Encouraging Heat Pump Technology for San Joaquin Valley Residents

Resolving Hidden Financial Costs Paves Way for Heat Pump Adoption

The need to prioritize the installation of heat pumps in California’s low-income households is clear.

California’s Fourth Climate Change Assessment devoted a separate report on the challenges for low-income residents in the San Joaquin Valley, and the resulting health implications. Affordable air conditioning is likely at the top of the list of health needs for the vulnerable in the San Joaquin Valley, where weather regularly exceeds over 100 Fahrenheit in the summer and fall.

“Some residents living in these homes are disabled, need regular medical attention, and are unable to work,” a program implementer noted in a pilot report update on San Joaquin Valley, reporting on the conditions that program recipients had endured prior to the heat pump installations. “Ethically, these customers need HVAC systems to live comfortably and cannot be overlooked.”

Yet ensuring that these same communities benefit from rebate programs to encourage heat pump installations is more complex.

It turns out that for low-income residents, participation in a rebate program can require thousands of dollars of additional out-of-pocket costs, relative to richer households, because the homes tend to be older, the electricity is more likely to need upgrades, and there are often additional modifications or infrastructure improvements required -- such as replacing water damaged flooring or walls from leaks -- to provide the power. These costs, for additional wiring and other critical work, are typically either only partially or not covered by most rebate programs.

TECH Clean California, a statewide initiative to accelerate the adoption of clean space and water heating technology and put California on a path to carbon-free homes by 2045, has identified these additional costs as a key barrier to introducing heat pumps into lower-income homes.

“If you are a lower-income or harder-to-reach person, you’re probably not going to participate in a program that requires you to do a $20,000 HVAC replacement that you can’t afford,” said Sandy Laube, an energy efficiency policy researcher at Energy Solutions, the program administrator of TECH Clean California.

To address this roadblock, TECH Clean California provided funding for an already existing program, the San Joaquin Valley Disadvantaged Community Pilot Project. The pilot is part of California’s broader effort to assess the economic feasibility of helping these residents reduce their energy costs by replacing certain appliances with electric ones. The findings will be used to determine how best to meet the State’s broader goals for addressing climate change and reducing the disproportionate climate burden these communities bear.

TECH Clean California, which has committed 40 percent of its incentive funding to income-qualified customers, has learned that working with other partners in equity work helps leverage that commitment even further.

For this effort, TECH Clean California experimented with encouraging greater participation from interested households, many of which were budget-constrained.

The San Joaquin Valley Disadvantaged Community Pilot program had funded the installation of heat pump systems into roughly 279 qualifying low-income homes in the San Joaquin Valley, but due to restrictions in how funding can be used, there is a $5,000 minor home repair remediation cost maximum. This put some of the needed repairs out of reach for would-be program participants.

TECH Clean California was able to provide enough additional incentive funding to expand the San Joaquin Valley Pilot, so that it could reach more residents. In fact, TECH Clean California successfully helped fund remediation work in 89 additional homes. “We saw that many of these lower-income households were not going to be able to participate and get the broader benefits of renewable power in their home,” Laube said. “We wanted to be equitable in how we are spending the incentive money, which has meant finding ways to include groups that would normally not participate.”

This additional TECH Clean California funding covered home repair expenses, trenching, and other infrastructure costs, bridging the gap between what the utility was able to fund through its program and what the end customers needed to install the new electrification equipment. As a result, eligible customers had no additional out-of-pocket expenses.

“The additional TECH Clean California funding ended up being very important,” said Jose Landeros, the Director of Energy Programs for Proteus. “If it had not been for those additional funds for the remediation, many of these customers would not have participated.”

The needed work which TECH Clean California funded were a subset of homes that PG&E’s Building Electrification program had identified as needing heat pump water heaters. For these homes in San Joaquin Valley, the preparatory work for installation in a 2022 pilot project revealed a broad range of preliminary repair issues that first needed to be addressed.

Many of these homes needed to relocate the new heat pump systems water heater to the exterior of the home, requiring the installation of a metal enclosure for protection from weather or other damage.

Several residences in the San Joaquin Valley also required panel upgrades to support the added load of the new electrical equipment.

“It costs more money to electrify low-income households,” said Rachel Etherington, an energy transition strategist with the Ortiz Group, who worked with the San Joaquin Valley community in facilitating heat pump installations. “You only know how bad it is when you're on the ground. “There's no pavement for example. You can't put machinery on dirt. You must revert to manual trenching, so that's a significant labor cost. And every single home needed an electrical panel upgrade. It gives you an understanding of why it's such an interesting project, like the pioneer of low-income implementation.” However, these kinds of upgrades will have further benefits for customers down the road, providing the basis for further electrification.

“A 200-amp panel gives low-income customers a better availability of power for the future, meaning that if they do have to get an electric car, they now have the capacity to be able to put an EV charger on their house,” said Lyal Ray, a quality production manager for Synergy Energy who was actively involved in many of the installations for San Joaquin Valley. “They have the capacity to put battery storage that is provided for low-income housing.”

It’s these kinds of hidden costs that are proving to be a barrier for lower-income families to access the benefits that electrification technology such as heat pump water heater HVACs can provide.

“Without TECH Clean California funds, 89 of these households would not have been able to participate, elderly residents who require electricity all day, residents on dialysis machines,” Etherington said. “They required a significant amount of infrastructure upgrades. But at the end of the day, these are people’s homes, and those TECH Clean California funds created a huge quality of life improvement for those households.”

By Emily Pickrell

For more information about this and other projects, please visit TECH Clean California’s Annual Report at techcleanca.com. The report highlights learnings and accomplishments through the initiative's statewide focus and collaboration. The guiding principle of TECH Clean California puts the state on a pathway to six million heat pumps by 2030 and carbon-free homes by 2045.