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Why are Contractors Still Pushing Gas Furnaces?

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To have any hope of meeting its GHG reduction goals, California will need to dramatically reduce or eliminate the use of natural gas. As long as millions of residential water heaters and furnaces continue to discharge their post-combustion waste products into our atmosphere, the state will never achieve its climate change objectives.

The Costs of Natural Gas

Natural gas is a fossil fuel, which makes it a finite resource. Heating with natural gas relies on combustion, which produces harmful byproducts in addition to greenhouse gas emissions. Transportation and delivery of gas is a challenge, as it has the tendency to leak, which releases methane into the atmosphere. Methane is a potent greenhouse gas, and its short-term impacts are much worse than carbon dioxide. As if that was not enough, much of California's natural gas infrastructure is reaching the end of its useful life. Updating and maintaining the system requires massive infrastructure investments. I have written about this as recently as last month.

Many programs across the state now support the installation of heat pump water heaters and most will add incentives for heat pump space heating soon. Local legislation provides additional incentives to switch away from gas. In Southern California, for example, gas furnaces must now meet Low-NOx requirements to help reduce the smog that gets trapped in the Los Angeles basin. Because low-NOx gas furnaces are expensive and prone to failure, it often makes more sense to install a clean electric heat pump instead (see my blog from July 2020).

For all of these reasons, electricity is quickly becoming the preferred energy choice for buildings. The electrical supply grid is getting cleaner every day due to the increase in renewable generation sources. Wind, solar, geothermal, and other renewable sources are being added to the grid every day. Recent studies have indicated that solar electricity has just become the cheapest energy source, so it makes sense to use more of it. Finally, electric appliances are typically 3 to 5 times more efficient than their gas counterparts.

You might assume that contractors would be aware of all this, and would be aggressively pushing customers towards electric heat pumps instead of gas furnaces and water heaters. It seems like an excellent time to get out in front of the competition and be an early advocate for this transition.  But while a few contractors have taken this position, most still are committed to the status quo. If electricity is the preferred energy source of the future, why are contractors still pushing gas appliances and trash talking electric heat pumps? The answer is complicated.

Moving Away from Natural Gas

Lack of consumer awareness is possibly the biggest reason for the slow adoption of electric heat pump technology. While groups like the Building Decarbonization Coalition are conducting multi-media consumer awareness campaigns to showcase the benefits of residential electrification and promote the advantages of electric appliances over their gas counterparts, there’s much more work to be done.

If a consumer has never owned a heat pump, switching to one from gas appliance can feel like a risk. Most people don’t think much about their furnace or water heater until it fails, at which point replacement is urgent. When someone’s house is cold or they can’t take a warm shower, they are less inclined to try an unfamiliar technology. Contractors are aware of this and are quick to offer a like-for-like replacement for the failed product and move on. It is the path of least resistance, and it is profitable. Callbacks (a return visit to a finished job) are the death blow to contractor profit.

This leads to the second big reason adoption of heat pumps is slow—the prevailing approach to contractor business models. Unfortunately, there is a culture of short term, skirt-the-rules thinking among many, if not most, contractors.

Most contractors seldom give much thought to proper sizing or the delivery system, not to mention long-term operational costs. To ensure the timely restoration of service, contractors often stock standard sizes of gas appliances themselves. An 80 percent efficient gas furnace with a three-ton air conditioner will work in lots of different houses. Will it be the most efficient solution? No. Will it be the least costly to operate? No. Will it provide the most comfort? No. The main thing going for this solution is it allows the contractor to restore service quickly and move on to the next job. The same holds true for a 40-gallon gas water heater.

History is another reason some contractors avoid heat pumps. Heat pumps for space heating have a bit of a checkered past. In the 1970s, there was a push to all-electric homes, driven by the oil embargo and the rising price of fossil fuels. Heating and cooling contractors installed heat pumps in place of gas furnaces. Most contractors did little or nothing to confirm the correct sizing of the equipment. Even fewer addressed the delivery systems and simply hooked up a heat pump to the existing ductwork, which was often poorly sized and leaky. It should not come as a huge surprise that many of these systems failed to deliver the comfort the contractors promised. Today's heat pumps are a far cry from what was available in the 1970s. They have evolved into sophisticated, capable, and very efficient devices.

If all of this is true, why are contractors still talking people out of heat pumps and installing gas appliances?

I believe that high-quality contractors are selling heat pumps.  Unfortunately, these contractors are undercut on price every day by quick and dirty contractors who may not even bother to pull proper permits for their work. (Permit requirements, which are there to protect consumers, are not strictly enforced; failing to pull one can save as much as $1,000).

If you are playing by the rules, pulling permits, and doing high-quality work, the decision to offer heat pumps is a good one. If you are a bottom-line driven, “get-in, and get-out” contractor, you will likely stay with the easiest and most profitable solution. Today, this is a gas furnace or water heater, installed in one day, with no permit. The “get-in, get-out” bottom-line business model is very profitable, even if it is illegal (building permits are not optional!).

So how do we move forward and support the cleaner and more efficient solution?

Support the Transition to Heat Pumps

The first step is to make sure it is more profitable to do the right thing. Rebates can help, but as stated above, contractors are forgoing incentives in favor of doing work without permits and spending less time on the job site.  If they were doing high-quality work, it would be less of a concern. To me, this solution is obvious. Support and promote high-quality contractors and expose those who do sub-standard work and don't comply with regulations. Hefty fines for permit violations would be a great start. It's time for the California Energy Commission (CEC) to step up to the plate and take a serious stance on permits and enforcement. It would make a huge difference.

If the state wants to meet its climate goals, it will need to regulate some of the older technology out of existence. We know this works. A good example is the Low-NOx regulations in Southern CA. A statewide ban on N20 emissions from furnaces and gas water heaters could be an excellent place to start.

But regulations can only go so far, especially if enforcement is weak. If regulations are going to be a part of the solution, there needs to be funding for enforcement. Make the penalty for not pulling a permit severe enough that contractors will be forced to comply. I suggest at least $10,000 per violation. Hefty fines have helped control refrigerant releases by HVAC contractors. Financial penalties could work for furnaces and water heaters too.  That would be a game-changer.

The state is counting on building electrification as a means to achieve its long-term GHG emission reduction goals. These climate goals are not merely suggestions. They are mandates intended to reduce the effects of climate change. Heat pumps are a critical component to converting buildings to all-electric and reducing their impact. To be effective, we need to concentrate on consumer awareness and create demand. Next, we need to examine the contractor's business models and make sure they are fair and profitable.

If we fail to address either of these concerns, we have little chance of limiting our GHG emissions and mitigating climate change's adverse effects, which is not really an option at this stage of the game.

Questions or comments? Please submit a comment below. We would love to hear from you.

Charley Cormany

Executive Director

Efficiency First California