The world can’t eliminate health-harming, climate warming emissions unless it heats buildings without fossil fuels. Buildings make up 25% of greenhouse gas emissions (GHG) in the United States. In California, heating in buildings, mostly from gas water heaters and furnaces, makes up 10% of total GHG emissions. Those emissions are an even bigger slice of the pie in dense, urban areas such as San Francisco, where emissions from buildings make up 44% of all GHG emissions.
Luckily, buildings can be heated with clean electricity using high-efficiency heat pump water heaters and heat pump HVACs, which also provide much needed air conditioning for a warming climate. The Bay Area is fortunate to have community energy providers that supply homes with mostly clean, renewable energy from wind, solar, and hydro-electric sources. So, not only do heat pumps run without generating air pollution, the energy created to run the heat pumps is produced with far less air pollution compared to fossil fuel energy production. This is why heat pumps offer the only clear path to decarbonizing heating in a cost-effective manner.
In 2023, the Bay Area Air District took a groundbreaking step: it established a new rule that will require retailers to stop selling residential gas water heaters in 2027 and residential gas furnaces in 2029. After these dates, homeowners will likely need to buy an electric heat pump when their existing heating equipment reaches the end of its useful life.
But there’s a problem. Heat pumps are more expensive than gas heating appliances. SPUR found that a heat pump HVAC costs about $6,000 more than a typical gas furnace and central air conditioner and that a heat pump water heater costs about $2,900 more than a gas water heater. For many households, especially those with low incomes, those cost differences are far from trivial.
Some of this gap can be closed by expanding the market for heat pumps, which will improve efficiencies in how heat pumps are distributed, marketed, permitted, installed, and otherwise accessed by customers, bringing costs down over time. But the market won't get us all the way there. Public funding and programmatic solutions will be needed to close the rest of the gap for resource-constrained customers.
Heat Pump Affordability Is a Work in Progress
Heat pump rebates are helping close the affordability gap between gas appliances and heat pumps. California’s TECH Clean California recently launched new rebates for income-qualified residents to switch from gas to electric appliances. Many of the Bay Area’s energy providers offer local rebates that can be stacked atop state and federal incentives. As a result, many Bay Area residents can already get a heat pump water heater for less than a gas water heater or even for free.
While this news is encouraging, funding for rebates and incentives will not cover the incremental costs for all the Bay Area’s resource-constrained residents to install heat pumps — eventually these programs become overbooked. Additionally, incentives are unevenly distributed geographically and are often not easy to access.
Even if most residents can cover the average cost gap between gas appliances and heat pumps with rebates, some residents will discover that rebates don’t cover all their costs. Equipment relocation, extra wiring or plumbing needs, deferred maintenance in a home, or in some cases electrical systems upgrades can all drive up costs for a small percentage of households.
Rebates are not the only financing option to bring decarbonized residential heating to resource-constrained customers.
Some of the Bay Area’s local community energy providers are experimenting with zero-interest financing. Peninsula Clean Energy offers zero-interest loans to support home electrification. Silicon Valley Clean Energy (SVCE) recently began a clean energy financing pilot to undertake clean energy retrofits of 200 low- and moderate-income households. The pilot offers the households zero-interest loans that they can repay over a decade through their utility bill.
California is considering utility financing programs that use customer bills to pay back loans; however, these propposals are currently stalled in a California Public Utility Commission proceeding.
Direct Install Programs Offer a Model for Equitable Decarbonization
In 2024, the San Francisco Department of the Environment launched the Climate Equity Hub (CEH) as a multipronged approach to supporting disadvantaged communities to get off gas and reap the benefits of clean air and high-efficiency electric appliances. The CEH is developing one of the few city-run “direct install” programs for heat pumps. This program is fully funding the installation of heat pump water heaters in income-qualified homes. Other direct install programs in the Bay Area include Palo Alto’s full-service heat pump water heater program and Peninsula Clean Energy’s no-cost home electrification options for income-qualified residents. And soon, California will expand this model statewide through its Equitable Building Decarbonization Program, which promises to invest hundreds of millions in direct install programs.
Direct install programs are a particularly effective tool for holistically addressing equitable decarbonization. Disadvantaged communities may face particularly high barriers to heat pump water heater installation, including older electrical equipment that needs costly replacements and deferred maintenance on a building that triggers additional building work and permits prior to heat pump installation. Without the assurance that unexpected costs will be covered and complexities dealt with, many customers might delay replacing their gas equipment as long as possible.
The CEH program remains in its pilot phase — the next test will be whether San Francisco is willing to fund the program to reach thousands of residents. Such a move would represent a truly groundbreaking decarbonization policy for the city and a model for the rest of the country.
The CEH is also working with organizations, including SPUR, San Francisco Physicians for Social Responsibility (SF Bay PSR), Bayview Hunters Point Community Advocates (Advocates), People Organizing to Demand Environmental and Economic Rights (PODER), South of Market Community Action Network (SOMCAN), the San Francisco Housing Development Corporation (SFHDC), the Emerald Cities Collaborative (ECC), and the Community Youth Center (CYC).
Public Engagement Can Make Heat Pumps “Hot”
One benefit of the CEH model is its focus on public engagement. To get communities to take the heat pump water heater leap, they need answers to basic questions: What is a heat pump? How well does it work? Will it lower my electricity bills? How are heat pumps healthier? How can I access rebates? Who in my area knows how to install heat pumps? Are heat pumps safe? What’s the problem with gas appliances?
It’s critical that utilities, cities, contractors, and public agencies not only answer these questions but also work to build understanding of and trust in clean heating technologies. This effort requires developing tools and resources, such as concierge programs that offer direct expert-to-resident support for electrification planning. It also requires simplifying permitting and zoning rules and otherwise addressing local constraints that can create headaches for those making the leap to electrify homes. If educational efforts succeed, first adopters will have good experiences with heat pumps, and they will share those experiences with their neighbors.
Gas Can’t Be the Solution for Communities With the Fewest Resources
It might be tempting to just let some residents stay on gas, but doing so would only entrench inequity. Communities hit hardest by the health impacts of gas appliances and poor air quality are often the same disadvantaged communities that might find it harder to electrify. If they are left on the gas system, they’ll face continued localized health harms as well as rising gas prices. As wealthier residents electrify, policymakers and energy providers need to make sure that those still using gas are not being charged more to support an aging gas infrastructure and can electrify and benefit from reduced energy bills too. The California Energy Commission estimates that gas rates will escalate much faster than electricity rates. For this reason, we must move cost-burdened residents to the front of the clean heating transition, not to the back.
Local Solutions Are Most Promising
Given a federal administration unlikely to be a productive partner and a state budget that remains tight, local governments, energy providers, and community groups will fare best by working together on local solutions. Models that holistically integrate income-qualified cost support, technical support, and electrification planning, educational resources, and community engagement have a good shot at cleaning up heating in communities with the least means and greatest pollution burdens.