ET26SWE0032 - Market Characterization of Hot Water as a Service for Central HPWHs

This project will evaluate barriers and opportunities for accelerating the adoption of and improving energy savings associated with central heat pump water heaters (“CHPWH”) in multifamily buildings. CHPWHs typically consist of one (1) or more heat pump water heaters, hot water storage tanks, a backup heating system (usually electric resistance), and infrastructure that supports supply water temperature maintenance, mixing, and controls. 

In particular, this project will focus on a “Hot Water as a Service” (“HWaaS”) enabling technology for CHPWH systems. TRC and New Buildings Institute (“NBI”) (referred to herein as the “Project Team”) will analyze market potential and financing options for service-based deployment of CHPWHs. The HWaaS approach recovers upfront costs through predictable monthly fees, improving affordability by removing capital barriers and increasing the likelihood that systems will perform at a high level of efficiency and reliability through continuous monitoring and maintenance, accelerating adoption of this key decarbonization technology. The core energy savings associated with this technology often result from the inherent incentives to optimize performance of the system and to keep Energy Efficiency (“EE”) optimized over time.

Hot water is one of the largest end uses of energy in multifamily housing, and yet conventional gas or electric resistance water heating is highly inefficient and carbon intensive. CHPWHs, which use electricity to move heat rather than generate it directly, can reduce energy use by more than 60% and eliminate on-site combustion, improving both efficiency and indoor air quality. Despite these benefits, adoption has been slow due to high upfront costs, installation complexity, ongoing maintenance challenges, and a lack of reliable performance monitoring. This project will focus on HWaaS deployments in buildings served by CHPWH systems, in addition to similar service-based deployment of CHPWHs. At this time, while HWaaS is technically feasible for buildings served by unitary systems, the primary emerging technology gap which HWaaS could help resolve is in buildings with CHPWH systems.

The research questions at the core of this project are: 

1) How can the use of the HWaaS model and key enabling technology improve the energy performance of CHPWH systems in multifamily buildings and accelerate the adoption of these systems?

2) Can this model help disadvantaged communities (“DACs”) and hard-to-reach communities (“HTRs”) that will be mandated to install heat pump water heaters due to zero (0) nitrogen oxide (“NOx”) water heater rules in two (2) of the largest air quality districts in California, encompassing ~60% of the state's population? 

This project will analyze existing HWaaS options for CHPWHs in California. Through literature reviews and interviews, the Project Team will assess the potential for HWaaS to address financing, maintenance, and installation barriers in a single integrated solution. The Project Team will also evaluate and estimate potential energy and demand savings associated with the anticipated improved real-world performance of CHPWH systems with HWaaS. There are several examples of HWaaS and heating as a service, both domestically and abroad, and this project will identify existing efforts and learnings and characterize the energy and demand savings associated with installations and program deployments wherever possible. 

The HWaaS model has significant promise to deliver energy and demand savings in CHPWH systems. This is because these systems are provisioned with onboard metering equipment and advanced fault detection and diagnostics systems. The systems come with these capabilities by default because the very business model of HWaaS relies on ongoing, day-to-day, real-world energy savings. The profit from HWaaS providers relies on high system EE and inherently rewards continuous optimization. In addition, the fact that these CHPWH systems are operated by a dedicated organization with a high degree of expertise and knowledge with deep familiarity with the specific systems installed, helps ensure measurable and reliable energy efficient performance.

The HWaaS approach provides a pathway to accelerate electrification and decarbonization goals. For building owners, it delivers cost certainty, reduced risk, improved system reliability, and promises to deliver high-efficiency performance throughout its life. For residents, particularly in DACs, it expands access to efficient, affordable, and clean hot water. 

Through the research conducted under this project, the Project Team will analyze whether HWaaS can unlock widespread CHPWH adoption, reduce building energy use, and support California’s clean energy transition. 

The Project Team will identify EE programs that would benefit from the project findings and recommendations from this work as early in project implementation as possible, for example, engaging with program administrators (“PAs”) responsible for existing heat pump water heater incentive programs, and similarly with PAs representing central hot water system programs in general.