Regional Heat Pump Water Heater Market Transformation Program

Regional Heat Pump Water Heater Market Transformation Program May 2019

Growing Momentum for Building Decarbonization • Legislative and regulatory support from state and local government • SB 1477 allocates funding for pilot programs • Residential Heat Pump Water Heaters (HPWH) are win-win

Why Focus on HPWH? § Gas WH are largest source of GHGs in residential building stock (16. 9 tons avoided over equipment life) § Load building (~$4, 500 of new revenue per HPWH installed) § Super energy-efficient technology MOVES heat, doesn’t create heat (300% efficient or COP 3. 0) § Equipment wholesale cost is about $600 more compared to natural gas water heater § Offers load management capabilities through built in or retrofit software Source: Energy Star

Our Objective • Establish uniform program design that can be supported by local energy providers • Demonstrate Bay Area’s political will to scale up HPWH market • Leverage these early actions to successfully compete for statewide funding in 2020+

Key Supply Chain Actor Midstream Actors influence 60% - 90% of all sales

BAAQMD Grant Provides Seed Funding • Bay. REN team will: • Design single-family midstream incentive • Engage local energy providers (CCAs and POUs) • Engage HPWH supply chain actors • Support workforce education • Homeowner education • Cross-promote with other complementary programs • Layer a HPWH incentive onto Bay. REN’s Multifamily program • Local Energy Providers: • Funds for incentives and implementation (ongoing)

Benefits to the Region Cumulative 3 -Year Impacts Consumption GHG Reduction Revenue ($) (k. Wh) (Tons) DR Reduction Potential (k. W per Event) Capture Rate Total Units 5% 5, 000 7, 000 6, 500 $1. 75 m 500 10% 10, 000 14, 000 13, 000 $3. 5 m 1, 000 25% 25, 000 35, 000 32, 500 $8. 75 m 2, 500 Assumes: 13 -year useful life; $0. 25 per k. Wh retail electricity price; 1. 3 tons of avoided GHG per unit; 1, 400 k. Wh annual unit consumption; natural gas baseline

Pathway to Launch April/May 2019 July 2019 Program Design & Development Engage market actors Estimate program potential Present program & obtain feedback Test & refine design with market actors Obtain commitments from local energy providers Program Onboarding & Launch Onboard distributors & contractors Configure software Customer ready platform

Thank You Jennifer West 510 -891 -6555 jwest@stopwaste. org

Why a Midstream Program? 900% MORE…. • Program participation • Energy & GHG impacts ††PG&E Commercial HVAC • Customer benefits • Customer touchpoints †Efficiency VT HPWH

Midstream Incentive Process 5 B. Receives “Thank You” packet CUSTOMER CONTRACTOR SUPPLIER IMPLEMENTER 3. Complete application 2. Stock, promote, sell and ship eligible equipment 1. Engage CEO/GMs; train sales staff; provide marketing materials & support 5 A. Reinvest incentive in stocking, upselling, and trainings 4. Verify customer & equipment; pay incentive FAST; send customer packet

Qualified Contractor Marketplace Facilitate the bid process & steer customers to the best trade allies 754 684 652 Service Marketplace for Trade Allies Digital Site Survey Generates Project Scope Contractors Receive Bid Request Installation Complete Quality Assurance Products Purchased and Installed Complete Close-Out Survey

Sample Program Services • Supply chain engagement • Contractor education & training • Turnkey incentive processing • Online contractor marketplace 3 -Year Program Overview Incentive + Implementation Fee (per unit) $ Program Goal (Units) Program Budget 2, 000 10, 000 $ 20 million 3 -Year Program Benefits Avoided GHG Emissions (Tons) Lifetime Revenue 169, 000 $ 45 million Simple Payback (Year) 5. 71 Internal Rate of Return 18% Cost-effectiveness ($/ton GHG avoided) $ 118. 34 Assumes: 13 -year useful life; $0. 25 per k. Wh retail electricity price; 1. 3 tons of avoided GHG per unit; 1, 400 k. Wh annual unit consumption; natural gas baseline

Distributor Value Proposition: HPWHs Electric Resistance HPWH Variance Resale from distributor to customer $458 $1054 $596 Distributor cost (estimate) $376 $850 $474 Gross profit per water heater $82 $204 $122 Gross margin % per water heater 18% 19% 150% $4, 100, 000 $10, 200, 000 $6, 100, 000 Factor Gross profit generated from 50, 000 units / year