Part 1 of this article series explored four zoning code strategies to accelerate heat pump adoption. Part 2 explored permitting and inspection improvements.
Balkanized and complex local regulations can slow efforts to update our buildings and infrastructure to address the climate crisis. In a rare bipartisan effort, Republicans and Democrats are working on a reform bill that would simplify federal permitting for energy infrastructure. Permitting rules for big infrastructure, including electricity transmission lines and large solar arrays that power the energy grid, get most of the attention, but those rules are only part of the challenge. Streamlined permitting rules for electric retrofits of existing residential buildings are also crucial for meeting climate goals.
Water and space heating are responsible for the majority of on-premise greenhouse gas emissions for residential buildings. That means replacing gas furnaces and water heaters with electric heat pump devices is necessary to get existing buildings off fossil fuels. But municipal processes are often complex and costly. SPUR has recommended local-level permitting solutions. State-level solutions are also needed. Contractors work across multiple jurisdictions, and only state solutions can eliminate the thorniest inconsistencies in how code compliance is implemented for heat pumps across California’s 483 municipalities.
California has already taken action to reduce permit barriers for homeowners seeking to electrify and decarbonize their homes. State laws mandate automated permitting processes for solar photovoltaics and home batteries (Senate Bill 379, Weiner, 2021), require expedited solar permitting and restrict reasons for denying solar permits (Assembly Bill 2188, Muratsuchi, 2014), and limit high fees for solar permits (AB 1132, Friedman, 2023). For electric vehicle charging stations, California requires an expedited and streamlined permit process focused solely on a health and safety review (AB 1236, Chiu, 2015), and it limits jurisdictions to a simple nondiscretionary permit type (AB 970, McCarty, 2021).
Heat pumps have yet to receive such treatment — despite heat pump contractors regularly citing time-consuming and cost-driving complexities associated with local permitting and despite ambitious clean air rules and state climate targets setting the stage for a veritable heat pump explosion. With new Bay Area Air Quality Management District rules that phase out the sale of gas equipment likely to go statewide in the next few years, it’s time for state lawmakers and regulators to smooth local rules for permitting and inspecting the electric heat pump equipment that will replace gas equipment.
Public Funding Comes With Permit Requirements
As SPUR’s recent analysis shows, only about 5% to 15% of water heaters are being installed with a permit — so what’s the point in streamlining permitting if everyone is sidestepping the process?
Critically, customers and contractors must get permits to access public dollars for heat pumps. Rebates, subsidies, financing, and direct install programs usually require participating contractors to get a permit for heat pump devices. The result is that far more permits are being pulled for heat pump water heater and heat pump HVAC (heating, ventilation, and air conditioning) retrofits than for gas heating equipment installations. The City of Palo Alto illustrates the disparity.
Between January 1 and September 24, 2024, Palo Alto Planning and Development Services issued 239 traditional and instant permits for heat pump water heaters (HPWHs) compared with just 84 permits for gas water heaters, even though HPWHs remain a relatively low share of Palo Alto’s total water heater replacements per year based on imputed water heater failures (roughly 1,400 to 2,400). A direct install HPWH program, launched by Palo Alto’s electric utility in 2023, now accounts for most of the permits for water heaters. Public funding of the program means that permits are required to get these clean appliances into homes. By contrast, gas appliance installations continue to bypass permits.
Permit Simplification Can Make Climate Programs More Cost-Effective and Equitable
Permit simplification can increase the impact of incoming funding for heat pump devices. The federal High-Efficiency Electric Home Rebate Program (HEEHRA) offers rebates for multifamily homes and has just extended those rebates to single-family homes. This program could be on the incoming Trump administration’s chopping block, but Californians can take advantage of the California Energy Commission’s Equitable Building Decarbonization program. It will provide $557 million in funding for no-cost energy efficiency and electrification retrofits for low-income households starting in 2025.
If these public dollars are to go further and not get bogged down in local rules, state lawmakers need to take a serious look at permit simplification for heat pump devices. Doing so is not only a government efficiency issue — it’s an equity issue. Public funding programs for home electrification are often income-qualified and thus designed to promote adoption of clean heating technologies by lower- and higher-income families alike. Moreover, simplified permitting will lead to greater competition among installers, who will no longer have to learn complex permitting rules for each community. This competition will, in turn, drive down the cost of projects that rely on subsidies, as more installers compete for the same incentive dollars.
Reducing heat pump costs is critical. The upfront cost of electric heating equipment is significantly higher than that of gas heating equipment. Soft costs, such as contractor labor costs, marketing, distribution, and, yes, permitting and inspections, explain much of this cost premium. Some municipalities may look at permit reform as an opportunity to increase permit compliance, but if compliance efforts are not bringing down the cost of obtaining a permit, they could prove counterproductive.
California State Legislators Can Immediately Improve Clean Appliance Permitting
State legislators can act right now to improve permitting for clean appliances. Doing so would support California’s building decarbonization goal of installing 6 million heat pumps by 2030. Improving permitting would also support expansion of zero-emission appliance rules, a goal of air districts and the California Air Resources Board. The Bay Area’s clean air rules will phase out the sale of residential gas equipment, and most of Southern California is likely to follow suit. Zero-emission appliance rules are under consideration for the whole state, following a timeline similar to that for the Bay Area’s rules.
Fortunately, there’s growing recognition that permit reforms are critical to meet California’s climate and environmental goals. The Select Committee on Permitting Reform is directly addressing the permitting complexities hindering state progress on these goals.
SPUR has met with state and regional stakeholders to identify legislative solutions that could mandate, incentivize, guide, and resource the modernization of permitting at the local level. We have offered 11 options for these stakeholders to consider:
- Mandate that cities cannot impose rules that go above and beyond state code compliance if the rules would increase heat pump costs. California’s Solar Rights legislation limits cities from imposing restrictions that “significantly” impact the cost of solar systems. Legislation could mandate that any rules beyond those required for state code compliance add no costs to heat pump retrofits.
- Set an upper limit on fees and develop fee structure methodologies that generate ultra-low fees for heat pump equipment. Ultra-low fees on heat pumps are possible. Arizona’s Pima County charges installers $22.50 to $50 fees for water heating and heating/cooling units. State legislation could set fee limits and direct agencies to develop a new fee structure methodology that offers large discounts for heat pumps.
- Restrict permitting review for heat pump equipment to health and safety considerations. This measure could include explicit limits on how cities are allowed to regulate noise limits and setback distances — for example, a 60–65 decibels limit for inverter heat pump equipment during continuous operation or a 3-foot setback limit for placement of heat pump condensers.
- Mandate automated permitting. Require most jurisdictions to implement an online, automated permitting platform. Any mandates for adopting automated permitting tools should specify how compliance checks are to be performed and reference the relevant legislation or standards.
- Require only one permit and one inspection. Mandate that cities and counties require a single building or nondiscretionary permit and a single inspection (covering both the electrical circuit and the appliance installation). Some exceptions could be made for cases in which significant alterations to the building and electrical infrastructure are required to install a heat pump.
- Allow contractors to self-certify building code compliance. Some municipalities already do so. California agencies could develop guidance on self-certification policies. HEEHRA and other state programs that train and certify contractors could leverage those activities to build a self-certification pathway. Compliance spot checks could be used to ensure code compliance.
- Set up a heat pump water heater installer certification program. Implement a California version of Oregon’s Water Heater Installer Certificate to open the field of simple water heater replacement to workers without full plumbing licenses.
- Evaluate permitting for heat pumps. State agencies and research institutions could evaluate localized factors driving heat pump costs. For example, VoteSolar and the U.S. Department of Energy developed scores to evaluate local rules applied to home solar installation.
- Reform combustion air safety rules. Offer clear direction to make combustion air safety (CAS) requirements logical so that expensive and time-consuming CAS tests are no longer routinely required for two kinds of installations: those where no combustion devices are present or where a room’s air pressure is not changed with a remaining combustion device.
- Design public rebates and incentives without permit requirements. Pending a major overhaul of permit requirements, public programs should drop requirements for participating contractors to show they’ve received a permit. Instead, contractors could self-certify that their installations meet code requirements.
- Require local governments to eliminate inspection wait times of more than one hour. Requiring a contractor to wait for hours can cost projects hundreds of dollars. Self-certification for inspections (mentioned above) is one solution. Another is offering a virtual inspection where contractors provide photos and videos to an inspector. Governments could also better coordinate inspectors across jurisdictions to eliminate wait times.
With clean air rules that phase out gas equipment likely to go statewide in the next few years, California needs a state-level effort to optimize heat pump permitting in 2025. Such an effort can enable local jurisdictions to modernize their permitting and inspection processes. The result will be more equitable and cost-effective expenditures of public money to decarbonize building infrastructure in service of the climate imperative.
Read the first two articles in the Smoothing the Transition to Heat Pumps series: