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What’s the Deal with Contractors and Heat Pumps?

Posted by Charley Cormany, EFCA Executive Director

Electric heat pumps for space heating are getting a lot of attention these days, and with good reason. Heat pumps are a readily available alternative to gas furnaces. They are more efficient and perform as well or better than gas alternatives. Given the greenhouse gas impact of space heating, heat pumps are a critical component of the effort to reduce emissions.

Given these advantages, we should expect mass adoption over the next few years. And yet, the reality is that contractors are talking their customers out of heat pumps all the time and installing gas appliances instead. Sometimes even after the customer asks for a heat pump.

As a result, tens of thousands of new gas appliances will be installed this year, each one with fifteen or more years of effective useful life.

There are loads of incentives available for heat pump HVAC systems. So why are more contractors not embracing this important technology? And how can we make things different?

First off, we need to look at the typical contractor’s business model. With the standard triple bid process, customers are often drawn to the lowest-priced option. Unfortunately, this creates a race to the bottom. For contractors this means you will likely get more work if you can shave a few pennies off your bid and be cheaper than your competition. If you subscribe to this business model, the best solution is the one that requires the least amount of effort. In most cases, this means replacing a failed appliance with the exact same thing.

Regulators have tried to end this practice. They implemented a third-party verification process for Heating, Ventilation, and Air Conditioning (HVAC) systems to confirm the equipment is sized and installed correctly. A HERS rater is required to check specific functions, namely the refrigerant charge and duct leakage on all new installations. On the surface, this seems like a great idea. If a contractor knows a third party will be testing the refrigerant charge and ducts for leakage, they are far more likely correctly size equipment and include improvements to the ducts in their proposals.

But contractors have an easy an easy workaround:  don’t pull a permit, and your project won’t trigger the mandatory HERS inspection. How pervasive is this practice? Before regulators started requiring third-party HERS testing on all HVAC installations, roughly eighty-five percent of HVAC installations were done with a permit. Today, and less than ten percent are.  More often than not, contractors will try to convince homeowners that getting a permit is optional and not in their best interest. Neither of these things is true, of course. In fact, it is against the law to install an HVAC system without a permit in California. The problem is enforcement.

The main reason is that contractors are avoiding the extra cost and paperwork associated with the building permit and HERS inspection. Consider the following example. Two contractors bid on the same HVAC project, and one follows the law and pulls a permit. The other contractor convinces the customer that a building permit is not required. All things equal, the project with the permit will ultimately be more expensive. The HERS raters fee will add roughly $350 to the cost of the project. The building permit fee will add a couple hundred (varies by region) to the price, not to mention the time required for the contractor to obtain the permit. It is not uncommon to see a legal, fully permitted and inspected project cost $750 to $1,000 more than a project without a building permit.

When I was a contractor, we played by the rules. Every one of our projects included a building permit. I can’t tell you how frustrating it is to lose a job to a hack undercutting you by not complying with the regulations.

Contractors not pulling permits is a big deal, and the powers that be are aware of it. There have been hours of discussion at the California Energy Commission about ways to solve the problem. Some have considered using a registration system to track the serial numbers of equipment. As you might guess, equipment distributors are not keen on this idea. Local building departments don’t have the human resources to address the issue, so the practice continues. But one way or another, regulators and industry will have to solve this problem.

Simply replacing an existing gas furnace with the same device is a missed opportunity. In California, most HVAC systems have oversized furnaces and undersized ductwork. For the best performance, the new system should include ductwork too. The best approach is to determine the actual heating and cooling need first and then design a complete solution that includes appropriately sized ductwork.

Building codes address this too. A heating and cooling load calculation is required on all new HVAC installations. Using computer software models, high-quality contractors perform load calculations before installing the system. These load calculations determine the size of the heat source, the airflow required for each room, which dictates the size of the ductwork and register grills. A fully engineered system will perform better, provide increased comfort, and be cheaper to operate. Overall, it will outperform a “rule of thumb” installed system and provide years of savings with improved comfort.

As you might expect, a fully engineered HVAC system costs more upfront. Long term though, a well-designed system will be cheaper to operate and perform significantly better than a slam-and-go system. Pay a little more upfront to get years of benefits or choose the lowest cost option.  Consumers usually don’t understand the impacts of this choice though. From the contractor’s perspective, if your business model depends on your proposal being as cheap as possible, you will do everything you can to avoid a comprehensive approach.

Some contractors have an issue with heat pumps because heat pumps are not as forgiving as gas furnaces. It takes more effort to install a heat pump properly, as they don’t have loads of extra capacity. I believe this is another big reason why contractors and talk consumers out of heat pumps. Poor installations will lead to callbacks for the contractor, which has nothing to do with the technology. Contractor pushback on installing heat pump HVAC systems should be a red flag for consumers.

If you are working with a high-quality contractor, the heat source is not that big of a deal. The contractor should design the system first, based on heating and cooling loads. Next, they engineer the duct system to match. At that point, the choice of fuel, gas or electricity is not that important as far as performance is concerned. The advantage of properly sized electric heat pumps is that they improve comfort, are safer, more efficient, and don’t directly contribute to greenhouse gas emissions.

Heat pumps are perfect for California, but sizing matters. A correctly sized heat pump HVAC system has minimal excess capacity, and that’s a good thing. Heat pumps come in a much wider range of sizes than gas furnaces. A good analogy is a small fuel-efficient car. A small car has a small engine. There is no extra capacity, and it takes a while to get up to speed on the freeway. Once it does, it gets excellent gas mileage. Stuff a large V-8 engine in that same small car, and it gets up to speed very quickly, but it drains your wallet with poor gas mileage. California furnaces are like the V-8 engine in most cases. We need smaller, high-performance solutions that use only as much energy as they need.

It’s time to bring HVAC contractors out the dark ages and encourage them to make heat pumps the go-to standard. Many contractors are already doing this, and they are having success. Now we just need to bring the rest of the industry along.

Here are some suggestions to help move the needle to make heat pumps the de facto standard.

1. Enforce existing HVAC regulations

Require permits and impose penalties for failure to comply. Include proof of the design in all HVAC applications. Load calculations, proper equipment sizing, and good duct design are required by code. The intent of these regulations is solid. The follow-through and enforcement are almost non-existent.

2. Heat Pump Education

We need increased public awareness about the benefits of heat pumps and how to find an HVAC contractor to install them. We need to educate the local building departments and building officials about the existing regulations and encourage enforcement. Enforcement will require additional staff at local building departments. Funding this staff should be a part of the solution (creating rules without considering the cost of enforcement is bad policy). We need to educate contractors and their sales teams. Heat pumps have come a long way in the past ten years. Many contractors have not taken the time to learn about their capabilities or advantages, which needs to change.

3. Promote value over price

This is a big one. Let’s prop up contractors who comply with regulations, obtain permits, and appropriately size and install systems. If contractors continue to lose jobs to others taking shortcuts, we will never achieve our objectives.

4. Regulate out the older, dirty HVAC technology

We need to price in the negative impacts of fossil fuel heating solutions and account for their greenhouse gas emissions. In Los Angeles, the Southern California Air Quality Management District (So Cal AQMD) placed NOx (Nitrous Oxide) emission restrictions on natural gas appliances to curb smog. Manufacturers responded and made ultra-low NOx furnaces. The furnaces are expensive and have reliability issues. In response, contractors are installing heat pumps as a viable solution. Heat pumps don’t rely on combustion and therefore are zero NOx. We need to curb greenhouse gas emissions and support technologies that align with the state’s goals.

The days of ignoring the greenhouse gas implications of burning fossil fuels are over. The state has a clear and aggressive greenhouse gas mitigation strategy. We will be transitioning residential heating loads from fossil fuels to electricity. The planning process for phasing out residential natural gas is well underway at the California Public Utilities Commission (CPUC). We will be moving to a future powered by all-electric buildings.

It’s time to start supporting the contractors who are leading the way and enforce existing regulations to get others to join along. Time is not on our side in this effort. We need some real action from policymakers and all stakeholders involved in the heating and cooling industry. Forget triple bid and lowest cost bidding and promote quality work that fully complies with our existing regulations. It is an easy first step.

Charley Cormany

Executive Director

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