of appliance in your home. And I wonder, back to what Nate was saying earlier, he was saying if you do electrification wrong, it can be a big health risk, like the humidity kind of thing.

I wonder if there’s an opportunity there to talk about like health and comfort more directly in a way that gets consumers more interested in the HVAC stuff, like you said. I can’t, maybe I will get excited to give tours of my heat pump if we can make it exciting. I don’t know, like people will share weird things. I have been in people’s basements before for them to show me things and like I keep thinking about in Minnesota actually, like for a central heat pump, right? Some of the equipment is outside, I can see it and it looks different than the other stuff. Now it’s not flashy or whatever, right? I don’t think it’s supposed to be, but I don’t know. It seems like somewhere in here there’s an opportunity to tap the way that people think about things, which is, you know, they become emotionally attached to things or they make emotional decisions whether it’s about health and safety or whether it’s about something that’s cool. And I’m just kinda curious, Steve, how you’re thinking about that for the sort of thorny thing of something in your basement.

Steve Pantano:

Yeah, I mean you’re right. We absolutely want people to have an emotional reaction and want these things like that, that will help, that’s part of getting the demand. I mean we need demand, we need people to be asking for these and then we quickly need to move people into a place of like true understanding, right? So they’re going to enter the conversation somewhere, whether it’s about the health of their child in their kitchen or the fact that their furnace broke and it’s 12 degrees outside or they just got an EV and there’s an electrician at their house putting in an EV charger who could then tell them about the rest of the story related to electrification and prepare them to get a heat pump in the future. There’s hundreds of entry points to this conversation for people of all across the political spectrum, all across the country for very different reasons.

We’re trying to think about all of those regularly, Rewiring as I’m sure many others are, and figure out a way to bring people into that next level of the conversation where they then say, okay, like I’m here, I’ve figured out what electrify everything means. I’m kind of on board now. What do I need to know? And really the next thing people, like I firmly believe and we’re working towards this, is that people need a good education and a solid plan, right? And they need to know how their home works and they need to know what they can do about that, right? And how much it’ll cost and when and how that balances out with everything they would have to spend anyway if they were going to replace their furnace, how many incentives they qualify for, where those are coming from, how they can access them effectively and very importantly, which contractors they should call who are skilled at this stuff and can give them a quality installation that’s not gonna leave them with a bad result. Cuz that’s the last thing anybody needs right now on a personal level or kind of collectively as the electrification movement. We don’t want people having bad experiences.

So the sort of, the corresponding piece to that is we have to be, I think we have to be having a very big open national conversation about how it is that we get thousands and thousands more Nate Adams out there who know what they’re doing and can do it well and can also make a living doing it and provide good customer experiences, make a decent living off this, make a good profit, feel good about what they do, and help people meet their needs for comfort or climate or whatever it is that came to the store with in the first place, right? You gotta have this holistic perspective that runs from the start of the customer experience. Like whenever they first hear about this to the very end when the equipment’s installed and it needs to be maintained and they know what to do and they know how their home works, right? And they’re engaged in this in a way that they never were before.

Nate Adams:

Yeah. So I think the best way to sum that up is we need to make electrification sexy. And so like what one thing that that bugs me about the stove piece. I mean, look, I have an induction stove right there that’s one of three that we own. That was a two year fight for me to get the first one at our house. We got rid of a really cool 1940s O’Keefe me that had come back from California. I love that stove, but I also knew what it did to my air quality. And in talking to my wife, she didn’t want to hear it because if we take the negative tack of you’re hurting your children, people’s walls go up. And that’s really challenging. In fact, like efficiency programs have found this. When they target homes with very high energy use and they tell them they have high energy use, they basically get told to go screw themselves. Like, it makes people mad.

So the framing is super important here. I’m still learning this too, but induction is just a really nice experience. It’s fast, it’s super controllable, it’s like gas as far as how controllable it is, but if you’ve ever made a mess on a gas stove and had to clean it up, when we sold that stove, I spent four hours cleaning it so that it was nice to sell it and I could get top dollar. Four hours. That was a long time. Where with induction, you just wipe the sucker down and you’re done. It’s a glass top. So talking about the experiences and like we, we joke that the first rule of heat pump fight club is you don’t talk about heat pumps. Heat pumps just happen to be the thing that gets installed, but mainstream, we actually don’t wanna talk about heat pumps that much oddly enough. Like that’s what we find with our HVAC clients. Just so how do you do that? Oh, it’s called the heat pump. And then oftentimes you just move on framing this in a positive manner and making it sexy is good.

I also think about a weird experience that I had. I put a deposit on a Tesla model 3 years ago, didn’t manage to do it because my business model doesn’t make enough money to be frank. It’s a challenge. But, I went to Aldi: German discount grocery store, and there’s a guy there with a model S and I said, hey, nice car, I’ve got a deposit on a three. And he’s like, oh, cool. Have you ever driven one? He, this guy I’ve never met, never seen since then forced me to drive his Tesla, $110,000 car. Can you imagine being like, Hey man, nice Ferrari.

Nate Adams:

Oh really? You think so? Come drive it. That doesn’t happen. But he’s like, I love this car. And he also liked the mission and so how can we get people inspired to do that?

But we also don’t wanna be pushy about it and obnoxious and like act as early adopters, which is off-putting to the mainstream. So, there’s this weird balance of we need to be working with early adopters right now, but we need to help them speak mainstream. And that’s a really weird mixture and I’ve been consistent on that. The electrify everything course, two years old now, if you look at a second video and there it says exactly that.

Steve Pantano:

I’ll just point out too, I mean, heat pumps out-sold furnaces for the first time in history very recently. These are mainstream products. Like I, part of this challenge too is like, let’s not over complicate this too much because there’s 4 million or so heat pumps sold every year in this country. Granted a lot of them are in the Southeast, but it’s a, the technology’s mature to a large degree. There’s always room for innovation. But this is, this is common technology by any measurable standard in this country and we’re just trying to make more. A lot of it is making me people aware of it and demystifying it a bit further.

John Farrell:

Maybe we just need a winter program to offer educational tours. Folks from Atlanta, HVAC contractors come to Minnesota in January and talk to people about how heat pumps work. Super attractive, I’m sure for them to think about that.

Nate Adams:

You know, basement tours might be a piece of this. So two of the heat pumps that I sold happened at an electrify everything night that one of my other clients helped me put on. And both people went down in the basement, they’re like, it looks like a furnace, an air handler looks like a furnace. It just doesn’t have pipes coming out of it. And the outdoor unit gets huge, but it looks like an air conditioner. So it was familiar enough that both of ’em were like, yeah, that’s what we’re doing. So there is an element of that, and that’s an early adopter thing, more so than mainstream. But yeah, it’s in there.

Steve Pantano:

There, a little while ago, there was a thing happening on Twitter where people were painting their outdoor units and decorating them like garden gnomes or something of that nature. Yeah. So, you know, things like that can carry some attention as well. There’s lots of creative ways to approach this.

John Farrell:

Well, Steve and Nate, I’ve already used more of your time than I said I would, but thank you so much for coming on to take a Twitter conversation into real space and to talk through many of the challenging barriers and our, like, common interest in trying to overcome them. I really appreciate your time.

Steve Pantano:

Thank you. I think these open, sort of real life conversations, let’s say, are important, right? We wanna be hearing from people. They’re, like as I said at the outset, we’re learning a lot as we go. There’s a huge task ahead of us. We all need to be moving in the same direction, and we’re an open door at Rewiring for people with better ideas about how we should be doing our work. And like I said, we’re, we’re all in this together. So thanks for having us.

John Farrell:

Yeah, thank you so much, Steve.

Nate Adams:

I want to close with one thing that rewiring is spectacular at is pr. You guys are amazing, even if I don’t like most of it <laugh>, but you just had one that came out yesterday or the day before. Don’t ask me which brother it was.

Steve Pantano:

Jonathan Scott. Yeah.

Nate Adams:

Jonathan. Yeah. And like, you had Celebrity bandwagon and it was funny, like he, he’s wearing this purple suit and saying how it’s fancy, like that is the kind of framing that we want. So that was just really spectacular. So more of that, please.

Steve Pantano:

There’s more of that to come. Trust me,

Nate Adams:

I believe it. That’s, that sort of thing is not off the cuff kind of thing, but Yeah. How do we make it sexy and how do we make it business as usual? These are the challenges. Yep.

Steve Pantano:

How do we, I would just amend that to say how do we make it sexy to get people in the door? How do we make them smart so they can have a constructive conversation as they’re in this transition and have a plan And then, yeah. How do we, how do we close the deal?

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules, where we regularly violated the first rule of Heat Pump Fight Club. That is the rule not to speak about heat pumps. Instead, Steve, head of research at Rewiring America, and Nate Adams, the CEO of HVAC 2.0, discussed the importance of setting the right cost expectations for consumers, the urgency of shifting HVAC replacements, which are almost always emergencies, to heat pumps by 2030, as well as a host of other strategies to make home electrification easier. On the episode show page, look for a link to Nate’s original Twitter thread about the Rewiring America cost estimates, a link to the Hybrid Heat Homes project that Nate and Steve collaborated on, as well as the Federal HEATR Act that would effectively ensure no one would sell a disabled heat pump, also known as an air conditioner. And if you like this content, also watch the Local Energy Rules Podcast feed for another interview with Nate Adams, recorded before this discussion with Steve, but that dives much deeper into the challenges of making heat pumps the default HVAC solution by 2030. Local Energy Rules is produced by myself and Maria McCoy, with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.