Heating and cooling may sound basic, but after solar power, it is the next frontier in home decarbonization.
The group of 25 states has a goal of installing 15 million heat pumps by the end of the decade. Nine of these states hope to have 90% of residential heating, cooling and hot water systems equipped with this technology by 2040. To cope with the workload, the United States plans to add 23,000 engineers by 2032. You'll probably still be overworked though.
Part of the problem is that heating, ventilation, and air conditioning (HVAC) equipment is laborious and time-consuming to install. Automation doesn't work. However, much of the remaining work may be cited, especially new projects.
“Contractors spend three to five hours with a lead, and the sales conversion rate is 20 to 25 percent,” says Phil Criner, co-founder and CEO of Arch, a software company serving HVAC installers. states. “Not only is it frustrating, but it's also a huge waste of resources.”
About 30% of carbon pollution in the United States comes from buildings, and Kriner saw an opportunity to reduce emissions by encouraging people to switch from fossil fuel heat to heat pumps. The technology was ready, he discovered, but the contractors weren't.
Three years ago, Kriner asked 15 contractors for quotes to replace her apartment's heating unit with a gas furnace or heat pump. The average price for heat pumps was high, but no contractor could tell us whether it would save us money in the long run.
That was a surprising omission. Kriner worked for years in the solar industry, where saving money on energy bills was a big part of his sales pitch. Add to this his low-cost solar panels and project design and proposal software, and the industry has grown 24% annually since his 2010. Heat pumps will need similar data and tools to realize their potential.
Kriner started by learning about the industry by observing contractors quoting and installing heat pumps. Eventually, he and his co-founder Sacha Schmitz hired a team to develop an algorithm that allowed contractors to quote jobs faster.
Arch's software can suggest appropriate heat pump capacity within minutes by using publicly available details about a home, such as the square footage of the home and the number of rooms it has since it was built, and typically uses room measurements. It saves hours of time on the typical quoting process that requires measurements. Inspect the radiator and ducts.
“I'm not claiming 100 percent,” Criner said. “But the interesting thing about heat pumps is that you don't have to get them perfectly right.” That's because heat pumps can dynamically change their output, and the indoor components of heat pumps range in size from 6,000 to 18,000 BTUs. This is because there are often only 5 types. “He has five units, so of course there's a chance of 20% accuracy,” he said.
The startup is on track with pre-seed funding, and recently raised a $6.2 million seed round from Coatue, Floodgate, Gigascale Capital, MCJ Collective, and ReGen Ventures.
The San Francisco-based company is currently focused on the Northeast, where many homes still use expensive oil to heat their homes because of unreliable natural gas infrastructure. “The adoption of heat pumps is happening very quickly because there is a lot of interest in the market,” Kriner said. “From an ROI standpoint, it's very easy to compete.”
Kriner said Arch plans to use the seed round to expand geographically and improve its estimation algorithms. It also plans to add additional features to the software, including a tool to predict how much homeowners can save on their energy bills and a marketplace where lenders can offer financing for heat pumps. The latter two are intertwined, Kriner said, and homeowners who spend less on utilities should be more attractive to lenders, leading to lower financing costs.
Kriner and Schmitz's timing couldn't have been better. Not only are dozens of states working to promote heat pumps, but the Anti-Inflation Act provides incentives of up to $2,000 to homeowners who install heat pumps. Heat pumps were attractive before, and now they're even more so.
Still, there is a lot of inertia in the market to overcome. Many sell what they know, which is often an oil or gas furnace. Helping contractors see the value and benefit in heat pumps can go a long way in overcoming contractor hesitance. Software has helped accelerate the adoption of solar power, and the same could happen with heat pumps.