How Your Water Heater Can Be a Secret Weapon in the Climate Change Fight

Nearly every home has a water heater, but people tend not to think about it until the shock of a cold shower signals its failure. To regulators, though, the ubiquitous household appliance is increasingly top of mind for the role it could play in reducing greenhouse gas emissions and weaning the power grid from fossil fuels

High-tech electric water heaters can double as thermal batteries, storing excess production from wind and solar generators. In California, officials aim to install them in place of millions of gas water heaters throughout the state.
That would reduce the need to fire up polluting fossil fuel power plants to supply electricity for water heating after the sun sets.

“Water heaters have significant potential,” says Commissioner Clifford Rechtschaffen of the California Public Utilities Commission. “We know we’ll need a tremendous amount of storage to get to our decarbonization goals. We’re challenged now in evenings when renewable energy production declines and demand peaks.”

The focus is on heat pump water heaters, which transfer warmth from the atmosphere to a tank. They’re up to four times as efficient as conventional gas or electric water heaters. Nationwide, about half of water heaters are powered by natural gas. In California, water heating is one of the biggest consumers of fossil fuels and gas water heaters account for 90% of the market. Swapping them for heat pump versions could reduce greenhouse gas emissions from water heating in the state by as much as 77%, according to a paper published in January by the nonprofit New Buildings Institute.

Here’s how using heat pump water heaters for energy storage works: When renewable energy production peaks in the afternoon, a signal is sent that activates heat pump water heaters. After heating water, the devices shut down and store the hot water for use in the evening when demand spikes. That puts to use excess renewable energy generated during the day that would otherwise be wasted. Grid operators could also charge these thermal batteries as needed to balance supply and demand or before a planned power outage due to wildfire threats or in anticipation of extreme weather that could trigger blackouts. It’s estimated that heat pump water heaters could store hot water for 12 hours or more, depending on the size of the tank.

Water heaters typically have lifespans of 12 to 15 years and about 800,000 of them fail annually in California, according to Pierre Delforge, a senior scientist at environmental group Natural Resources Defense Council in San Francisco. He says replacing them with programmable, WiFi-enabled heat pump devices would create a network of thermal batteries that could be charged with renewable energy as needed.

“We’ll have millions of batteries that are useful to the grid and that will make it cleaner,” Delforge says.

A 2018 paper he co-authored for the nonprofit American Council for an Energy-Efficient Economy modeled the potential impact of using heat pump water heaters for energy storage. The study found such a network would lower utility bills, boost renewable energy consumption, and strengthen the reliability of the power grid.

California regulators have recognized the potential of heat pump water heaters—which currently comprise just 1% of the state’s heating market—to meet the state’s aggressive climate targets. In 2020, they approved an initial annual budget of $44.7 million to promote the adoption of heat pump water heaters.

That’s a small down payment on a goal that could cost hundreds of millions of dollars to achieve over the next decade. Regulators are currently developing a statewide incentive program set to launch later in 2021. Rechtschaffen says the CPUC is still evaluating the mix of incentives, but they will likely include rebates to encourage homeowners and contractors to adopt heat pump water heaters. That would spur market demand, resulting in lower manufacturing and installation costs so that heat pumps would become competitive with gas water heaters.

Meanwhile, three California utilities are running pilot projects that offer rebates to customers who install grid-connected heat pump water heaters so their performance as thermal batteries can be evaluated. Another two utility programs are awaiting regulatory approval. The state’s two largest utilities, Pacific Gas & Electric Co. and Southern California Edison Co., are planning multimillion-dollar pilot projects to create networks of 6,400 and 17,000 heat pump water heaters, respectively.

Heat pump water heaters are about twice as expensive as conventional water heaters and installation costs can add thousands of dollars. The majority of California’s nearly 14 million homes were built before 1980 and many would need an upgrade to the electrical panel to handle the extra load from a heat pump water heater. Such upgrades can run between $3,000 and $6,000.

“It’s definitely a huge hurdle,” says Rachel Kuykendall, senior program manager at Sonoma Clean Power, a Northern California utility. Last April, Sonoma Clean Power added heat pump water heaters to its GridSavvy program, which gives customers a $5 credit on their monthly bill if they allow the utility to control household devices such as smart thermostats and electric vehicle chargers to maximize the use of renewable energy and balance the grid.

The modest $5 incentive aside, Sonoma Clean Power customers can qualify for rebates of up to $2,000 to purchase a heat pump water heater. Later this year, the utility will roll out a 0% interest loan program that can be tapped to finance electrical panel upgrades. So far, 100 water heaters are among the 969 devices currently controlled by GridSavvy.

“I honestly think heat pump water heaters are probably one of the best resources out there for decarbonization,” says Kuykendall, noting that when a heat wave hit Northern California last August, GridSavvy helped the utility to avoid a blackout. “We were able to use this to keep the lights on.”

Inefficient conventional electric water heaters—which use an electric heating element—are common in other regions of the U.S. That means those homes already have electrical panels capable of powering heat pumps, making a switch cheaper and quicker, according to Amruta Khanolkar, a project manager at the New Buildings Institute in Portland, Oregon.

She says that later this year three big makers of heat pump water heaters, General Electric Co., Rheem Manufacturing Co., and A.O. Smith Corp., are expected to introduce versions that can be plugged into standard 120-volt panels, eliminating the need for expensive electrical upgrades. (The trade-off is that such water heaters may not be suitable for colder climates.)

“We’re currently in a climate emergency and in a pandemic where people are working from home and using more energy for water heating,” says Khanolkar, who manages the Advanced Water Heating Initiative, a coalition of manufacturers, utilities, and government agencies. “The residential sector is now even more critical for decarbonization.”