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Cold climate heat pump (HP) technology is relevant to a substantial portion of the U.S. population, especially with more than one-third of U.S. housing stock concentrated in colder regions of the country and another 31% in the mixed-humid climate region. Specifically, it is estimated that in 2010 almost 1.37 million heating equipment units were shipped to the cold/very cold climate regions and that 1.41 million were shipped to the nation s mixed-humid region. On a national level, the trend in the last decade has indicated that shipments of gas furnaces have grown at a slower rate than HPs. This indicates a potential opportunity for the cold climate HP, a technology that may be initially slow to penetrate its potential market because of the less expensive operating and first costs of gas furnaces. Anticipated implementation of regional standards could also negatively affect gas furnace shipments, especially with the higher initial cost for more efficient gas furnaces. However, as of 2011, the fact that there are more than 500 gas furnace product models that already achieve the expected efficiency standard indicates that satisfying the regional standard will be a challenge but not an obstacle. A look at the heating fuel and equipment currently being used in the housing stock provides an insight into the competing equipment that cold climate HPs hope to replace. The primary target market for the cold climate HP is the 2.6 million U.S. homes using electric furnaces and HPs in the cold/very cold region. It is estimated that 4.75% of these homeowners either replace or buy new heating equipment in a given year. Accordingly, the project team could infer that the cold climate HP primary market is composed of 123,500 replacements of electric furnaces and conventional air-to-air HPs annually. A secondary housing market for the cold climate HP comprises homes in the mixed-humid region of the country that are using electric furnaces. Homes using gas furnaces across both the cold/very cold and mixed-humid regions represent another secondary market for the cold climate HP. The cold climate HP could also target as a secondary market homes across both the cold/very cold and mixed-humid regions that use propane and fuel oil as their primary heating fuel. The combined total of homes in these three secondary markets is 46 million, and we can also infer that about 2.2 million of these systems are replaced annually. When comparing heating equipment stock in 2001, 2005, and 2009 in the cold/very cold region of the country, it appears that gas furnaces are slowly losing market share and that electric furnaces and HPs are making gains. The fact that electricity-dependent heating equipment is rising in preference among homeowners in the colder regions of the country shows that future penetration of the cold climate HP holds promise. Accordingly, cold climate HP technology could achieve an attractive position, given certain favorable market conditions such as reaching a competitive cost point, strong federal incentives, a consistent level of reliable performance, and a product rollout by a credible market leader. The project team relied on payback analysis to estimate the potential market penetration for the cold climate HP in each of its primary and secondary markets. In this analysis, we assumed a $250 price premium for the cold climate HP over the baseline HP. Electricity and gas prices and emissions were based on the 2010 Buildings Energy Data Book. The average heating load was calculated as 25.2 MMBTU per year in the cold/very cold and mixed-humid regions of the United States. Typical installed costs were obtained from the technical document supporting the U.S. Department of Energy rulemaking. The analysis showed that the cold climate HP will have a 2.2 year payback period when replacing an existing electric HP in the colder regions of the nation. The cold climate HP will have a 6 year payback period when replacing gas furnaces in the same climate regions. Accordingly, we estimated that the cold climate HP will have a penetration ratio ranging between 5% and 35% in its potential primary and secondary markets, resulting in a total annual estimated shipment of 298,000 units to both targeted regions of the nation. Once the cold climate HP technology meets its potential market penetration, it would contribute to annual site energy savings of 3,664,405 MMBTU and a CO2 emission reduction of 470,000 Ton

Preliminary Market Assessment for Cold Climate Heat Pumps