‘How Much Can I Save?’ HPWH Incentives Explained

What are they? Why do some HPWHs get bigger rebates?

Homeowners can get a pretty good deal on a Heat Pump Water Heater (HPWH) right now when combined with incentives. In part 2 of our conversation with Pierre Delforge, we take a look at the offerings, why thermal storage is “hot” and what incentives are available. He explains why the energy cost savings make them a good economic investment for years to come. If you missed, our primer on heat pump water heaters, check our Part 1 here.

David Tuft: Let's talk about incentives for heat pump water heaters. You're pretty familiar with incentive packages being offered right now. Can you break it down for me? What can consumers expect from various kinds of tax credits and rebates when they're in the market for heat pump hot water heaters? 

Pierre Delforge: Yeah, so heat pump water heaters are eligible for a number of incentives that vary by region, but everywhere in the country you can get up to $2,000 of Federal tax credits and low-income customers will soon be able to get Federal rebates. And for thermal battery systems that meet the capacity requirements of the Inflation Reduction Act (IRA) like Harvest, you may be eligible for the 30 percent investment tax credit just like electrochemical batteries and solar. That's Federal. 

Then depending on your region and your utility, you may be eligible for other rebates. There are rebates in many states. In California, you can get $3,100 for a heat pump water heater and up to $5,300 for a Harvest system from a program called TECH HPWH.  California utilities also offer other rebates which under certain conditions can be “stacked” on top of each other, up to the project cost. This can pay for a significant part of the cost of installing the heat pump water heater.

‍DT: Okay. So Harvest can capture $5,300 in rebates from this TECH HPWH program. Part of that is because of the energy savings, is that correct? What exactly is the state of California trying to get out of it? 

PD: The Harvest system benefits from the base rebate of $3,100, as well as two kickers: One is for having a tank with a capacity greater than 55 gallons. This is because heat pump water heaters are more efficient when they have larger tanks because they don't need to use the electric resistance [heat] element as much. This efficiency benefit vastly outweighs the slightly higher thermal losses from the larger tanks. They cost a little more but the difference with the incentive would make it cost-neutral and therefore encourage people to right-size their water heater, rather than to go after the smallest therefore cheapest one. So the state of California is incentivizing people to buy heat pump water heaters with larger tanks, and because Harvest systems uses a larger tank they are eligible for that $700 kicker. 

And the other kicker that the Harvest Thermal system is uniquely eligible for is the low global warming potential [refrigerant], which means a lower climate impact than the standard water heater. We use CO₂ – the SANCO2 is the only heat pump water heater on the market currently to use CO₂ – and as such we capture this $1,500 kicker for low global climate impact refrigerants. 

DT: Okay, so the second kicker is purely about climate. It’s not about storage. 

PD: That's right. The key requirement for this incentive program in general is to have certain grid flexibility capabilities. Heat pump water heaters need to be able to shift load away from peak [time] when electricity is scarcer, more expensive, and higher emissions. California wants to electrify from gas to heat pump water heaters, but in a way that does not increase peak load of the electric grid. So for heat pump water heaters to be eligible for this incentive, they must meet a requirement that they can leverage their built-in storage capability in a way that minimizes operating on peak. 

DT: So to get this incentive from the state of California, you have to be able to manage and communicate with the grid.  

PD: Yes, the communication protocol with the grid is called EcoPort, also known by its technical name CTA-2045. Another requirement is called Joint Appendix 13 (JA13) of the California Building Energy Code, which defines how heat pump water heaters need to be able to optimize energy costs for people's time-of-use rate. 

Together, EcoPort and JA13 give you the ability to communicate with the grid and respond to time-of-use rates. Few utilities offer grid signals for water heaters. That's still very uncommon. It will become more common in the future. At the moment the goal is for heat pump water heaters incentivized by the TECH HPWH program to be ready to take advantage of grid signals when available. 

And in the meantime, they are able to optimize for time-of-use rates which has immediate value because most Californians are on some kind of time-of-use rate. So if they have a hybrid heat pump water heater that automatically optimizes energy use for time-of-use rates, it saves them money on their energy bills. 

So it's a double benefit. The first benefit is to be grid-friendly. The second benefit is to optimize for people's electric energy costs. 

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Phew. That was a lot. We hope you enjoyed that deep dive into rebate programs for heat pump water heaters. You can save a whole lot by buying right now. But what about over the long term? How much does it cost to operate? Can we save our planet and save money at the same time? Find out in Part 3.