States pledge joint action to help electric heat pumps dominate market by 2030

Nine states will collaborate to ensure that the majority of household heating equipment installed within their borders utilizes zero-emission technology by the end of the decade.

The states signed a memorandum of understanding (MOU) on Feb. 7, pledging to take collective action to achieve a common goal: By 2030, electric heat pumps will account for 65% of residential space and water heating and air-conditioning equipment shipments within those states. Under the MOU, that goal ratchets up to 90% of shipments by 2040.

Directors of environmental agencies from California, Colorado, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon and Rhode Island signed the MOU.

"Heat pumps and building electrification are the future for healthier homes and a thriving green economy," Secretary Serena McIlwain of the Maryland Department of the Environment said in a Feb. 7 news release.

The MOU builds on a recent commitment by the US Climate Alliance's 25 member states and territories. In September 2023, members set a goal of quadrupling electric heat pump installations in the states, with a goal of collectively reaching 20 million units by 2030.

A smaller group pledged to explore a range of building decarbonization strategies.

The shipment targets in the Feb. 7 MOU were calibrated to help achieve the earlier 2030 installation goal, according to Emily Levin, a senior policy adviser at Northeast States for Coordinated Air Use Management (NESCAUM), an association of state air pollution control agencies.

Within the nine signatory states, the building sector produces 173 annual metric tons of planet-warming carbon dioxide emissions. The sector also yields 138,000 tons of nitrogen oxides and 6,000 tons of fine particulate matter per year, which contribute to a range of adverse public health outcomes, according to NESCAUM.

NESCAUM and the Northeast Energy Efficiency Partnerships (NEEP) will coordinate the effort, with states utilizing the groups' established multi-state building electrification task force and working group, as well as NEEP's energy code collaborative.

Developing multi-state action plan

Through these venues, states will identify opportunities for multi-state collaboration and launch collaborative projects to reduce residential building emissions.

Many of the participating states have pursued electrification mandates, but the initiative outlined in the MOU does not seek to pursue building gas bans, said Levin, who leads NESCAUM's Building Electrification Initiative. Instead, she said it aims to cultivate a market for heat pumps, a highly efficient technology that conditions heat from the air, ground or water to heat and cool indoor space.

"When we were looking at what would be most impactful in accelerating this transition to zero-emission residential buildings, we felt it would be really beneficial for states to collaborate on some collective targets for developing the heat pump market," Levin told S&P Global Commodity Insights. "Putting more focus on that market development piece seemed like an area that was ripe for state collaboration and collective action."

Within 12 months, NESCAUM, NEEP and states will develop an action plan outlining strategies to support residential electrification.

In developing the plan, the states expected to explore policies and programs that accelerate the transition to heat pumps while safeguarding energy affordability and supporting electric grid flexibility and resiliency. The signatories anticipated considering zero-emission building codes and other pathways to eliminating on-site emissions.

Another priority is funding for home retrofits to facilitate electrification and boost efficiency through weatherization and demand response tools. The signatories planned to carry out at least 40% of these upgrades in low- and moderate-income areas and to coordinate applications for federal incentives.

The states expect to prioritize converting households that use oil, propane and electric resistance for heating. Another anticipated focus is promoting heat pump installations in lieu of air-conditioner purchases.

Finally, the states will explore a range of market transition strategies, including incentives and financing options, consumer education campaigns and workforce development and contractor training.

Heat pump manufacturers, installers key to initiative

NESCAUM and NEEP will work with the states, heat pump manufacturers and distributors and other stakeholders to improve access to data on heat pump sales, shipments and installations.

Using those data, the groups will report annually on heat pump sales. The reports will also provide updates on the states' progress toward the 2030 and 2040 goals, the residential building electrification market, remaining market barriers and opportunities to accelerate the transition.

Ceres, a nonprofit that works with capital market leaders on sustainability initiatives, organized a group of 24 businesses, investors and building owners and operators to support accelerating heat pump adoption.

"Initiatives that encourage collaboration across state lines to develop best practices are essential to accelerating this transition," said Alli Gold Roberts, senior director of state policy at Ceres.

Manufacturers have partnered with the US Department of Energy to achieve breakthroughs in cold climate heat pump technology.

The Building Decarbonization Coalition, which counts heat pump manufacturers among its membership, will also support the initiative. Matt Casale, the coalition's senior manager for market transformation, told Commodity Insights that he hopes the initiative will facilitate exploration of thermal energy networks.

These neighborhood scale infrastructure systems use ground-source heat pumps to share heat among buildings on an underground loop. They have attracted interest from policymakers and utilities, in part because they could preserve a role for gas distributors in the energy transition.