The Heat Pump Manufacturing Boom is About to Begin

When Russia invaded Ukraine in February 2022, American environmentalist and writer Bill McKibben pitched an idea to sap Russia’s power by drying up the market for its oil and gas. Heat Pumps for Peace and Freedom, he named the proposal, which called on President Biden to use his wartime emergency powers to ramp up manufacturing of electric heating appliances so that households could replace their fossil fuel-based furnaces.

Remarkably, Biden obliged. Just a few months later, he authorized the use of the Defense Production Act to expand American manufacturing of electric heat pumps, deeming them essential to national security. Now, a year and a half later, money is finally going out the door. On Friday, the Department of Energy announced $169 million in grants for nine companies that will invest in projects to boost domestic production of heat pumps.

“More than 40% of all U.S. [energy] consumption comes from homes, offices, schools, other buildings,” said Department of Energy Secretary Jennifer Granholm during a virtual event promoting the projects on Friday. “The problem is that we rely heavily on other countries for the oil and gas that heat and cool these buildings, and transitioning to American-made heat pumps makes us more secure.”

Granholm also noted that some 40% of heat pumps purchased here are made in China. “Today’s announcement means that we can chip away at that market and put America on a path to dominating it,” she said.

The manufacturing grants will ensure there’s supply to meet growing demand for heat pumps spurred by the Inflation Reduction Act, which created a number of incentives for building owners to install them. Many states are also creating their own programs and incentives to spur heat pump adoption as part of their climate plans.

“This is meeting demand that’s taken off all across the country,” said White House national climate advisor Ali Zaidi during the event, noting that a coalition of governors have collectively set a goal to deploy 20 million heat pumps by 2030. “That’s a massive expansion.”

The projects span 13 states and support a range of technologies. The largest grant, at $50 million, went to Mitsubishi to build a new factory in Kentucky that will make “variable capacity compressors,” which are essential components in the best performing, most efficient heat pumps on the market. Honeywell received $15 million to expand one of its existing facilities in Louisiana to increase annual production of a refrigerant that has a lower global warming potential than what’s used in many existing models.

A $17.5 million grant is going to a startup called Gradient to build its first factory in Detroit, Michigan, with a capacity of 100,000 units per year. Gradient specializes in producing heat pumps that can be installed in the window, similar to an air conditioner, and don’t require an electrician or plumber. The company was also selected by New York state to supply heat pumps for New York City’s public housing.

A company called Johnson Controls plans to use a $33 million grant to retrofit three of its factories in Kansas, Texas, and Pennsylvania, to increase the number of and types of heat pumps it produces. It anticipates producing more than 200,000 heat pumps per year, “an enormous increase” over the company’s 2023 production, according to the Department of Energy.

The grants will also support the production of different kinds of heat pumps. A company called Armstrong International based in Michigan will build a new facility to manufacture industrial versions that can produce the high heat needed to replace natural gas boilers in food manufacturing and paper and pulp plants. This can reduce the energy use associated with industrial heating by up to one third, according to one estimate, cutting emissions by 30 to 43 million tons per year.

Granholm said the grants would bring down the cost of heat pumps by boosting supply. It can cost homeowners anywhere from a few thousand dollars to upwards of $20,000, even with federal and state incentives, to swap out a natural gas boiler for a heat pump — a major impediment to wider adoption.

Stephen Pantano, the head of market transformation at Rewiring America, a nonprofit that advocates for electric appliances, was optimistic that the grants would help. “If you’re working with a domestic supplier, there’s an incentive for the builder and the component supplier to align and work together on product design and make products that are better suited for the U.S. market,” he said. “You also don’t have import duties and shipping costs and a lot of the other stuff that you have to deal with when you’re sourcing things internationally,” he said.

The grants are also expected to spur an estimated 1,700 jobs at the manufacturing facilities, as well as deliver investments to community colleges and apprentice programs for workforce development.

The Department of Energy said it plans to issue another round of Defense Production Act grants in the new year. The heat pump manufacturing boom is officially underway.