California injects $40M into heat pump water heater effort amid broader push to decarbonize buildings

Kavya Balaraman, UTILITY DIVE

California energy regulators Thursday approved an additional $40 million in funding from the 2023 gas cap-and-trade allowance auction to promote heat pump water heaters, on top of a previously authorized $44.7 million.

The initiative, part of the California Public Utilities Commission’s (CPUC) self-generation incentive program, which promotes existing and emerging distributed energy resources, is one of many efforts to cut carbon emissions from buildings by expanding incentives for electric appliances, CPUC Commissioner Clifford Rechtschaffen said at the agency’s meeting.

Dive Insight:

California’s building sector contributes around a quarter of the state’s greenhouse gas emissions, and regulators see heat pump water heating systems as a promising tool to reduce that. Heat pump systems tap into the electric grid to heat water, and as the state’s electricity mix grows cleaner, they can offer a cleaner and more efficient alternative to natural gas water heating, according to the CPUC.

Approximately 800,000 water heaters are replaced every year in California, and under the agency’s program, customers can receive incentives for installing heat pump water heaters — up to $4,885 for low-income, single-family residential customers and $3,800 for other single-family residential customers.

The heat pump water heater systems are required to operate in a way that shifts electricity demand to off-peak hours on the grid, and reduces greenhouse gas emissions, in order to be eligible for the incentives. Using a technology called a “thermostatic mixing valve,” these systems can pre-heat water when electricity demand is low, essentially allowing them to provide energy storage services.