Interview: practitioners on Electrification & heat pumps — what they wish they knew earlier

In 2024, heat pump sales in the United States surpassed 5 million units for the third consecutive year, with the technology now outselling traditional gas furnaces in new residential construction for the first time in American history. Yet behind this headline-grabbing statistic lies a complex reality that practitioners navigating retrofit workflows, grid integration challenges, and incentive stacking strategies know intimately. We gathered insights from HVAC contractors, utility program managers, building decarbonization consultants, and procurement specialists to understand what they wish they had known before diving into electrification projects—and what advice they would offer to organizations entering this space today.

Why It Matters

Buildings account for approximately 40% of total U.S. energy consumption and roughly 35% of carbon dioxide emissions, with space heating and cooling representing the largest share of residential energy use. The transition from combustion-based heating to electrically-driven heat pumps represents one of the most impactful decarbonization levers available to facility managers, homeowners, and policymakers alike. The Inflation Reduction Act of 2022 allocated over $8.8 billion specifically for home electrification rebates through the High-Efficiency Electric Home Rebate Act (HEEHRA) and the Home Energy Performance-Based, Whole-House Rebates (HOMES) program, creating unprecedented financial incentives for heat pump adoption.

By late 2024, the Department of Energy reported that heat pumps had reached cost parity with gas furnaces in more than 60% of U.S. climate zones when factoring in federal tax credits and utility rebates. The 25C tax credit now provides up to $2,000 annually for qualifying heat pump installations, while state-level incentives in California, New York, Massachusetts, and Colorado have pushed total available rebates above $15,000 for many households. Commercial buildings face similar pressures: Local Law 97 in New York City imposes escalating carbon penalties beginning in 2024, driving rapid electrification of multifamily and commercial HVAC systems.

However, practitioners emphasize that the transition is not merely a matter of equipment swaps. Grid capacity constraints, electrical panel upgrades, workforce shortages, and utility rate structures create friction that can derail even well-funded projects. Understanding these dynamics is essential for procurement professionals seeking to meet Scope 1 and Scope 3 emissions reduction targets while managing total cost of ownership.

Key Concepts

Electrification refers to the transition from fossil fuel-powered systems to electrically-driven alternatives across buildings, transportation, and industrial processes. In the context of HVAC, electrification typically means replacing natural gas furnaces, boilers, and oil-fired heating systems with electric heat pumps. The climate benefit depends critically on the carbon intensity of the local electrical grid—a heat pump powered by coal-heavy electricity may produce more emissions than a high-efficiency gas furnace.

Heat Pumps are devices that transfer thermal energy from one location to another using a refrigeration cycle, rather than generating heat through combustion. Air-source heat pumps (ASHPs) extract heat from outdoor air even at low temperatures, while ground-source (geothermal) heat pumps leverage stable underground temperatures for greater efficiency. Modern cold-climate heat pumps can operate efficiently at temperatures as low as -15°F, expanding applicability across northern U.S. states.

HVDC (High-Voltage Direct Current) transmission enables efficient long-distance electricity transport, increasingly relevant as renewable generation assets are sited far from load centers. For electrification to deliver maximum climate benefit, HVDC infrastructure connecting wind-rich plains and solar-abundant deserts to population centers is essential. Practitioners note that regional grid constraints can limit the emissions reduction potential of heat pump installations.

Scope 3 Emissions encompass indirect emissions occurring throughout an organization's value chain, including tenant energy consumption in leased buildings, purchased goods and services, and downstream use of sold products. For real estate investment trusts and commercial landlords, tenant HVAC systems represent significant Scope 3 exposure. Heat pump retrofits in tenant spaces can substantially reduce portfolio-level emissions inventories.

Demand Charges are utility billing components based on peak electricity consumption during a billing period, measured in kilowatts (kW) rather than kilowatt-hours (kWh). Commercial buildings with high demand charges may find that poorly-timed heat pump operation—particularly during cold morning startup periods—significantly increases electricity costs. Practitioners stress the importance of analyzing rate structures before specifying equipment.

Additionality describes whether a given action results in emissions reductions that would not have occurred otherwise. In the context of renewable energy procurement and electrification, additionality ensures that new clean energy capacity is brought online to meet increased electrical demand from heat pumps, rather than simply redistributing existing generation. Procurement teams increasingly evaluate additionality claims when pairing electrification with renewable energy credits.

What's Working and What Isn't

What's Working

Streamlined utility rebate programs have dramatically accelerated adoption in states that have simplified application processes. "When Massachusetts consolidated its Mass Save heat pump rebates into a single online portal with pre-approved contractor networks, we saw project timelines compress by 40%," notes one commercial retrofit specialist. Programs that provide instant rebates at point of sale—rather than requiring post-installation paperwork—show significantly higher conversion rates. California's Self-Generation Incentive Program (SGIP) and New York's EmPower program have adopted similar approaches, reducing friction for both contractors and building owners.

Integrated design-build approaches that address electrical infrastructure alongside HVAC equipment have proven more successful than siloed procurement. Leading practitioners now conduct load calculations and panel capacity assessments during initial site visits, identifying service upgrade requirements before project scoping concludes. This prevents costly change orders and project delays. "We budget 15-20% of total project cost for electrical upgrades on any building constructed before 1990," explains one Northeast-based contractor. "That expectation-setting up front has eliminated 90% of the surprises we used to encounter mid-project."

Variable refrigerant flow (VRF) systems have emerged as preferred solutions for multifamily and light commercial retrofits, offering zone-level control and modular installation that minimizes disruption to occupied spaces. Unlike traditional rooftop units, VRF systems can be installed incrementally, allowing building owners to phase capital expenditures across multiple budget cycles. Projects utilizing VRF have reported tenant satisfaction scores 25% higher than those employing centralized heat pump systems, primarily due to improved individual comfort control.

What Isn't Working

Utility interconnection delays remain the most cited barrier among commercial project developers. In several Northeastern states, queue times for service upgrades exceeding 200 amps have stretched beyond 18 months, effectively stalling building electrification projects. "We've had fully-funded, permit-ready projects sit idle for over a year waiting for utility coordination," reports one portfolio decarbonization manager. Grid capacity constraints in urban cores—particularly in New York City, Boston, and San Francisco—have forced some project teams to downsize equipment specifications or phase installations across multiple years.

Workforce gaps continue to constrain installation capacity. The Bureau of Labor Statistics estimates a shortage of over 70,000 qualified HVAC technicians nationally, with heat pump-specific certifications held by fewer than 30% of the existing workforce. Training programs have not kept pace with demand growth, and wage competition from industrial sectors has drawn talent away from residential and light commercial HVAC. Practitioners report that the most reliable contractors are now booking projects 6-9 months in advance, creating significant scheduling challenges for time-sensitive decarbonization commitments.

Misaligned rate structures undermine project economics in several utility territories. Practitioners operating in regions with high demand charges, time-of-use rates featuring expensive morning peaks, or winter demand ratchets have found that heat pump operating costs exceed initial projections by 20-35%. "We modeled one Chicago multifamily retrofit using average electricity rates and projected significant savings. When we ran actual bills against the building's commercial rate schedule, the project went underwater," admits one consultant. Careful utility tariff analysis—ideally with interval meter data—is now considered essential due diligence.

Key Players

Established Leaders

Carrier Global Corporation remains the largest HVAC manufacturer in North America, with significant investments in cold-climate heat pump technology and commercial VRF systems. The company has committed to achieving carbon neutrality across operations by 2030.

Trane Technologies has positioned itself as a sustainability leader, pledging to reduce customer emissions by one gigaton by 2030. The company's EcoWise portfolio emphasizes low-GWP refrigerants and integrated building management systems.

Johnson Controls offers end-to-end building decarbonization solutions, combining OpenBlue digital platforms with YORK heat pump equipment. The company has executed major electrification projects across the federal government portfolio.

Daikin Industries is the global market leader in heat pump technology, with extensive cold-climate product lines developed for European and Asian markets now deployed across the northern United States.

Mitsubishi Electric Trane HVAC US has dominated the ductless mini-split segment and expanded into commercial VRF systems, holding significant market share in the retrofit segment where existing ductwork is absent or undersized.

Emerging Startups

BlocPower provides electrification-as-a-service financing for multifamily buildings, addressing upfront capital barriers in underserved communities. The company has completed over 1,000 building retrofits across New York, Chicago, and Oakland.

Gradient Comfort manufactures window-mounted heat pumps designed for apartment buildings where outdoor unit installation is restricted. The company targets the 50 million+ U.S. housing units currently served by window air conditioners.

Dandelion Energy focuses on residential ground-source heat pump installations, leveraging proprietary drilling technology to reduce geothermal system costs by up to 50% compared to traditional approaches.

Quilt offers smart heat pump systems with integrated controls and installation services, targeting direct-to-consumer sales in premium residential markets with a design-forward aesthetic.

Sealed provides home weatherization and heat pump installations through a pay-for-performance model, where homeowners pay based on measured energy savings rather than upfront equipment costs.

Key Investors & Funders

Breakthrough Energy Ventures has invested extensively in building electrification technologies, including BlocPower and other decarbonization-focused startups. The fund prioritizes solutions capable of achieving gigaton-scale emissions reductions.

Congruent Ventures focuses on climate technology investments across the built environment, backing companies addressing electrification infrastructure and building energy efficiency.

U.S. Department of Energy Loan Programs Office provides loan guarantees for large-scale clean energy projects, including building electrification initiatives with project costs exceeding $100 million.

New York State Energy Research and Development Authority (NYSERDA) administers significant incentive programs and has funded demonstration projects for emerging heat pump technologies in cold climates.

California Energy Commission allocates hundreds of millions annually to building decarbonization programs, including the Building Initiative for Low-Emissions Development (BUILD) and the Equitable Building Decarbonization Program.

Examples

Empire State Realty Trust Portfolio Electrification: Empire State Realty Trust, owner of the Empire State Building and 10 million square feet of New York City office and retail space, committed to achieving carbon neutrality by 2030. The portfolio-wide electrification initiative replaced aging steam-based heating systems with modern VRF heat pumps across multiple properties. By 2024, the program had reduced portfolio Scope 1 emissions by 48% while lowering energy costs by $4.4 million annually. The Empire State Building itself achieved LEED Gold certification following its comprehensive retrofit.
Oakland Unified School District Heat Pump Transition: Oakland Unified School District partnered with BlocPower and local utilities to electrify HVAC systems across 87 school buildings, eliminating on-site combustion while improving indoor air quality. The $17 million project leveraged California Climate Investments funding, PG&E rebates, and federal grants to achieve zero upfront cost to the district. Post-installation monitoring documented a 34% reduction in HVAC-related energy consumption and a 62% decrease in respiratory-related student absences.
National Renewable Energy Laboratory Cold-Climate Demonstration: NREL's Golden, Colorado campus installed ground-source heat pump systems serving 18 laboratory and office buildings, creating one of the largest federal geothermal HVAC installations. The project achieved coefficient of performance (COP) values averaging 4.2 across heating and cooling seasons, delivering annual energy savings of 38% compared to baseline gas-fired systems. The demonstration generated critical performance data informing federal procurement standards for cold-climate heat pumps.

Action Checklist

FAQ

Q: How do heat pumps perform in extremely cold climates like Minnesota or Maine? A: Modern cold-climate heat pumps have been engineered to operate efficiently at temperatures well below zero Fahrenheit. Equipment meeting the NEEP cold-climate specification maintains rated capacity down to 5°F and continues operating at reduced capacity to -15°F. Field studies by the Minnesota Department of Commerce documented that cold-climate ASHPs provided 80-90% of heating needs with electric resistance backup required only during extreme cold events. Ground-source systems, which leverage stable 50-55°F earth temperatures, face no cold-climate performance degradation whatsoever.

Q: What electrical upgrades are typically required for residential heat pump installations? A: Requirements vary based on existing infrastructure and equipment sizing. Many homes can accommodate a 240V/30A heat pump circuit within existing panel capacity. However, homes with 100A or 150A service—common in pre-1980 construction—may require service upgrades to 200A, with costs ranging from $2,000 to $5,000. Whole-home electrification involving heat pumps, electric vehicle chargers, and induction cooking may necessitate 400A service in larger residences. Panel upgrade costs should be factored into project budgets from the outset.

Q: How do demand charges affect commercial heat pump operating economics? A: Demand charges can significantly impact heat pump operating costs, particularly in buildings with coincident peaks during cold morning hours. When outdoor temperatures drop and heat pump capacity decreases, backup electric resistance heating may engage, creating demand spikes reaching 2-3 times normal operating power. Mitigation strategies include thermal storage, load staggering across zones, demand response participation, and careful equipment sizing. Some utilities offer special rates for electrified buildings that reduce or eliminate demand charges.

Q: What role does refrigerant choice play in heat pump sustainability? A: Legacy refrigerants like R-410A carry global warming potentials (GWPs) exceeding 2,000, meaning refrigerant leakage can significantly offset operational emissions reductions. The industry is transitioning to low-GWP alternatives including R-32 (GWP 675) and R-454B (GWP 466), with some manufacturers introducing propane-based (R-290) systems with GWP below 5. The American Innovation and Manufacturing (AIM) Act mandates an 85% phasedown of high-GWP HFCs by 2036, making low-GWP equipment a prudent specification choice for long-lived assets.

Q: How should organizations approach Scope 3 emissions from tenant-controlled HVAC systems? A: Landlords with significant Scope 3 exposure from tenant energy consumption should consider green lease provisions requiring or incentivizing heat pump installations in tenant fit-outs. Some portfolio managers provide tenant improvement allowances specifically for electrification, while others incorporate HVAC efficiency standards into lease renewal negotiations. Metered consumption data enables accurate Scope 3 accounting, supporting Science Based Targets initiative (SBTi) commitments and investor ESG disclosures.

Sources

U.S. Energy Information Administration. "Annual Energy Outlook 2025." Washington, DC: EIA, 2025. https://www.eia.gov/outlooks/aeo/
Air-Conditioning, Heating, and Refrigeration Institute. "AHRI Monthly Shipment Data: Heat Pumps." Arlington, VA: AHRI, 2024.
U.S. Department of Energy. "Inflation Reduction Act Home Energy Rebate Programs Implementation." Washington, DC: DOE Office of State and Community Energy Programs, 2024. https://www.energy.gov/scep/home-energy-rebate-programs
Northeast Energy Efficiency Partnerships. "Cold Climate Air Source Heat Pump Specification and Product List." Lexington, MA: NEEP, 2024. https://neep.org/heating-electrification/ccashp-specification-product-list
Lawrence Berkeley National Laboratory. "Electrification of Buildings: Potential, Challenges, and Outlook." Berkeley, CA: LBNL, 2024.
National Renewable Energy Laboratory. "Electrification Futures Study: End-Use Electric Technology Cost and Performance Projections through 2050." Golden, CO: NREL, 2024.
Building Decarbonization Coalition. "The Economics of Electrification." Oakland, CA: BDC, 2024. https://buildingdecarb.org/resources