Death of the Heat Pump

Heat pumps are like refrigerators–they move heat.

Why aren’t heat pumps sold on every street corner? They are more efficient than any furnace and they don’t burn fossil fuels! I have talked with a few companies who say they used to sell a lot of them, but aaah…those were the days of the incentives and, more importantly, those were the days when natural gas was more expensive.

These days our local Big Valley Heating says they sell one every so often, but mostly they sell gas appliances. The heat pumps they do sell are Daikin. Monte, our energy advisor suggested Daikin or Mitsubishi, but I haven’t found a Mitsubishi dealer yet.

When you read stories about Green Jobs it’s hard to get an idea of what they’re talking about. Who are these people and what jobs are they doing? I’m going to tell you about 86 green jobs in the Fraser Valley that existed and are now gone. This seems like we’re going  backwards to me.

In 2008, when we performed our first retrofit, we were able to hand over a rebate cheque to my father-in-law for about $3500. My in-laws had agreed to pay for painting, insulating and sealing the house when we bought it to give us a good start and avoid burdening us with huge fuel oil bills. Heating bills are a big problem with older homes.

As I said before, I thought this was a perfectly reasonable government investment to encourage energy and greenhouse gas reductions and to counteract the huge subsidies given to the fossil fuel industry.

GSHP-flow-chartA few years later when we looked into replacing the wasteful oil furnace with a geothermal heat pump I was surprised to find no incentives available to us. We were ineligible for the LiveSmart BC grants because we had already been at that trough (even if the money had gone to Leanne’s parents). I think that’s fair; we had our turn. Get someone else on the sustainability train.

The Federal ecoACTION grants, however, were just gone.

With both these programs not available to us, a $14K investment in a geothermal heatpump became a $20K impossibility.

So we kept polluting until I got stubborn and refused to buy any more oil.

Can we agree that, taking the long view, choosing to help oil companies instead of homeowners is bad economics because the money flows out of the country and all that carbon exacerbates climate change which we know will already cost Canada at least 5 billion dollars per year come 2020? I wish we could. It’s easy to get distracted by short term things like elections.  In the short term, oil profits will increase our GDP and cutting the grants saves the government money which means maybe they can lower taxes a bit. Both of those things makes them look good to many conservative-minded voters.

In this situation, getting politicians to act in the long-term best interest of the country is difficult, but necessary. That’s why I invited my MP to tour Hammond Forever House. That’s also why I’m supporting Bob D’Eith and the NDP in my riding because he has a good shot at beating the Conservative Party candidate.

I shared with you Garry Lowney’s view on government cuts. Garry is an energy advisor who owns The House Whisperers.

Here is another perspective from Clay Martin whose company, CR Martin, supplied and installed heat pumps. At its peak, CR Martin employed 86 people plus sub-contractors. Now Clay is in Real Estate. He has the numbers and the experience and his conclusion, that no matter how ecologically sound switching to heat pumps is, they don’t make short-term economic sense to homeowners, nor to governments. That’s why we need high level government leadership. Leadership willing to take on that long-term challenge.

In an e-mail informing me that CR Martin Heating was no more, Clay wrote:

I actually believe the cancelled/modified rebate programs occurred both as a reaction to market forces and a change in government owned utility policy towards clean energy. The Federal Eco-Energy Rebate program, plus in 2009 the tax incentives for energy savings and remodeling, can be argued were simply national stimulus packages, albeit both very well timed from an Energy Efficiency stand point.

The rise in popularity of heat pumps with consumers can be traced to Natural Gas prices: Natural gas rose on the spot market steadily with a peak in Dec 2000, a moderate pull back then to a peak in Sep 2005 with very little pull back to the peak in Jun 2008. Data:

When natural gas was averaging above $8 Mbtu and the price of electricity was $0.05 kwh a heat pump using 16A of 240V electricity (3.84kw) to make 48,000 BTU of heat/hr for $0.192 was more efficient than a furnace needing 60,000 BTU of gas to make the same 48,000 btu of heat/hr for $0.48. Both assuming an outdoor ambient temperature of 0 deg C. Now there are obviously a few variables left out however the math is fairly sound. Today the market is reversed, gas is $4/ Mbtu and electricity (second tier) is $0.0117/kwh meaning the heat pump costs $0.449 and the furnace is $0.24 for the same amount of work. Now there are more advanced variable compressor technology heat pumps on the market today that can match furnace price to operate but they start at about $8,000 to which many consumers say ‘what’s the point?’ In terms of capital investment a very good air conditioner is less than half that cost and operates at the same efficiency for cooling, remembering the furnace was already required for and capable of providing heat, therefore a heat pump argument loses steam.

Secondly the rise in Heat Pump installation put a strain on the electrical grid. When all the advertising you receive says “use less power” it is not because they want us to pay less, on the contrary, paying makes tax revenue. The reality was a measurable increase in electrical usage per home with a heat pump even after taking into account the other rule changes on efficiency in new construction and measuring the before and after results of Eco-Energy remodeled homes. Therefore while the heat pump is ecologically more beneficial it goes directly against governments mandates of reducing energy consumption per person. With a government trying to encourage new home construction, which fuels our economy to a great extent, on the same infrastructure built for far less people, increasing the electrical load at each home is a bad idea no matter how ecologically sound.

The provincial program LiveSmart had when it started an odd amalgamation of contributors. This included both BC Hydro and Terasen Gas. When BC Hydro realized that their mandates were being subverted by a program they were paying into they lead the charge for change. Hence you will find the commercial programs still running and the insulation and windows components still there to some extent but no heat pump bonuses.

Terasen pulled out of the LiveSmart program a couple years ago because they found were giving $800 rebates to people that were going to change a furnace, due to winter breakdown or age, anyway. Instead Terasen has introduced a new program to replace furnaces and water heaters in the off season instead, called “planned replacements”. It can be argued that the money is not going where it is really needed from a social perspective, who couldn’t use a break on a $4500 unexpected bill in the winter, but from a company perspective the “off-season” rebate helped level the employee field from needing 20 guys in the fall and winter down to 5 in the spring to needing 15 in the winter and 12 in the spring. This also is helpful in reducing EI claims and business failures.

When CR Martin Heating was at a peak we employed 86 people plus sub-contractors. The multiple government programs DID play a role in revenue growth and decline in that they brought forward about 8 years of probable replacement into a 3 year window. This three year window became a base but in hindsight was a false stability, removing the programs worked like pulling a rug out from under the company. The concurrent drop in Natural Gas prices, mostly due to the inventions of horizontal drilling and ‘fracking’ of shale, again something completely out of anyone’s control, added to the Heat Pump sales decline and you get a perfect storm of free-falling revenues and the loss of the highest profit sales item.

CR Martin was profitable at $10M a year in revenue (2009) but wasn’t prepared to service the same debts at only $4M a year in revenue so massive cuts needed to be made. Cutting staff was the hardest part, I personally let go over 60 people in 4 years, a real heart breaking task. When the dust settled the company was down to 16 people, revenue was stabilized and losses were hemmed in but I was burned out; so I sold off a large chunk of the firm to employees. The employees only lasted 18 months before deciding they would be better off hanging up the CR Martin flag and starting a different heating company. Of particular note there were only four firms in the Lower Mainland the same size as CR Martin in 2009. Today three including CR Martin are gone. The only large company that survived this pull-back had zero debt and was second and third generation and able to finance the down-sizings from cash flow. That company is GANDY INSTALLATIONS.

Let me know if any of the above makes sense 🙂

Clay Martin
Professional Realtor
Royal Lepage Wolstencroft Realty
778 809 4662

It does make me feel better that the Province of BC has introduced a new incentive just for people who want to switch from oil furnace to heat pump. Notice, however, that the federal government is nowhere to be seen.

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James Rowley

James lives in Maple Ridge, BC, Canada with his amazing partner, Leanne Koehn, and their two amazing kids in their beautiful house. He studied Science and English Literature at the University of British Columbia where he met Leanne. He also studied acting for a while at Studio 58 in Vancouver. He works as a teacher of English and curriculum writer for new Canadians.

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