Zero-Carbon Hot Water and Steam in Homes and Industry

Heating water in homes and commercial buildings, and producing low-temperature steam in multifamily and industrial facilities are one of the biggest untapped opportunities to slash carbon emissions while cutting energy bills and enabling the expansion of renewable power, finds a new study from Schatz Energy Research Center, in collaboration with NRDC and other partners.

Producing hot water and steam in homes, commercial buildings, and low-temperature (less than 300°F) industrial applications in the U.S. is responsible for 520 million metric tons of carbon emissions annually, equivalent to 113 million cars each year, and 27 percent more than the 410 million metric tons associated with heating buildings. Heat is responsible for a quarter of all emissions from energy use in the U.S., and this report addresses roughly 10 percent of U.S. emissions from energy use. The study also identified potential bill savings of $30 billion per year with large-scale deployment.

Traditionally, the need for hot water and steam has been provided by burning fossil fuels in water heaters and boilers, releasing climate and air pollution. The good news is that technology exists, and is already widely used in many countries, that can slash these emissions by half or more with today’s electric grid, provide a pathway toward carbon- and pollution-free hot water and steam when powered by renewable energy, while reducing energy costs compared to conventional gas boilers.

What Are Heat Pump Water Heaters?

Heat pump water heaters are to water heating and steam what LED (Light Emitting Diode) bulbs are to lighting and electric vehicles to transportation: a 21^st century technology solution that is ready for prime time. It just needs serious policymaker attention and support to dislodge outdated and polluting incumbent technologies.

Heat pump water heaters take advantage of the laws of thermodynamics to produce four to five times more energy than they consume, and up to seven to eight times in industrial applications, by efficiently absorbing heat out of the air, water, or the ground, and concentrating it into a hot water tank. This process, like that used in air conditioners and refrigerators, is far more efficient than even the most efficient gas combustion water heaters and boilers. So, despite gas being cheaper than electricity per unit of energy, the energy savings from a modern heat pump more than offset the price difference, yielding lower energy costs. The savings are even more compelling when replacing electric resistance, fuel oil or propane where heat pump water heaters can energy costs in half or more.

Heat pumps can serve the hot water and low-temperature steam needs in many applications, from residential single- and multifamily, to district heating on campuses and in cities, to commercial sectors such as hotels, healthcare, education, food service, to industrial needs such as food processing, brick drying, plastics/chemistry, paint booths, wood products, etc.

Three Big Ideas: Efficient, Climate-Friendly, Grid-Flexible

What makes heat pump water heating so attractive? They are a perfect tool in the clean energy transition because they are efficient, climate-friendly, and grid-flexible.

1. Efficient: Heat pump technology has come a long way. As the study states, they now sit at “300 percent” efficiency or more for residential applications, surpassing the efficiency of conventional fossil fuel combustion (60-97 percent) or electric resistance (90-95 percent), and even more in many industrial applications. High-performance heat pumps can heat water using less energy therefore costing energy users less on their energy bills. The study found that 80 percent of residential customers, 70 percent of industrial customers, and 60 percent of commercial customers would pay less for electricity to power a heat pump water heater than they currently pay for gas-fueled water-heating, at today’s energy prices. Those incentives should only go up as heat pump performance continues to improve rapidly. 
2. Climate Friendly: Using high-efficiency heat pump water heaters powered by increasingly clean electricity will reduce carbon emissions from water heating and steam. According to the study, nearly 100 percent of the potential sites assessed across the residential, commercial, and industrial sectors would achieve decreased GHG emissions when using an electric heat pump water heater. And as the grid is decarbonized those emissions move towards zero.
3. Grid-Flexible: Heat pumps offer the ability to heat and store water during times when renewable energy is abundant for later use. In simple terms, heat pumps can act as thermal batteries to store excess renewable energy and buffer the grid. This can help decarbonize the grid faster and at a lower cost. The study determined that the overall share of customers in all sectors who would experience savings with a switch to heat pumps for hot water rises from 60-80% to 95% with flexible operation and appropriate pricing or incentives available. In many cases, this strategy is far more cost effective and more environmentally acceptable than other forms of storage such as constructing new hydro facilities for short-term storage.

A Potential Solution to Reduce Low-Income Households’ Energy Burden

The study finds that more low-income households would save money on their utility bills with heat pump water heating than other households, which is particularly important as they also spend the highest share of their income on water heating, up to 2 percent for the lowest income households.

However, for low-income households to benefit from these solutions, there needs to be intentional deployment policies that make these solutions accessible, affordable, and ensure they do not result in unintended consequences such as displacement due to increased rent following building retrofits. Underserved communities must be prioritized in clean water heating solutions deployment policies, via federal policies like the Zero Emission Homes Act (ZEH), and the Green Resilient Efficient, Affordable Homes for Tenants Act (GREAHT), that are being considered as part of the Biden administration’s and U.S. Congress’ infrastructure investment priorities.

Making It Happen

The report details many policies that are needed to seize this opportunity for a cleaner and more affordable way to serve the hot water needs of U.S. homes, businesses, and industry. In a nutshell, these policies fall into three buckets: 1) removing regulatory and market barriers; 2) investments to accelerate deployment; and 3) standards to scale adoption and ensure equitable access.

Now is the time to act: Fossil fuel water heaters and industrial boilers have a lifespan of at least a decade, sometimes two, perpetuating unnecessary emissions and creating higher costs for customers. The next several years are crucial for ensuring that heat pump water heaters play a significant role in achieving a carbon-free grid by 2035. As the study summarized, “Efficient and flexible heat pumps meet the moment by creating jobs in an important 21st-century sector, lowering customers’ energy bills, cutting carbon emissions, and easing integration of renewable energy.”