The Biden administration announced $9 billion in funding Wednesday to improve home efficiency, which could help support the installation of up to 500,000 heat pumps. With winter approaching and utilities warning of gas shortages, there are some major challenges facing the technology that money can be used to tackle.
To help decarbonize home heating and cooling, we need those heat pumps, and fast. The electricity-powered systems — which keep homes comfortable by pushing heat into the home in the winter and pulling it out in the summer — will be crucial in weaning the world off of fossil fuels. But installing the units on a timeline in keeping with net zero goals will require both a robust supply chain and well-prepared labor force. While neither of these are fully in place in the U.S., the Defense Production Act and Inflation Reduction Act represent opportunities to build them out.
The funds allocated Wednesday fall under a new state- and tribe-administered rebate program made possible by the IRA. The White House said this helps put the country on track to achieve the president’s campaign promise of weatherizing 2 million homes.
To get on track for the goal of net zero by 2050, the International Energy Agency has said the global stock of heat pumps needs to reach roughly 600 million by 2030. Last year saw a 25% increase in investment in the technology and record-high growth in sales, and roughly 190 million units were in operation worldwide. However, the organization said this growth has been stymied somewhat by ongoing supply chain issues.
The U.S. currently relies largely on foreign suppliers of heat pumps, leaving the White House’s goal vulnerable to supply chain complications like those brought on by Russia’s invasion of Ukraine. Sam Calisch, head of special projects at the electrification nonprofit Rewiring America, characterizes the U.S. heat pump supply chain as “not too bad,” but he added that investment is needed as “an ounce of prevention” for future complications, especially as the market grows.
The DOE is planning to devote an initial $250 million, which isn’t part of the $9 billion, to encourage more heat pump manufacturing, funding which relies upon the DPA authorities that President Biden invoked in June to strengthen the domestic supply chain for clean energy technologies. The agency is currently soliciting opinions on how to make best use of that pot.
In a recent report, Rewiring America encouraged the DOE to invest $500 million in up to 10 facilities in the U.S. in order to “ensure that American manufacturing capacity can meet the increased demand.”
The country’s goal, Calisch said, should be that all HVAC systems are replaced by heat pumps at the end of their lives “definitely by 2030, faster if we can do it.” Rewiring America found that the U.S. installed 3.9 million heat pumps in 2021; the 500,000 unit boost provided by the IRA funds is designed to “supercharge” the market, he said, but also fits within larger market trends.
Installing all those heat pumps will also require a workforce to grow alongside the market. The IEA encourages policymakers to anticipate potential labor challenges “to avoid bottlenecks” on the way to net zero, and specifically recommends investment in knowledge-sharing and upskilling for HVAC employees.
The DOE said Wednesday it is putting together a discussion between “labor, businesses, and other key stakeholders” to determine how best to spend another $260 million, also not part of the $9 billion, on workforce development for energy efficiency. This federal investment is something Calisch said is greatly needed.
“There are new programs springing up, but we are consistently finding that, particularly around electricians, we're facing a shortage,” Calisch said. He said one option for ameliorating that shortage is for the U.S. to reinvigorate apprenticeship programs.
The IRA contains funding that requires companies receiving wind or solar tax incentives to employ apprentices, though it doesn’t have a similar requirement for home efficiency companies. Specific companies like heat pump company BlocPower have created apprenticeship programs geared toward training a green workforce and advancing racial justice goals at the same time.
This heat pump enthusiasm is happening against the backdrop of instability in the natural gas market, prompting higher winter heating bills worldwide. The Energy Information Administration's recent Winter Fuels Outlook anticipated a 19% increase in natural gas prices this year as compared with last. Electricity prices have also increased, but by just 8%.
“That [increase in fossil fuel prices] definitely spurs increased interest in heat pumps,” Calisch said, citing the fact that heat pumps cost users less in heating than other types of systems.