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How can we increase heat pump adoption in multifamily buildings?  

Massachusetts Electric and Natural Gas Program Administrators

Multifamily Heat Pump Barrier Study

To meet the state’s ambitious climate targets, Massachusetts Project Administrators (PAs) have prioritized electrification in their Three-year Energy Efficiency Plan. Heat pumps are an essential element of their electrification strategy. The PAs have made inroads with heat pumps in single-family homes; however, they’ve had a difficult time encouraging heat pump adoption in the robust multifamily housing sector. The PAs brought on Cadeo to help. Cadeo investigated the barriers to heat pump adoption and identified opportunities to overcome those barriers.

Interviewing the Many Stakeholders

We began by interviewing the PAs and their implementation partners. In these interviews, we learned about their experience promoting heat pumps in multifamily buildings and the challenges they’d faced. In addition, we learned about the specific market intelligence they sought from our research. Then, we interviewed 32 supply-side market actors (manufacturers, local HVAC contractors, and electricians). We wanted to understand their perception of the PAs current heat pump offerings. We learned about not only their interactions with multifamily building owners and managers but also their experience installing the technology in multifamily buildings. Finally, we surveyed over 100 building decision makers—engaging with those who had installed heat pumps and those who had not.

Barriers and Opportunities

We used the results of these activities to define the barriers to increased heat pump adoption in Massachusetts. In turn, we also identified opportunities the PAs could act on:

Installing heat pumps in multifamily buildings is complex, especially in retrofit scenarios; because of this, heat pumps take additional time to install, which means higher labor costs and greater risk that something goes wrong—not exactly incentives for busy, litigious-adverse contractors!Develop multifamily heat pump-specific installation workshops, ideally coupled with onsite training, assistance, and oversight. Orient this training around how contractors can overcome common multifamily installation hurdles or technical challenges that have historically resulted in higher bid pricing (to protect themselves) that discourages heat pump adoption.
Leverage distributor support to provide this training. Unlike contractors, distributors have natural motivation to sell heat pumps since the equipment cost is typically higher. Many distributors, often in partnership with their manufacturer representatives, offer contractor training, resources, or other support for priority products.
Many contractors remain generally uncomfortable with heat pump technology, installation, performance, and applicability. They shared that the complexity of multifamily properties only heightens their underlying discomfort with the technology. A few distributors indicated that a lack of education about the product is one reason why contractors might be uncomfortable, and one distributor shared that though some manufacturers have mandatory product training for contractors, the passing score is sometimes as low as 30%. There’s a need to diversify, customize, and ramp up heat pump and multifamily-specific training elements. Further training should focus on familiarizing contractors with the range of HP technologies, models characteristics and efficiencies, and which models are best suited for various multifamily scenarios. Additionally, offering training on project technical design would help overcome any multifamily-specific challenges, these HP-centric efforts will also empower contractors to promote and install HPs for their single-family clients too.
Building decision makers and supply side stakeholder agreed that current heat pump incentives are not enough for multifamily properties because of the added liabilities and equipment costs. The complexity of multifamily installations and general discomfort with heat pumps culminate in higher pricing for heat pumps. Furthermore, multifamily properties have higher upfront costs than single-family homes, given the larger equipment size and the amount of ancillary equipment required.Extend the Expanded 2–4 Family Loan offer to small or mid-sized multifamily buildings. Increase the visibility of commercial financing options to help large multifamily buildings (20+ units). Larger properties will need more than the HEAT loan—ensuring that the decision-makers at larger properties understand the extent of financial support available to them will be essential.
Going through the PAs’ custom rebate process for multifamily buildings slowed heat pump adoption and discouraged distributors (and, in their opinion, contractors) from promoting and installing heat pumps.Create a simplified rebate structure with a $/ton rebate structure but maintain the custom savings analysis to account for the high degree of variability in site-specific savings. Develop a fast and straightforward participation pathway for critical decarbonization measures like heat pumps.
Multifamily building decision-makers are generally unfamiliar with heat pumps. Two-thirds of the multifamily decision-makers survey respondents said they are either slightly or not at all familiar with heat pumps. Contractors confirmed that multifamily decision-makers rarely inquire ask about heat pumps.In addition to continuing to promote heat pumps through email and mail, develop case studies of retrofitted multifamily buildings in high density multifamily areas. The PAs could also create an advertising campaign where buildings can serve as advocates for multifamily heat pump retrofits.
The lack of rebates for replacing natural gas heating systems prevents greater heat pump adoption in multifamily buildings. The PAs’ current whole-home rebates for 3- to 4-unit buildings are only for replacing existing oil, propane, or electric systems. With the low price of natural gas, installing heat pumps makes no economic sense for contractors without rebates.Given the state targets for heat pump adoption and natural gas low prices, including natural gas as a preexisting heating type on whole-home rebates could make heat pumps more competitive against natural gas.

Read the full report here.

Market Characterization

Cadeo characterizes markets to understand the technological, regulatory, and competitive dynamics that impact the market actors and policies our clients seek to influence. We go beyond typical supply chain mapping to characterize decision chains, key influencers, and the core economic drivers at play.