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Heat pumps can save households money on their utility bills and are essential to cutting carbon emissions. The catch? The superefficient appliance can cost thousands of dollars more than a new gas furnace.
Zero Homes aims to change that. The startup just raised $16.8 million to make it cheaper and easier for homeowners to switch to heat pumps.
Founded in 2022, the Denver-based company can scope and size the all-electric systems without ever stepping foot inside a customer’s home. Its digital platform cuts the cost of a heat pump installation by 20% on average, with much greater savings common in hard-to-reach rural areas, according to Grant Gunnison, Zero Homes’ founder and CEO.
Prelude Ventures led the Series A funding round. “Homeowners want comfort, and they want it easy,” Matt Eggers, Prelude’s managing director, said in a statement. “Zero Homes has built the missing digital infrastructure for home upgrades, making it dramatically easier for millions of homeowners to adopt efficient, modern systems without friction.”
The first step in getting a heat pump is sizing: figuring out how big a system needs to be to efficiently and comfortably heat and cool a home. It’s crucial to get that right. A wrong-size system can lead to worse comfort, bigger energy bills, a shorter appliance lifespan, and a greater risk of health-harming black mold.
Historically, quoting a heat pump system’s size has been a hands-on job. Most heat pump installers visit a home to conduct what’s called a Manual J assessment: the gold standard method to determine how much heating and cooling a building requires to keep occupants comfortable. An in-person visit adds time and expense before customers have even committed to a project. And that, according to Gunnison, unnecessarily inflates heat pump costs.
Reducing those “soft costs” is especially important now, as utility bills rise nationwide. Electricity and piped gas prices are the biggest drivers of overall inflation.
The startup aims to cut project costs by eliminating the need for an in-person Manual J step with software. By using the company’s free phone app, an individual can take photos and videos of their home and receive a heat pump quote, with all applicable rebates and tax credits included. Once a homeowner agrees to the price, Zero Homes schedules a vetted contractor to get the system up and running.
Beyond reducing costs, this has the added benefit of being less disruptive to customers than the traditional, on-site procedure, which requires a homeowner to coordinate with an HVAC contractor.
“We want to … be nationwide,” said Gunnison, a former general contractor and an MIT-trained engineer who once worked on satellite communications and remote imaging at NASA.
To achieve that scale, Zero Homes relies on partnerships with independent installers that it subcontracts with. Currently, the company operates in Colorado, Massachusetts, Minnesota, Illinois, and California.
Zero Homes’ approach has gained some traction. The U.S. Department of Energy validated the startup’s remote assessments in 2024, Gunnison reported. The Air Conditioning Contractors of America also that year approved the startup’s software as a tool to perform the organization’s trademark Manual J calculations remotely.
Gunnison declined to share whether the company was profitable, but he did say that its revenue had grown by a factor of 10 from 2024 to 2025. Customer service calls on the installations it has managed are “very low,” he added. And Zero Homes’ installer network has expanded to nearly 100 contractor businesses.
“We get rid of a lot of the overhead that costs them a lot of time and heartache, so that they can be successful,” Gunnison noted. “We don’t charge them for leads; [we] fill their calendars.”
A number of utilities and power co-ops, including ComEd, Great River Energy, and Tri-State Generation and Transmission Association, have hired Zero Homes to deploy heat pumps in their service territories. A couple of local governments have also expressed confidence in the company: Chicago partnered with Zero Homes as part of its Green Homes program, and Colorado is giving the business a $745,000 boost through its economic development office to expand its Denver-area operations.
Several other startups around the country are specializing in heat pump installations, such as Elephant Energy, Tetra, Forge, Quilt, and Jetson — which recently raised $50 million to get its in-house-designed heat pump into more buildings.
Gunnison plans to use the new infusion of capital to double his company’s 25-person headcount this year and improve its software capabilities, he said.
It used to take Zero Homes several days to provide a quote to a homeowner who had submitted a scan. Now that process is complete in about one day. By the end of 2026, the startup aims to slash that time to 30 minutes, Gunnison noted.
“Once we can consistently deliver that, then we will very, very rapidly expand geographically.”
Canary Media’s “Electrified Life” column shares real-world tales, tips, and insights to demystify what individuals can do to shift their homes and lives to clean electric power.
As Winter Storm Fern was dumping record amounts of snow and ice across the U.S. a couple of weeks ago, Kit Wu sprang into action.
Wu, the founder of the Boston-based heat-pump installation and research startup Laminar Collective, quickly reached out to his customers. He wanted to know how the more than 70 households his startup had installed heat pumps for were faring — and to address any performance issues that might have come up as the city weathered its eighth-biggest snowstorm in history.
The vast majority of heat pumps fared well, Wu’s customers reported. Even as Fern eventually departed and a brutal cold snap gripped the region, more than 90% of heat pump units held up without a hitch. But six did struggle.
Their owners saw dips in indoor temperatures and sent Wu photos of their outdoor units, the parts of heat pump systems that find warmth in even frigid winter air. These appliances had a significant buildup of ice on their backs — up to a half inch thick.
That wasn’t good.
Heat pumps, which provide both heating and cooling, use finned metal coils filled with refrigerant to extract thermal energy from the atmosphere. A stubborn crust of ice throttles airflow, making it tough for a heat pump to scrounge up enough heat to keep residents toasty, Wu explained.
For years, heat pumps have been popular in the warmer U.S. South, but not so much in chillier parts of the country. That’s changing. Tech improvements have made it possible for households in colder climes to embrace the appliances, which are always better for air quality and often cheaper to run than fossil-fueled boilers and furnaces. Even in notoriously frosty states like Maine, they’re taking off.
But with this new territory comes new challenges. While some heat pumps are designed to work in temperatures as low as minus 22 degrees, it’s possible for extreme, prolonged winter weather to dampen their efficiency.
That’s exactly what happened with the struggling heat pumps that Wu encountered: They had accumulated so much ice that they just “couldn’t keep up,” he said.
Thankfully, these challenges are surmountable. Wu was able to return each of the iced-over units to smooth working order in one visit. But it would have been better to avoid the issue in the first place. Here are a few steps you can take to help your heat pump perform at its best even on the worst winter days.
To keep your heat pump humming along in the freezing cold, bring in a heating, ventilation, and air-conditioning technician before the bad weather comes, said Mark Kasdorf, founder and CEO of Forge, a heat-pump installer based in Newton, Massachusetts.
“I think 99% of all issues can be taken care of by just having an expert take a look at the system,” he said.
A professional can perform what’s called a blower-door test to find any big air leaks in your home, which work against a heat pump. And have the technician check for blocked air filters — or do it yourself — particularly if you bought the home with the heat pump already installed.
“Tons of homeowners never change their filters,” Kasdorf noted, even though it’s something most can do on their own. Helpful YouTubers have demonstrated the process for both ductless and ducted systems.
You’ll want to give your heat pump space to breathe, with at least two feet of clearance. If snow or fallen leaves are common in your area, make sure your heat pump is raised off the ground. The appliance needs this space so that, when it goes into defrost mode, water can efficiently drain away, rather than refreeze into ice.
When snow is coming down hard, break out the shovel, Wu added. “If you’re going to dig out your car, you should also dig out your heat pump.”
You could even get a little awning or semi-enclosed hut for your system to give it extra protection from a storm.
A suffocated heat pump is a sad heat pump.
A layer of ice will cause it to run less efficiently and jack up your energy bills. But there are a couple of remedies you could try, Wu said.
One is to run the heat pump in reverse in cooling mode. That will heat up the coils, potentially allowing them to thaw their icy coats.
Another is a manual defrost: pouring room-temperature water over the ice. This trick worked on all the units that he recently tended to, Wu said.
Never use hot water, though, he noted; the metal could crack.
I’ll admit, I was a bit skeptical of this piece of advice. But Kasdorf insisted it has worked for him, so here goes.
If your appliance isn’t pumping out enough heat, then take a picture of the unit, upload it to an AI model — Gemini has worked best for Kasdorf — and describe the weather and your issue.
A large-language model can suggest quick fixes. When I gave Gemini a test case, it offered some of the strategies in this article, as well as warned me to resist the urge to chip at the ice with a sharp object. A misplaced stab could cause a refrigerant leak that takes the heat pump out of commission.
Treat the tool “like a really smart uncle” who’s an HVAC technician, Kasdorf said; the voluble advice may be helpful, if imperfect. It’s also best to think of this exchange as a starting point for some troubleshooting. If it provides anything that seems especially involved — or just weird — call a professional, he noted. And if your problems persist, the same applies: Work with your installer.
That is, after all, what Wu’s customers did, and the results speak for themselves.
Last Friday, 10 days after Fern swept through Boston, area temperatures were still well below freezing, and Wu could see snow piled high outside. But after the simple fixes he employed, every one of his customers’ heat-pump systems was working just fine.
Want more tips on keeping your heat pump humming even in extreme weather? Efficiency Maine has a plethora.
Heat pumps outsold fossil gas–fired furnaces in the U.S. yet again last year.
That’s the fourth year in a row — a testament to Americans’ sustained appetite for the zero-emissions appliances crucial to weaning buildings off planet-warming fossil fuels.
In 2025, 12% more air-source heat pump units shipped in the U.S. than gas furnaces, the next most-popular heating appliance, per data released today from the industry trade group Air-Conditioning, Heating, and Refrigeration Institute.
Now, that doesn’t necessarily mean that more households are installing the über-efficient appliance instead of furnaces; one home may need multiple heat pump units to replace a single furnace.
And not all the data was good news for the climate. Shipments of gas-powered units ticked upward last year to 3.2 million, while heat pump sales fell to 3.6 million.
But these are year-to-year fluctuations, and the broader trend is still toward heat pumps, experts told Canary Media.
Given the health, comfort, efficiency, and climate benefits of the tech, a complete transition to heat pumps feels inevitable, said Ryan Shea, manager in the carbon-free buildings team at nonprofit RMI. “I think the only question is … how fast the transition happens, not if.”
Electric heat pumps are two-way air conditioners that offer both space cooling and heating. They’re a critical tool to eradicating carbon pollution from buildings, which account for more than one-third of U.S. greenhouse gas emissions. Because the tech is two to four times as efficient as fossil-fueled systems, heat pumps also save most households money on their energy bills — a winning attribute as more Americans grapple with a cost-of-living crisis.
So why the dip in heat pump shipments last year?
A combination of factors, from tariffs to higher interest rates to a sluggish construction market, was likely to blame, according to experts.
A changeover in refrigerants also played a role. For years, heat pumps and air conditioners utilized the hydrofluorocarbon refrigerant R-410A, which has a strong global-warming potential. But as of Jan. 1, 2025, federal law has required newly manufactured systems to use a less polluting class of refrigerants, called A2Ls.
At least some distributors stocked up on the equipment in 2024, so they’d be ready if customers asked for their broken heat pumps or ACs to be replaced with the same models, said Kevin Carbonnier, senior manager of market intelligence at the nonprofit Building Decarbonization Coalition. That led to a backlog of extra inventory in 2025.
But the refrigerant and market factors “are temporary headwinds,” said Wael Kanj, research manager at electrification advocacy nonprofit Rewiring America. “I don’t think they change the fundamentals. Heat pumps are still the most efficient and comfortable way to heat and cool the home.”
Standing in the way of a total heat-pump takeover has long been their price tag. In 2024, Rewiring America estimated that for a medium-size home, a central heat-pump system costs a median of $25,000. A comparable gas furnace plus central AC system can cost roughly half that.
Even for the same building, contractors may provide hugely varying estimates. Last year, heat-pump research firm Laminar Collective found that for one 2,000-square-foot abode in the Boston area, installers’ quotes for a whole-home heat-pump system could differ by more than $10,000.
The Trump administration has worked against making the tech more affordable. Last year, it terminated home-energy tax credits that reduced the cost of an air-source heat pump by up to $2,000, and of a ground-source, or geothermal, heat pump by an uncapped dollar amount up to 30% of the cost.
Some federal funding to boost heat pumps continues to flow, however, including a $200 million grant to Denver-area local governments. Several states — including California, Georgia, New York, and Indiana — have also been able to tap into an $8.8 billion grant program created under the Biden administration to launch home energy rebate programs that help low- and median-income households afford heat pumps.
Even without the tax credits, thousands of incentive programs that lower the upfront costs of electrification still exist at state, local, and utility levels, Kanj said. Rewiring America and the North Carolina Clean Energy Technology Center offer online tools so that households can find available credits.
State and local governments are also pursuing creative ways to help heat pumps take off. New England and California have launched multipronged initiatives to raise public awareness and get heating, ventilation, and air conditioning contractors on board. Massachusetts has implemented a lower winter electricity rate for heat pump owners. New York City, which has an all-electric standard for new buildings, launched a $38.4 million program earlier this month to deploy window heat pumps in affordable housing. And California legislators are considering a bill that would cut red tape for homeowners looking to install these electric appliances.
Investors are backing innovation in this space. The Vancouver-based startup Jetson, for example, just raised $50 million to scale its direct-to-consumer approach, which it says cuts installation costs in half.
And although U.S. heat-pump sales didn’t break any annual records in 2025, the tech did quietly achieve a major milestone: In September, more heat pumps shipped than central ACs for the first time.
“It’s really exciting to see the market moving in that direction,” Shea said.
The Building Decarbonization Coalition’s Carbonnier hopes that in the next year or two, “we’ll see it fully cross over” — the way heat pumps overtook gas furnaces four years ago.
A group of governments in the Denver metropolitan area has managed to hold on to a nearly $200 million federal grant to unleash heat pumps in the region — and now it’s putting that money to work.
The group has retained the funding, awarded by the Environmental Protection Agency in 2024, even as the Trump administration has canceled or attempted to claw back tens of billions in grants and loans doled out under Biden’s landmark climate and energy laws: the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.
The Denver Regional Council of Governments, whose members include area cities, towns, and counties, launched the new Power Ahead Colorado initiative last week. The program aims to improve local air quality and public health by tackling pollution from the region’s biggest emitters: buildings. Fossil fuel–powered appliances release toxic compounds, both indoors and outdoors, that increase the risk of a wide range of maladies, including asthma and cancer.
Power Ahead Colorado will provide free energy-efficiency and heat-pump retrofits to about 2,000 low-income households, offer personalized help from on-call energy advisers, issue $40 million in rebates for home energy upgrades, and train an estimated 4,800 heat-pump installers.
Eradicating gas usage is essential for Colorado to decarbonize its economy by 2050. About seven out of 10 households in the state burn gas as their primary source for heating.
“Everybody across the region stands to benefit from cleaner air, and Power Ahead Colorado … is specifically designed to do that,” said Chris Selk, communications and engagement program manager of Power Ahead Colorado.
Installing a heat pump to heat and cool spaces, a heat-pump water heater, and other electric appliances that eschew fossil fuels “has such an incredible impact on your comfort, your safety, and your health,” Selk added.
This flash of good news comes during a murky time for clean energy and decarbonization.
The Trump administration and Republican-controlled Congress have canceled or unlawfully terminated more than $113 billion in emissions-reducing program funding committed under the Biden administration, according to Jillian Blanchard, vice president of climate change and environmental justice at Lawyers for Good Government, a nonprofit that has been advising affected organizations and communities on how to address frozen funds.
The sheer number of federal attempts to rescind project funding — and court decisions ordering their release — has been dizzying.
Take one of the biggest buckets of grant money: the $27 billion Greenhouse Gas Reduction Fund, which included the National Clean Investment Fund ($14 billion), the Solar for All program ($7 billion), and the Clean Communities Investment Accelerator ($6 billion). Grant recipients are fighting for their awards in multiple ongoing lawsuits related to each one of these programs, according to Blanchard. There are four cases about Solar for All funding alone.
But some smaller programs have attracted less attention, including the $5 billion Climate Pollution Reduction Grants program — the source of funding for Power Ahead Colorado. The EPA selected state, local, tribal, and U.S. territory recipients in 2024, and, to Blanchard’s knowledge, all have continued to receive funding, though the reasons are unclear.
Power Ahead Colorado had a brief period last January when it was “unable to draw down any funds,” Selk said. “But that, thankfully, cleared up, and we haven’t had any issues at all.”
Selk estimates that the heat-pump program, which gets reimbursed for its spending, has used roughly 8% to 10% of its grant since 2024. But she expects outlays to pick up speed now that the program has launched. The federal grant lasts until October 2029.
Colorado is investing millions more of federal dollars in decarbonization efforts, the state publicized last week.
With a grant from the U.S. Department of Energy’s Training for Residential Energy Contractors program, the state energy office announced $1 million to teach about 400 heating, ventilation, and air conditioning technicians how to install heat pumps.
The state has also awarded $21.6 million, out of its own $50 million Climate Pollution Reduction Grant, to local governments to foster resilience and lower energy costs through emissions-slashing initiatives, including adopting all-electric building codes and making it easier to develop large-scale solar, wind, and geothermal projects.
The federal government may be throwing up roadblocks to local climate action, but Colorado is demonstrating that the Trump administration hasn’t completely choked political will for ditching fossil fuels.
“People are going to continue to do climate projects at the state and local level,” said Blanchard of Lawyers for Good Government. “And whenever we can leverage federal funding, we will.”
Home-electrification startup Jetson just raised $50 million to fuel its ambitious effort to slash the cost of installing heat pumps in the U.S. and Canada.
Founded in 2024, Jetson says it can install the ultraefficient appliance for 30% to 50% less than competitors. The company has also developed its own smart heat pump, called the Jetson Air, which it unveiled last September. Currently, the startup operates in its home base of British Columbia, Canada, and in Colorado, Massachusetts, and New York, with over 1,000 heat-pump installations to date.
Jetson’s team, which has grown from 75 employees in September to 120 today, has extensive experience in designing consumer hardware. Co-founder and CEO Stephen Lake previously led smart-glasses startup North, which Google acquired in 2020. Several former North employees have joined Lake to work on home-electrification products.
The infusion of Series A funding will help Jetson continue to grow its team — and its market reach.
Jetson will use the investment to develop other home appliances, find ways to further reduce costs for consumers, and expand into new geographies, Lake said. The company plans to unveil a heat-pump water heater midyear.
As for geographic expansion, Jetson will prioritize regions where “the need for efficient heating is clear,” he said. “We’ll be in Washington state shortly and will be announcing new locations throughout the year.”
Funders flocked to the company in part because Jetson is pursuing “an absolutely massive market,” according to Ryan Gibson, an investor at Eclipse Ventures, which led the funding round. Roughly half the homes across the U.S. and Canada burn fossil fuels for heating, according to government data, and could switch to emissions-free heat pumps.
The market for the heating-and-cooling appliance is ripe for disruption, according to Gibson. The way that heat pumps are traditionally sold and installed is fragmented and low-tech, with little pricing transparency, he said. Contractors typically need to perform assessments in person in order to provide an estimate. By contrast, Jetson provides instant quotes online and at competitive prices that rival the cost of a furnace plus a conventional air conditioner.
On average, a Jetson system costs about $15,000 before local incentives, Lake said. That’s quite a departure from the national average. Using 2024 data, nonprofit Rewiring America estimated that for a medium-size home, a central heat-pump system costs a median of $25,000. (Jetson declined to share whether it’s currently profitable.)
To achieve those lower prices, Jetson takes a vertically integrated approach: from designing its software-enabled and sensor-equipped heat pump to having its own technicians roll up in one of the startup’s green electric trucks to install the appliance in a person’s home. The company also provides ongoing remote monitoring so that it can alert customers to quiet issues, like a dirty air filter that’s eroding performance.
In addition to Jetson, venture capitalists have backed a few other “heat-pump concierge” startups in recent years, though more modestly. Elephant Energy raised $3.5 million in seed funding in 2022; Tetra secured $10.5 million in seed money in 2023; and Quilt, which makes mini-split systems, added to a $33 million Series A with a $20 million Series B round in December.
Jetson’s funding round comes just after the U.S. government repealed a $2,000 tax credit for heat pumps, as well as subsidies for other efficiency upgrades, and as the nation struggles with rising energy bills. This presents a clear opportunity for firms like Jetson, which promise big cost savings over traditional installers. And with the new cash, the startup has a chance to deliver.
New England winters can get wicked cold. This week, five of the region’s states launched a $450 million effort to warm more of the homes in the often-frigid region with energy-efficient, low-emission heat pumps instead by burning fossil fuels.
“It’s a big deal,” said Katie Dykes, commissioner of Connecticut’s Department of Energy and Environmental Protection. “It’s unprecedented to see five states aligning together on a transformational approach to deploying more-affordable clean-heat options.”
The New England Heat Pump Accelerator is a collaboration between Connecticut, Maine, Massachusetts, New Hampshire, and Rhode Island. The initiative is funded by the federal Climate Pollution Reduction Grants program, which was created by President Joe Biden’s 2022 Inflation Reduction Act. The accelerator’s launch marks a rare milestone for a Biden-era climate initiative amid the Trump administration’s relentless attempts to scrap federal clean energy and environmental programs.
The goal: Get more heat pumps into more homes through a combination of financial incentives, educational outreach, and workforce development.
New England is a rich target for such an effort because of its current dependence on fossil-fuel heating. Natural gas and propane are in wide use, and heating oil is still widespread throughout the region; more than half of Maine’s homes are heated by oil, and the other coalition states all use oil at rates much higher than the national average. The prevalence of oil in particular means there’s plenty of opportunity to grow heat-pump adoption, cut emissions, and lower residents’ energy bills.
At the same time, heat pumps have faced barriers in the region, including the upfront cost of equipment, New England’s high price of electricity, and misconceptions about heat pumps’ ability to work in cold weather.
“There’s not a full awareness that these cold-temperature heat pumps can handle our winters, and do it at a cost that is lower than many of our delivered fuels,” said Joseph DeNicola, deputy commissioner of Connecticut’s Department of Energy and Environmental Protection.
To some degree, the momentum is shifting. Maine has had notable success, hitting its aim of 100,000 new heat pump installations in 2023, two years ahead of its initial deadline. Massachusetts is on track to reach its 2025 target, but needs adoption rates to rise in order to make its 2030 goal.
The accelerator aims to speed up adoption by supporting the installation of some 580,000 residential heat pumps, which would reduce carbon emissions by 2.5 million metric tons by 2030 — the equivalent of taking more than 540,000 gas-powered passenger vehicles off the road.
The initiative is organized into three program areas, or “hubs,” as planners called them during a webinar kicking off the accelerator this week.
The largest portion of money, some $270 million, will go to the “market hub.” Distributors will receive incentives for selling heat pumps. They will keep a small percentage of the money for themselves and pass most of the savings on to the contractors buying the equipment. The contractors, in turn, will pass the lower price on to the customers. In addition to reducing upfront costs for consumers, this approach is designed to shift the market by encouraging distributors to keep the equipment in stock, therefore making it an easier choice for contractors and their customers.
These midstream incentives are expected to reduce the cost of cold-climate air-source heat pumps by $500 to $700 per unit and heat-pump water heaters by $200 to $300 per unit. When contractors buy the appliances, the incentive will be applied automatically — no extra paperwork or claims process required.
“It should be very simple for contractors to access this funding,” said Ellen Pfeiffer, a senior manager with Energy Solutions, a clean energy consultancy that is helping implement the programming. “It should be almost seamless.”
Consumers will also remain eligible for any incentives available through state efficiency programs, such as rebates from Mass Save or Efficiency Maine, but will likely not be able to stack the accelerator benefits with federal incentives like the Home Efficiency Rebates and Home Electrification and Appliances Rebate programs.
Program planners expect to be finalizing the incentive levels through the end of the year, enrolling and training distributors in the early months of 2026, and making the first participating products available in February 2026, said New England Heat Pump Accelerator program manager Jennifer Gottlieb Elazhari.
The second program area is the innovation hub. Each state will receive $14.5 million to fund one or two pilot programs testing out new ways to overcome barriers to heat pump adoption by low- and moderate-income households and in disadvantaged communities. One state might, for example, create a lending library of window-mounted air-source heat pumps, allowing someone whose oil heating breaks down the time to research replacement options rather than just installing new oil equipment.
The innovation hub will also include workforce development and training. Organizers are talking with contractors and other partners to figure out where the gaps are in heat pump training. In the first few months of 2026, they will develop a program with a target start date in April.
The goal will be not only to ensure that there are tradespeople with the needed skills to install the systems, but also to lay the groundwork for faster adoption by spreading knowledge about the capabilities of the technology and the available incentives.
The third major area of the accelerator is a resource hub to aggregate information for contractors, distributors, program implementers, and other stakeholders. Overall, organizers hope to have all three hubs operational in spring 2026.
Accelerator planners expect programs to boost adoption even as a federal tax credit of up to $2,000 on heat pumps and heat-pump water heaters is phased out at the end of the year, leaving states leading the way on clean energy action.
“At the state level, this is one example of a way we are helping to make progress in reducing greenhouse gas emissions, but with a solution that can help people take control of their energy costs,” Dykes said. “That’s really what we’re focused on.”
DALLAS — Past gnarly live oaks, behind a barbecue joint and a brewery in a suburb north of Dallas, a white-washed brick commercial building extruded its own wispy cloud into the Texas sunlight.
Inside, the startup Skyven Technologies was running a mechanical apparatus dubbed Arcturus, which turns waste heat into industrial-grade steam. It’s so new that I was the first outsider to see the contraption up close — signing my name in slot No. 1 in the log book. But, soon, Skyven will show it off to manufacturers who want to save money on energy bills while cutting their carbon emissions.
Industrial heat causes about 20% of global carbon emissions, per a McKinsey analysis. Very high-temperature processes, like melting ores for steelmaking, are tough to replicate without fossil fuels. But, in Skyven’s analysis, about half of those industrial heat emissions come from making steam, usually in boilers that burn gas or other fuels. Skyven, and a growing cadre of startups, are designing clean, electric, hyper-efficient heat pumps to take over that task.
They have their work cut out for them: Right now, the U.S. is home to about 39,000 industrial boilers, according to Richard Hart, a decarbonization expert at the think tank American Council for an Energy-Efficient Economy. The steam they generate is used to sterilize injectable drugs, turn pulp into paper, pasteurize milk, cure lumber, and more.
Boilers are reliable and not particularly expensive — and in the U.S., natural gas is cheap — so it’s hard for cleaner alternatives to compete. ACEEE, which tracks announcements of new industrial clean-heat projects, namely heat pumps or thermal batteries, currently registers just 19 completed installations nationwide.
Skyven tackles the tricky economics by focusing on energy savings. The startup installs Arcturus at no cost to the customer, alongside existing gas boilers. The heat pump taps into the factory’s waste heat, which helps it reach high temperatures with far more efficiency than older technologies. Skyven and the customer split the savings from making cheaper electric steam, but if electricity prices spike, Skyven temporarily switches back to the gas boiler to avoid higher costs.
“What we want to do as a business is make industrial manufacturing in the U.S. and worldwide a lot more efficient, by being the leader in upcycling industrial heat and reusing it without having to create it anew,” Skyven founder and CEO Arun Gupta told me.
For now, the steam produced in Skyven’s site near Dallas floats harmlessly into the sky. But with contracts signed and real-world data to share, Skyven is mobilizing for a wave of factory deployments in the years to come.
Arcturus is not something you can pull out of a box fully formed, but a room-sized network of interlocking pipes, chambers, and appliances.
Gupta and Jim Saccone, Skyven’s senior vice president of global sales, handed me earplugs and led me into the clamorous, sun-washed room where the machinery whirred. In one corner sat a conventional gas boiler and a water heater, which acts as a stand-in for the waste source Arcturus will harness in factories.
Arcturus uses a heat exchanger to transfer energy from whatever the source is to a loop of water. While I observed it, relatively cool water from Arcturus hit the heat exchanger and rose from around 67˚C (153˚F) to 92˚C (198˚F). That heated water flows through shiny steel piping into a thick metal vacuum chamber, which lowers the boiling point and swiftly “flashes” the water into steam.
That low-pressure steam then travels through a series of four compressors, all noisily spinning at roughly 15,000 revolutions per minute. Each compressor ratchets up the temperature and pressure of the steam until it hits the target zone, which can be tailored to the needs of each factory.
“Because we make this steam with waste heat that was otherwise going to get dumped, and then just use compressors to compress that steam, that’s much less energy than using the energy to make the steam but not having any compressors,” Gupta said.
The demonstration unit generates 105˚C (221˚F) steam, which runs back through a pipe into the “customer” side of the room. In a real customer setting, Arcturus could sit up to half a mile from the factory where it delivers steam, if space is limited. For now, the vapor just vents through the roof.
The demo system produces up to 1 megawatt of thermal output. Skyven has already signed deals in the 10- to 15-megawatt-thermal range — these will have a similar footprint, Gupta said, but use bigger pipes and compressors. The technology can heat steam all the way to 215˚C (419˚F) if needed; that’s unusually high for industrial heat pumps, which typically reach around 170˚C (338˚F).
Since Skyven is producing real heat now, it has established an empirical baseline for its operating efficiency. The term of art here is “coefficient of performance,” which measures how much energy is produced per unit of energy consumed.
Gas boilers score 0.83, Saccone said, losing some energy along the way. Electric resistance boilers, a commercially mature electric heat technology, hit close to 1, a near-complete transfer of energy into heat. Startup AtmosZero recently installed an air-source industrial heat pump at New Belgium Brewing in Colorado that can reach 165˚C (329˚F); that device sports a COP of around 2.
Skyven’s average measured COP for its pilot is 6.5, but Gupta said he aims to raise it to 8 within the next three months. This isn’t a fixed value: It depends on factors like how hot the waste source is and how hot the steam needs to get. The demo site nonetheless establishes a real-world high water mark of how efficient Arcturus can be.
“The higher that [COP] value goes, the less important the spark gap is going to turn out to be,” said Hart, referring to the gap between power and gas prices. If, for example, a unit of electricity costs twice the equivalent in gas, but produces six or eight times the heat, then the heat pump is cheaper to run than a gas boiler.
Gupta didn’t set out to invent an industrial heat pump.
He had been working at Texas Instruments’ digital-light-projection business, designing the chips that run most every digital movie-theater projector. He wanted to do something good for the world and was concerned about climate change. “So, I was skimming ARPA-E research papers, as one does,” Gupta recalled, as we noshed on burgers up the road from Skyven headquarters.
The Department of Energy’s ARPA-E funds research on potentially transformative technologies. That archive was where he hit on the challenge of clean industrial heat; he figured, with his expertise manipulating light, he could make a better solar-powered heat source.
Gupta founded Skyven in 2013. At first he just tinkered in his Dallas garage, for a while confined to a wheelchair by a calamitous motorcycle accident. Eventually, he moved to the Dallas Makerspace and raised pre-seed financing for his concept. But the sheer amount of insulated plumbing needed to distribute the solar thermal heat wrecked his project economics.
“I made the mistake of a classic technical founder, in that I had a technology that I thought solved the market problem, but I didn’t really validate the market problem,” he explained. Still, he didn’t want to give up on his goal.
“At the time, no one knew anything about industrial heat,” Gupta said. The cleantech industry had spawned plenty of companies that could sell solar electricity to commercial customers, but hardly any solutions for heating needs at factories.
So Skyven reoriented around developing and financing energy-efficient upgrades for industrial heat using the best available technologies. The startup raised seed funding for this tech-agnostic model and landed a breakthrough deal with California Dairies, Inc., the largest dairy co-op in the Golden State.
The mission was to reduce gas combustion, saving money and carbon emissions, at major dairies in Turlock and Visalia. Skyven did this by deploying three types of equipment at each site: solar thermal to generate clean heat, smart steam traps to monitor steam loss in the existing system, and apparatuses to recover heat from boilers.
Skyven bundled $9 million in grants from the California Energy Commission with utility incentives from Pacific Gas & Electric and Southern California Gas Co., and landed project financing from Kyotherm, a French lender for clean-heat projects. With that combined funding, Skyven installed the equipment at no up-front cost to the dairies, and then as the facilities reduced their gas consumption, split the cost savings with them. The dairies could see a metered readout of the avoided gas combustion, and they paid Skyven an agreed-upon portion of it.
Installation wrapped up in 2023. The interventions, still operating under 10-year service contracts, are cutting 7,000 metric tons of carbon dioxide annually by avoiding over 110,000 million British thermal units of natural-gas combustion, more than originally anticipated. But Skyven concluded that the commercially available solar thermal panels weren’t a competitive source for heat, reporting to the California Energy Commission that a steam-generating heat pump would be “a more effective decarbonization solution with a wider appeal.”
Around that time, Gupta said, Skyven was scoping out a deal for an ethanol company in the Midwest. The team came across a bare-bones case study from a European ethanol plant that had built something called an “open cycle mechanical vapor recompression” device — machinery that takes waste heat, compresses and heats it, then recirculates it into the plant.
The problem was, outside of that European plant’s in-house engineering team, “there’s really no one in the world that knows how to implement this,” Gupta said. Skyven tried hiring a third-party engineering firm to draw up designs for the Midwestern customer, but that proved unsatisfactory. “We then said, ‘Okay, what if we built that experience and expertise and essentially invented this system in house?’”
Having learned from his early missteps, Gupta first vetted the idea with a slew of potential customers, who responded enthusiastically. Then Skyven stopped its tech-agnostic deals and staffed up on engineers, drawing on millions of dollars of revenue from the dairy projects. The company’s task, Gupta said, was to take existing steam compressors and adapt them into a heat pump that can be easily inserted into “an actual manufacturing facility with all the intricacies and challenges.”
Now that process has concluded, as evidenced by the steam billowing into the blue Texas sky. And Skyven did all that having raised just $11 million in outside investment and having generated real revenues, quite the outlier for Silicon Valley-backed cleantech.
A functional, highly efficient industrial heat pump is just table stakes. For Skyven to succeed, it must fight an uphill battle convincing big, old companies to bet on new technology. That’s why the startup designed its product and deal structure to minimize risk for the customer.
Arcturus can be assembled without interrupting factory operations, so customers don’t have to sacrifice production time to get the benefits of clean heat. Then Skyven schedules the steam and water connections to coincide with the plant’s regular maintenance shutdown. If that’s not possible, workers can perform a “hot tie-in” to connect Arcturus without stopping factory operations.
Skyven only runs the heat pump when it’s less expensive than using the legacy heat source. This entails real-time algorithmic calculations based on the price of electricity, the price of gas, and the COP. Company software toggles back to the original gas boiler in moments when power prices surge; if Arcturus is running, it’s got to be saving money compared to burning gas, with a target of at least a 30% reduction in cost.
This arrangement means that factories don’t have to pony up millions of dollars up front to decarbonize their heat.
“You can spend your dollars on stuff that’s core, like expanding production or improving quality or rolling out a new product line, and you can still hit your sustainability goals,” Gupta said.
Facilities teams that partner with Skyven can even tell their bosses that they’ll reduce their future operating budgets through the savings from electric heat, Saccone said.
Skyven is able to offer no-money-down steam with the ongoing financial support of Kyotherm, which financed the waste-heat collectors Skyven put into the two California dairies. Now, Kyotherm has signed an agreement whereby Skyven pitches Arcturus installations, and Kyotherm agrees to finance ones that clear its performance thresholds.
“You cannot give a blank check; you need to look at each different project,” said Remi Cuer, Kyotherm’s investment and business development director.
Kyotherm expects high single-digit internal rates of return; that’s more than solar or wind farms would pay, because emerging heat tech carries more risk. But assuming Skyven keeps bringing attractive projects, it can expect project financing for quite some time. Cuer declined to name a specific cap on the agreement but suggested his firm could fund a few hundred million dollars of Skyven installations.
Financiers usually run away from new technology until several of their peers have vetted it. But Kyotherm wasn’t afraid to back Skyven despite the newness of Arcturus. Cuer attributed that assurance to having seen how the team worked on the dairy installations. The Dallas-area pilot project is “really important for us,” he added, so his team can review the logs of COP, uptime, and other key metrics.
“It’s a market, heat pumps, where there are a lot of [original equipment manufacturers] and perhaps, currently, not enough project developers,” Cuer mused.
Until a few months ago, Skyven had a surefire tool for getting its first customer-oriented Arcturus installations done: It had won $145 million from the DOE, part of a $6 billion Biden-era effort to decarbonize heavy industry.
The Trump administration canceled Skyven’s fully contracted grants along with many others in a legally dubious effort to roll back binding federal commitments for clean energy.
“The loss of certainty on the $6 billion from the DOE’s Industrial Demonstrations Program is a challenge for the recipients. They are all considering next steps,” Hart said. But even where the money is gone, the knowledge and corporate buy-in required to win those grants lives on. The grantees “had to really think about how to do this technically, how to bring the right partners together, get the plants excited about the idea, and do all of that due diligence as part of their submissions,” Hart said.
Most other companies losing those grants boast far greater balance sheets, like Kraft Heinz and Diageo. Skyven, a much smaller company, is pursuing an internal appeal within DOE, and not currently seeking legal recourse, Gupta said.
“The cancellation of the funds has not killed the projects,” Gupta said. “They are actually all still moving forward, they’re just moving forward a lot slower.”
The plan had been to build a slew of them and learn from the results to drive costs down. Instead, Skyven slowrolled development to grind out system-cost reductions, so the projects would still make financial sense without government support. This effort went surprisingly well, Gupta reported, and pushed costs 40% lower in just a few months.
Skyven once again has had to zig and zag, improbably emerging stronger from the turbulence.
President Donald Trump’s megalaw will soon slam the door on tax credits for homeowners who want to install heat pumps or make other energy-efficiency improvements.
But there’s still one way to tap federal assistance for cleaner heating.
The same law allows installers of geothermal heat pumps and systems that store thermal energy for later use to earn tax credits for years to come. Though individuals can’t tap the incentives directly, companies that retain ownership of the systems can lease them to customers at a cost that reflects the federal discount of 30% to 50%.
Already, some companies are adapting to the new state of play. Installers that didn’t previously have a leasing business are pivoting to take advantage of the incentives. For firms that already deploy thermal energy storage systems in multifamily buildings via commercial partners, the transition is especially straightforward.
It’s a rare and under-the-radar bright spot for home electrification in the One Big Beautiful Bill Act (OBBBA). The law is otherwise expected to slow down the shift from fossil-fueled buildings to heat pumps, which improve air quality and can save consumers money on top of reducing carbon emissions. But the pathway available to companies that lease geothermal and other clean-heat systems could help soften the blow.
Take Dandelion Energy, a startup specializing in home geothermal heat pumps that pull warmth from the ground rather than the air. Already, the firm has launched a leasing structure to take advantage of the changes.
If anything, the new law has made Dandelion’s approach to earning tax credits simpler, said CEO Dan Yates. That’s because the Google X spinout has in the past few years “focused on working with large-scale new homebuilders, where we do hundreds, even thousands of homes in new projects,” like its sizable partnership with homebuilder Lennar in Colorado.
Homebuilders didn’t have a clear way to capture the value of geothermal heat pumps under the Section 25D tax-credit program that’s going away at the end of this year, Yates explained. That tax credit was for households, not for companies that build homes with the eligible technology.
But under Dandelion’s new leasing structure, homebuilders can capture the baseline 30% tax credit, plus a 10% adder under domestic-content provisions that Dandelion’s U.S.-built systems qualify for. That enables them to save “thousands of dollars” up front, Yates said. “In many states, we’re seeing this lease as a real tipping point, where geothermal becomes less expensive than the status quo for the builders.”
The changes in the OBBBA also solved a key problem for third-party ownership of geothermal heat pumps, he said. Under previous tax-code language, those systems were considered “limited-use property,” meaning that the commercial owner couldn’t repossess them if the leaseholder failed to make payments, which complicated leasing structures.
But the Geothermal Exchange Organization, a geothermal-heat-pump trade group, successfully lobbied to change that language with the OBBBA. Now, leased geothermal systems can enjoy the same tax credits that have helped boost larger projects such as geothermal district-heating networks, which supply ground-source heat to buildings, campuses, or entire neighborhoods.
Dandelion’s leasing partner is Upstream Lease, a division of Carbon Solutions Group, which has previously specialized in monetizing tax credits for distributed energy systems like rooftop solar. Third-party lease and power purchase agreements make up roughly half of the U.S. residential rooftop-solar market to date, and remain available, at least in a truncated form, under the OBBBA.
Keith Martin, an attorney with law firm Norton Rose Fulbright and an expert on clean-energy tax equity, said his firm is working on geothermal-heat-pump leasing and tax-credit monetization strategies similar to those undertaken by Dandelion and Upstream, though he declined to name the companies involved.
“They’re looking at retaining ownership, just like the solar rooftop companies do, and then packaging large groups of heat pumps and arranging tax equity as a way of monetizing the tax benefits,” he said.
Companies can continue to claim geothermal-heat-pump tax credits for projects that start as late as 2034, Martin said.
As for the cost to homeowners, Yates said the typical payments add up to $150 to $200 per year, a “tiny” amount compared to typical rooftop-solar lease payments that can be as much every month. And the superefficient nature of ground-source geothermal can cut a home’s energy bills by $500 to $900 per year, or two to four times as much as they’re paying for a system that can last decades.
“That’s what we love about this — it really does align everybody’s interests,” he said.
The other class of household heating and cooling equipment that received a reprieve from Republicans in the OBBBA is thermal energy storage systems. The term typically describes large-scale systems that use energy to generate heat or cold, which is stored for later use — a class of technologies that range from industrial-scale heat batteries to massive chilled-liquid networks connected to multiple buildings.
But homes and apartments can also benefit from smaller-scale versions of these systems, which are eligible for full tax credits until 2033 and then for gradually reduced tax credits through 2035 under the OBBBA.
For Jane Melia, co-founder and chief revenue officer of Harvest Thermal, that opens up opportunities.
Her company makes the Harvest Pod, a device that uses a heat pump to warm both water and air, and also stores that heated water for later use. That allows households to use electricity when it’s cheap and plentiful to heat water, which can be tapped later when power prices are higher. Under the OBBBA, devices that can store enough energy to heat and cool a building for at least one hour qualify for tax credits.
Of course, those tax credits are also only available to companies, not consumers, under Section 48E of the tax code, she said. But lease structures for household heating, ventilation, and air-conditioning systems are relatively common, she said. “If they’re willing to lease the HVAC equipment, then the leaseholder captures the tax credit, and it flows through to making the lease payment lower than it would otherwise be.”
For single-family homes, “that’s something we’re actively working on to get it in place in 2026,” she said. “It’s not done yet. But I think that’s where the industry is going.”
Multifamily buildings are even better suited to capture tax credits for third-party-owned thermal storage systems, since the owners of properties are stand-ins for commercial leaseholders. In fact, Harvest Thermal has already seen some of its devices capture the 48E tax credit in a multifamily project in Truckee, California, a mountain town where efficient electric heating with storage can make a significant dent in energy costs.
“This project would not have happened without the tax credits,” said David Chanin, cofounder of FutureFit Partners, the company that managed the installation of eight Harvest Pods in a 72-unit low-income housing site in Truckee. The owner of the building was able to reimburse 40% of the project cost through tax credits, including the 30% base credit and a 10% adder available for projects in “energy communities” that have historically relied on fossil-fuel extraction and production.
The challenge with these large-scale projects is that companies might not have enough tax liability to capture the full value of the tax credits for the various projects they’re doing. Some firms are dealing with this constraint via a financial tactic called transferability, which lets them sell those tax credits to a bigger entity for cash.
In the case of the Truckee project, for example, the building owner sold its credits to a financial partner that wanted to offset its tax bills, Chanin noted.
Not all property owners are prepared to handle the legal and accounting tasks of turning tax credits into project finance, however. Those that fall into this bucket can turn to the commercial entities that aim to facilitate this process.
Take Kelvin, a New York City-based startup that has partnered with ClearGen, an energy-infrastructure investor owned by real-estate giant CBRE Investment Management, to structure some of its first tax-credit transactions.
The startup makes a device called the Cozy that fits over radiators that heat a lot of older buildings, captures the warmth they generate, and lets it out into rooms over time using software controls.
“We’re putting insulated radiator covers over 300 pounds of cast iron. When you heat that up, it’s actually an extraordinarily large thermal battery,” said Kelvin CEO Marshall Cox. That makes the Cozy eligible for tax credits under the OBBBA — as long as it’s owned by a third party.
Kelvin already offers its Cozy to building owners “on a subscription basis, just like solar finance,” Cox said. But ClearGen is helping it expand the scale of these kinds of agreements. “They have very large buyers” of tax credits “that they work with,” he said.
The startup has also monetized credits for a New York City project with the help of Giraffe, one of a growing number of companies that help owners of tax-credit-eligible projects find buyers for the incentives.
Identifying ways to turn the theoretical value of tax credits into real-world project financing isn’t simple, Melia said. But it’s important to expand the market for these technologies to households and buildings that would otherwise struggle to afford them.
“This is, first of all, a way for multifamily properties — low-income and high-income — to benefit,” she said. “But it’s also a way for the business model to evolve.”
A correction was made on Nov. 3, 2025: This story originally misstated Jane Melia’s title at Harvest Thermal. Melia stepped down as CEO to take on the role of chief revenue officer in April 2025.
In the depths of the 75-year-old Kendall Cogeneration Station along the Charles River in Cambridge, Massachusetts, a clean-heating transformation is underway.
For years, the facility has burned natural gas to produce steam for Boston and Cambridge’s century-old underground heating system. Now, it’s aiming to become a clean “district energy” system, capable of delivering warmth during bitter New England winters without baking the planet — a first for a citywide network in America.
Last year, Vicinity Energy, the owner and operator of the steam heating network, finished installing a 42-megawatt electric-powered boiler at the Kendall facility. Earlier this year, the company confirmed plans for its next step: installing a 35-megawatt industrial heat pump from Everllence, a German energy systems manufacturer formerly known as MAN Energy Solutions.
“That project was greenlit this summertime,” Vicinity Energy CEO Kevin Hagerty told Canary Media, and demolition to make way for the new heat pump has already begun.
“We’re anticipating that being completed midway through 2028. We’ll turn the heat pump on and turn the Charles River into a renewable energy resource,” Hagerty said.
The industrial heat pump will draw from the river water’s latent thermal energy to create boiling-point temperatures within the Kendall facility’s steam-generation complex. The technology will function even in the winter because the low-temperature refrigerant it uses is far colder than even the icy-cold Charles, creating a temperature differential that the heat pump can harness to produce steam.
All that steam flows through about 25 miles of piping to heat roughly 70 million square feet of buildings in Boston and Cambridge, including college campuses and biotech facilities. Vicinity has secured commitments to use the lower-carbon steam from its electric-powered heating systems from area customers such as Emerson College and life sciences real estate company IQHQ.
Hagerty said other “very large offtakers are underwriting this,” although he declined to name them. “The pump is not fully subscribed yet, but it’s getting there.”
The system will be among the biggest in the United States, which has roughly 900 district energy systems ranging from those in airports and on college campuses to the citywide steam network in Manhattan, the country’s oldest. District heating is also popular in European cities, where comparatively high fossil-gas prices are driving a more urgent embrace of large-scale clean-heating systems.
For customers in Cambridge and Boston, Vicinity’s “eSteam” plan makes sense for reasons of political economy, Hagerty said. Massachusetts has set mandates to expand its supply of carbon-free electricity and to reduce its use of fossil fuels in buildings. A preexisting, centralized system like the Kendall facility’s can convert to electric heat pumps and boilers far more cost-effectively than individual buildings could on their own, he said.
“It’s about one-half to one-fifth the cost for buildings to use our eSteam and electrify through the district energy system than it is for them to locally electrify and decarbonize,” Hagerty said.
Most of those savings come from the fact that the Kendall facility’s electric grid substation and steam pipe network are already built, he said. That obviates the need to retrofit individual buildings with electric heating — or for utilities to make distribution grid upgrades to accommodate a heat pump at every building.
District energy systems like Vicinity’s also benefit from economies of scale, Hagerty said. Large, centralized networks can mix and match mutually reinforcing technologies like electric boilers and heat pumps. They can recapture waste heat from other parts of the system and use it to make more steam, as is being done with the Kendall facility’s gas-fired electricity-generation turbine, which provides peak power and “black start” services for the local grid.
District energy systems can also store and shift energy, as Vicinity plans to do with the thermal energy storage that makes up the next stage of its eSteam conversion plan. It’s looking at systems that can convert electricity into heat storage, which would “allow us to relieve the stress on the electric grid and be a lot more flexible,” he said.
If anything, the Boston-Cambridge system is only starting to utilize the cost-effective decarbonization strategies that district energy systems enable, Hagerty said. Europe is leading the way on that front, with showcase projects such as the 70-megawatt industrial heat pumps now using the chilly water of the Baltic Sea as a thermal exchange to heat water to keep buildings warm in the city of Esbjerg, Denmark.
“They currently have the largest industrial-scale heat pump for district energy in the world,” said Alejandro Gorosito, U.S. national sales manager for Everllence, which provided the heat pump for the Danish city. It won’t hold that distinction for long, he said — Everllence is building a 150-megawatt heat pump for a similar project in Cologne, Germany.
In Europe, adoption of industrial heat pumps is helped along by the fact that fossil fuels tend to be more expensive than electricity. Because heat pumps are far more efficient than fossil-fueled options, they can be the most cost-effective choice when electricity is cheaper, Gorosito said — a fact that can push companies without climate goals to pursue the clean-heat technology.
In much of the United States, where fossil fuels are abundant and power prices are rising fast, the math doesn’t favor heat pumps, Hagerty conceded. But for Boston and other cities that require building owners to reduce their carbon emissions, and for states like Massachusetts that aim to decarbonize their economies, district energy systems can serve as a “regulatory hedge for our customers,” he said.
“They need to make decisions as to whether or not they’re going to heat their building with natural gas, because we’ve got regulations in place that are going to start enacting fines … Do they want to take the risk of spending millions of dollars on something that they may not be able to use in five to 10 years?”
Massachusetts heat-pump owners will spend less to stay warm this winter, thanks to an innovative policy going into effect this weekend.
The state’s three investor-owned electric utilities — Eversource, National Grid, and Unitil — are all offering lower winter rates to the roughly 100,000 households with electric heat pumps, starting on Nov. 1 and running through April.
“It really is what matters to people — it reduces the cost of running a heat pump,” said Larry Chretien, executive director of the Green Energy Consumers Alliance, who is replacing his own gas-fueled heating system with heat pumps this week.
Massachusetts is the first state in which all the major utilities are offering these savings. The rates — ranging from 4.3 cents to 7.5 cents per kilowatt-hour lower than the standard winter price — could trim from $70 to $140 per month off the average bill, utilities estimate. The lower rate applies to all electricity used by participating homes during the winter months.
Households that received heat-pump rebates from state energy-efficiency program Mass Save since 2019 will be automatically enrolled in the new rate. Residents who installed heat pumps earlier or didn’t work with Mass Save can contact their utility to receive the lower rate.
Massachusetts, like other states with ambitious climate goals and cold winters, has made heat-pump adoption a key part of its decarbonization strategy. Today, more than half the homes in the state use natural-gas heating, and another 25% burn heating oil or propane. More than 90,000 homes installed heat pumps from January 2021 to July 2024, but annual adoption rates will need to double over the next five years if the state is to hit its goal of getting the systems into 500,000 homes between 2020 and 2030.
The cost of installing and operating heat pumps has traditionally been a major barrier preventing people from making the switch, particularly in Massachusetts, where electric rates are among the highest in the country. Under current default rates, just 45% of households that transition to air-source heat pumps — the most common version of the appliance — would save money on heating each month, according to a study from climate-policy think tank Switchbox.
Seasonal heat-pump rates change that calculation. Eligible customers will be charged a lower rate on the delivery portion of their bill, while power-supply rates will remain the same. That means that customers who buy power from a third-party supplier or through a municipal community choice program can still participate.
The result should be more savings for more people. Factoring in the discounts, Switchbox estimates roughly two-thirds of households switching to heat pumps would see lower bills, with average monthly savings of $90. The lower cost of operation should make heat pumps a feasible financial choice for more residents, Chretien said.
“This will just put wind in the sails of the heat-pump market,” he said.
Proponents of heat-pump rates say the lower prices are not being subsidized by other customers. Instead, the new approach is a “right-sizing” of currently inflated winter rates.
The delivery portion of a utility bill pays for the poles, wires, transformers, and other infrastructure needed to, well, deliver power. The rate is determined, roughly, by adding up these costs and dividing the total by the number of kilowatt-hours the utility expects customers to use. That number, plus an allowed rate of return for the utility, becomes the final rate.
The grid infrastructure is built to handle moments of peak demand, typically those hottest of summer days on which millions of air conditioners turn on at once. In the winter, demand usually reaches no more than 80% of the highest summer levels, meaning plenty of capacity is left unused.
In other words, the grid already has the room to accommodate winter demand from heat pumps, so no expensive upgrades are required. Therefore, it would be unfair to ask the heat-pump owner to pay more when they aren’t adding more cost, supporters say.
And while the lower rates can save consumers money, they shouldn’t cut into utilities’ revenue, as the increased use of electricity offsets the decreased price per kilowatt-hour.
“We could see heat-pump rates as leveling the playing field,” said Amanda Sachs, state policy manager for electrification advocacy group Rewiring America.
This winter’s lower rates may be just the beginning for Massachusetts residents. The state energy department in January asked utility regulators to mandate even steeper discounts, ranging from 12 cents to 17 cents per kilowatt-hour, for the heating season starting in November 2026. With these much deeper cuts, 82% of households switching to heat pumps would end up paying less for winter heating, with a median annual savings of $687, according to the Switchbox analysis.
Seasonal heat-pump rates are not meant to be a long-term strategy. The logic underpinning the rates only holds so long as peak demand happens in the summer, and the New England grid is expected to shift to a winter-peaking system in the 2030s. By then, though, utilities should have rolled out advanced meters that will allow more sophisticated and nuanced rate structures to replace current models.
“We’ll be able to be way more accurate about heat-pump usage,” Sachs said.
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