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A new report from the American Council for an Energy-Efficient Economy has some exciting data for anyone attempting to retrofit a multifamily building.
By now there’s plenty of evidence showing why heat pumps are such a promising solution for getting buildings off fossil fuels. But most of that research has focused on single-family homes. Larger apartment buildings with steam or hot water heating systems — i.e. most of the apartment buildings in the Northeast — are more difficult and expensive to retrofit.
A new report from the nonprofit American Council for an Energy-Efficient Economy, however, assesses a handful of new technologies designed to make that transition easier and finds they have the potential to significantly lower the cost of decarbonizing large buildings.
“Several new options make decarbonizing existing commercial and multifamily buildings much more feasible than a few years ago,” Steven Nadel, ACEEE’s executive director and one of the authors, told me. “The best option may vary from building to building, but there are some exciting new options.”
To date, big, multifamily buildings have generally had two flavors of heat pumps to consider. They can install a large central heat pump system that delivers heating and cooling throughout the structure, or they can go with a series of “mini-split” systems designed to serve each apartment individually. (Yes, there are geothermal heat pumps, too, but those are often even more expensive and complicated to install, especially in urban areas.)
While these options have proven to work, they often require a fair amount of construction work, including upgrading electrical systems, mounting equipment on interior and exterior walls, and running new refrigerant lines throughout the building. That means they cost a lot more than a simple boiler replacement, and that the retrofit process can be disruptive to residents.
In 2022, the New York City Housing Authority launched a contest to try and solve these problems by challenging manufacturers to develop heat pumps that can sit in a window just like an air conditioner. New designs from the two winners, Gradient Comfort and Midea, are just starting to come to market. But another emerging solution, central air-to-water heat pumps, also presents an appealing alternative. These systems avoid major construction because they can integrate with existing radiators or baseboard heaters in buildings that currently use hot water boilers. Instead of burning natural gas or oil to produce hot water, the heat pump warms the water using electricity.
The ACEEE report takes the cost and performance data for these emerging solutions and compares it to results from mini-splits, central heat pumps, geothermal heat pumps, packaged terminal heat pumps — all-in-one devices that sit inside a sleeve in the wall, commonly used in hotels — and traditional boilers fed by biogas or biodiesel.
While data on the newer technologies is limited, so far the results are extremely promising. The report found that window heat pumps are the most cost-effective of the bunch to fully decarbonize large apartment buildings, with an average installation cost of $9,300 per apartment. That’s significantly higher than the estimated $1,200 per apartment cost of a new boiler, but much lower than the $14,000 to $20,000 per apartment price tag of the other heat pump variations, although air-to-water heat pumps came in second. The report also found that window heat pumps could turn out to be the cheapest to operate, with a life cycle cost of about $14,500, compared to $22,000 to $30,000 for boilers using biodiesel or biogas or other heat pump options.
As someone who has followed this industry for several years with a keen interest in new solutions for boiler-heated buildings in the Northeast — where I grew up and currently reside — I was especially wowed by how well the new window heat pumps have performed. New York City installed units from both Midea and Gradient in 24 public housing apartments, placing one in each bedroom and living room, and monitored the results for a full heating season.
Preliminary data shows the units performed swimmingly on every metric.
On ease of installation: It took a total of eight days for maintenance workers to install the units in all 24 apartments, compared to about 10 days per apartment when the Housing Authority put split heat pump systems in another building.
On performance: During the winter, while other apartments in the building were baking in 90-degree Fahrenheit heat from the steam system, the window unit-heated apartments maintained a comfortable 75 to 80 degree range, even as outdoor temperatures dropped to as low as 20 degrees.
On energy and cost: The window unit-heated apartments used a whopping 87% less energy than the rest of the building’s steam-heated apartments did, cutting energy costs per household in half.
On customer satisfaction: A survey of 72 residents returned overwhelmingly positive feedback, with 93% reporting that the temperature was “just right” and 100% reporting they were either “neutral” or “satisfied” with the new units.
The Housing Authority found that the units also lowered energy used for cooling in peak summer since they were more efficient than the older window ACs residents had been using. Next, the agency plans to expand the pilot to two full buildings before deploying the units across its portfolio. The pilot was so successful that utilities in Massachusetts, Vermont, and elsewhere are purchasing units to do their own testing.
The ACEEE report looked at a handful of air-to-water heat pump projects in New York and Massachusetts, as well, only two of which have been completed. The average installation cost per apartment was around $13,500, with each of the buildings retaining a natural gas boiler as a backup, but none had published performance data yet.
Air-to-water heat pumps have only recently come to market in the U.S. after having taken off in Europe, and they don’t yet fit seamlessly into the housing stock here. Existing technology can only heat water to 130 to 140 degrees, which is hot enough for the more efficient hot water radiators common in Europe but too cold for the U.S. market, where hot water systems are designed to carry 160- to 180-degree water, or even steam.
These heat pumps can still work in U.S. buildings, but they require either new radiators to be installed or supplemental heat from a conventional boiler or electric resistance unit. The other downside to an air-to-water system is that it can’t provide cooling unless the building is already equipped with compatible air conditioning units.
One strength of these systems over the window units, however, is that they don’t push costs onto tenants in buildings where the landlord has historically paid for heat. They also may be cheaper to operate than more traditional heat pump options, although data is still extremely limited and depends on the use of supplemental heat.
It’s probably too soon to draw any major conclusions about air-to-water systems, anyway, because new, potentially more effective options are on the way. In 2023, New York State launched a contest challenging manufacturers to develop new decarbonized heating solutions for large buildings. Among the finalists announced last year, six companies were developing heat pumps that could generate higher-temperature hot water and/or steam. One of them is now installing its first demonstration system in an apartment building in Harlem, and two others have similar demonstrations in the works.
The ACEEE report also mentions a few other promising new heat pump formats, such as an all-in-one wall-mounted heat pump from Italian company Ephoca. It’s similar to the window heat pump in that it’s contained in a single device rather than split into an indoor and outdoor unit, so it doesn’t require mounting anything to the outside of the building or worrying about refrigerant lines, although it does require drilling two six-inch holes in the wall for vents. These may be a good option for those whose windows won’t accommodate a window heat pump or who don’t like the aesthetics. New York State is also funding product development for better packaged terminal heat pumps that could slot into wall cavities occupied by less-efficient packaged terminal air conditioners and heat pumps today.
Gradient and Midea are not yet selling their cold-climate window heat pumps directly to consumers. Gradient brought a version of its technology for more moderate climates to market in 2023, which was only suitable for heating at outdoor temperatures of 40 degrees and higher. But the company has discontinued that model and is focusing on an “all-weather” version designed for cold climates, which is the one that has been installed in the New York City apartments. Gradient told me it is currently selling that model in bulk to multi-family building owners, utilities, and schools. Midea did not respond to my inquiry.
One big takeaway is that even the new school heat pumps designed to be easier and cheaper to install have higher capital costs than buying a boiler and air conditioners — a stubborn facet of many climate solutions, even when they save money in the long run. Canary Media previously reported that the Gradient product would start at $3,800 per unit and the Midea at $3,000. Experts expect the cost to come down as adoption and demand pick up, but the ACEEE report recommends that states develop incentives and financing to help with up-front costs.
“These are not just going to happen on their own. We do need some policy support for them,” Nadel said. In addition to incentives and building decarbonization standards, Nadel raised the idea of discounted electric rates for heat pump users, an idea that has started to gain traction among climate advocates that a few utilities have piloted.
“To oversimplify,” Nadel said, “in many jurisdictions, heat pumps subsidize other customers, and that probably needs to change if this is going to be viable.”
Editor’s note: This story has been updated to include comment from Gradient.
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A list of terminated grants obtained by Heatmap contains a number of grants that will cost jobs and revenue in Republican-led states.
The Trump administration terminated billions in climate and clean energy grants on Wednesday, in what appears to be yet another act of retribution against Democrats over the government shutdown. White House budget director Russell Vought announced on X that “nearly $8 billion in Green New Scam funding to fuel the Left's climate agenda is being cancelled,” noting that the projects were in 16 states, all but two of which — Vermont and New Hampshire — have Democrats in their governor’s mansion. A Department of Energy release published late last night further clarified that it was terminating 321 awards supporting 223 projects, with a total closer to $7.5 billion.
But a list of the 321 canceled grants that the Department of Energy sent to Congress, obtained by Heatmap, tells a different story. While much of the funding was awarded to blue state-based companies, the intended projects would have benefitted communities elsewhere, including in Texas, Florida, and Louisiana.
The list identifies the grants by their award numbers, and includes information on the DOE office overseeing the grant, the recipient name, and state. The document does not specify the project names, the programs under which they were awarded, or the amounts awarded.
That leaves a lot of open questions about the true impact of the terminations. It’s unclear, for instance, whether the $7.5 billion price tag the Department of Energy assigned to the cancellations is an estimate of the total amount awarded or the unspent remainder still in the agency’s coffers. Five of the listed projects, worth nearly $900 million, were already announced as terminated in an earlier round of cuts back in May.
Many of the projects listed have signed contracts with the government, are already well underway, and have spent at least some of their award. For example, the Northeast Energy Efficiency Partnerships has already published copious educational materials related to its community-driven transportation plan for the Northeast, a project supported by one of the terminated grants.
The list does seem to confirm that blue state grants were the hardest hit, with 79 award cancellations in California, 41 in New York, 34 in Colorado (Secretary of Energy Chris Wright’s home state), 33 in Illinois, and 31 in Massachusetts.
But when I began looking up projects by their award number, I found that many would actually have benefitted Republican strongholds. Take, for example, Moment Energy, a Delaware-based company that was awarded $20 million by the Office of Manufacturing and Energy Supply Chains to build the first certified manufacturing facility in the United States producing battery energy storage systems from repurposed electric vehicle batteries. The plant was set to be built in Taylor, Texas, creating 50 construction jobs and 200 new permanent positions. After receiving the Energy Department’s stamp of approval, the company raised a $15 million Series A funding round in January to help finance the plant.
Also listed are a $10 million grant for Carbon Capture Inc, a California-based company, to conduct an engineering study for a direct air capture plant in Northwest Louisiana, and a $37 million grant to New York-based Urban Mining Industries to build one of its low-carbon concrete manufacturing plants in Florida. Linde, the global industrial gas company based in Connecticut, had $10 million to build hydrogen fueling stations for heavy duty trucks in La Porte, Texas, clawed back. BKV, a Colorado-based natural gas company set to study the transportation of captured CO2 by barge throughout the Gulf Coast region, also had its $2.5 million grant canceled.
In addition to hurting investments and jobs in Republican states, the Department of Energy’s cancellations also target some unlikely victims. The list names 16 grants for General Electric, including 11 for GE Vernova, the company’s manufacturing arm, which produces natural gas turbines and components for wind energy generation; many of those awards were for wind technology research projects. The agency also canceled 24 grants for the Institute for Gas Technology and the Electric Power Research Institute, the research arms of gas and electric companies’ two biggest trade groups, respectively. Several of these awards funded research projects into carbon capture and storage.
Also on the list was a more than $6.5 million grant for a controversial study to retrofit the Four Corners coal plant in New Mexico with carbon capture equipment. The plant is currently scheduled to close in 2031.
Back in May, Wright promised Congress his agency’s review of Biden-era climate funding would be over by the end of the summer. “Certainly in the next few months, by the end of this summer — hopefully before the end of this summer — we will have run through all of the four or 500 large projects that are currently in the pipeline at the DOE,” he said during a House Appropriations Committee hearing.
As reported yesterday by Bloomberg, two regional Hydrogen Hubs in California and the Pacific Northwest — projects awarded funding from the Bipartisan Infrastructure Law to develop full hydrogen production and consumption ecosystems — are on the list. That leaves the agency’s intentions for the remaining five hubs scattered throughout the Midwest, Midatlantic, Appalachia, the Great Plains, and Texas unclear. And while the list includes a few smaller grants for early-stage Direct Air Capture Hubs, it is still a mystery whether the Department of Energy plans to support the two more advanced direct air capture projects in Louisiana and Texas that were selected for $1.2 billion under the Biden administration.
On a major energy acquisition, carbon cycle cash, and a cheaper EV
Current conditions: Hurricane Imelda hit Bermuda as a Category 2 storm • Storm Amy, the first named UK storm of the season, will bring heavy rains and wind to Scotland, England, and Wales on Friday • Sudan’s Ministry of Agriculture declared a state of emergency this week after the Nile River rose to record levels.
The Department of Energy said on Wednesday that it is terminating 321 grants supporting 223 projects, cutting a total of more than $7.5 billion in funding for clean energy projects. While the Department has not yet specified what the awards were, Office of Management and Budget Director Russ Vought posted to social media yesterday that the canceled projects were located across 16 Democrat-led states. An administration official told Bloomberg that at least two of the projects in question were hydrogen “hubs” under development in California and the Pacific Northwest. The cuts come on top of $13 billion in climate funds that had not yet been dedicated to specific projects that the Department of Energy said it would “return” in late September, as instructed by the reconciliation bill.
The Department of Energy has left the recipients of billions in obligated funds for climate projects in limbo since Trump took office. Secretary of Energy Chris Wright said the agency was “reviewing” the awards in May. He testified in Congress that his office would make a decision about many of them by the end of the summer, but this week’s terminations — amid the government shutdown — are the first announcement the agency has made since an initial batch of cuts at the end of May.
The Trump administration said Wednesday that it is putting $18 billion in funding for New York City transit projects on hold while it investigates violations of a rule barring diversity considerations in hiring that the Department of Transportation published on Tuesday. “The timing is, shall we say, noteworthy,” my colleague Matthew Zeitlin wrote on Wednesday, “not least because the Democrats’ two top congressional negotiators — Representative Hakeem Jeffries and Senator Chuck Schumer — are both from New York.” In a statement, Secretary of Transportation Sean Duffy blamed those two lawmakers for the shutdown, lamenting that thanks to them, “USDOT’s review of New York’s unconstitutional practices will take more time.”
Blackrock-owned Global Infrastructure Partners, an investment fund, is in talks to buy energy developer AES for more than $38 billion in “what would be one of the largest infrastructure takeovers of all time,” according to the Financial Times. AES owns utilities in Ohio and Indiana in addition to owning both conventional and renewable energy generation projects across the globe. The company is also the top supplier of renewable energy to corporate buyers in the world. AES stock jumped nearly 17% on Wednesday on the news.
A new report from the Union of Concerned Scientists found that residential customers in seven states that are part of the PJM Interconnection, an electricity market that covers the Mid-Atlantic and parts of the Midwest, are paying nearly $4.4 billion for transmission upgrades intended to deliver electricity to data centers. The finding is not a big surprise — PJM’s own Market Monitor has acknowledged that data center load growth is the primary factor driving up rates. But the report specifically analyzes the amount the whole ratebase is shelling out for transmission projects that only benefit a single customer. It recommends that the Federal Energy Regulatory Commission create a new customer class for such customers and require them to shoulder the cost alone.
Trump has slashed millions in grants for climate science research and plans to cut the federal government’s climate science funding and staff dramatically in next year’s budget. Stepping in to replace some of that lost cash is Schmidt Sciences, a philanthropy founded by former Google CEO Eric Schmidt. Schmidt announced Thursday that it’s committing up to $45 million over five years for research to advance understanding of some of the least-studied parts of the global carbon cycle. For example, one project will measure how much carbon dioxide the Southern Ocean absorbs from the atmosphere with the help of robotic sailboats that can collect data year-round, including during times when it’s too dangerous for research ships to operate.
The 2026 Ioniq 5 Limited. Image courtesy of Hyundai
Hyundai is cutting the price tag on its 2026 Ioniq 5 by nearly $10,000, and will continue to offer $7,500 off the 2025 model — equivalent to the now-expired federal tax credit. The 2026 Ioniq 5 base model will start at just $35,000, making it one of the cheapest EVs available in the U.S.
Some of the industry’s biggest names are joining forces to keep the momentum moving forward.
Climate tech funding has slowed in the face of federal government pushback — but it has certainly not stopped. As the administration has cranked up its hostilities against everything from electric vehicles to wind turbines, companies and investors are responding by getting strategic, forming new coalitions to map, fund, and shape progress in the absence of public support.
Last month I covered the launch of the Climate Tech Atlas, an interdisciplinary effort that includes venture capitalists, nonprofits, and academics working to map out the most salient climate tech opportunities and help guide external research and funding in the sector. There’s also the All Aboard Coalition, which unites big name investors to help plug the missing middle finance gap. Sector-specific investment vehicles are popping up too, like the Oneworld BEV fund, a partnership between major airlines in the Oneworld Alliance and Breakthrough Energy Ventures to advance the commercialization of sustainable aviation fuels. All three of these new initiatives were announced in September alone.
“We are in a unique moment right now,” Carmichael Roberts, a managing partner at BEV told me via email. “Over the past decade, the climate tech ecosystem has made enormous progress driving innovation across every sector of the economy. That puts us in the position to step back and ask first, what areas are still crying out for urgent innovation?”
This year has also seen a number of climate tech companies struggle at key points in their attempts to scale. Sodium-ion battery company Natron Energy shut down in September, while direct air capture leader Climeworks laid off 22% of its staff in May, citing “current macroeconomic uncertainty” and “shifting policy priorities where climate tech is seeing reduced momentum.” Another direct air capture company, Noya, shuttered this August, while the battery recycling company Li-Cycle filed for bankruptcy in May.
Other startups pursuing emerging technologies — from carbon capture to long-duration battery storage, advanced geothermal, and next-generation nuclear — are looking to avoid the same fate. But while federal funding from places such as the Department of Energy’s Office of Clean Energy Demonstrations and the Loan Programs Office once provided an avenue for financing capital-intensive demonstration plants, the Trump administration is now retracting funding, going so far as to cancel contracts with projects previously approved under Biden.
The Oneworld fund, announced in mid-September, is BEV’s first to focus on a specific theme and its first to be backed by an industry coalition. Members of the Oneworld Alliance — which include Alaska Airlines, American Airlines, British Airways, and Cathay Pacific — had already committed to using SAF for 10% of their fuel by 2030, while also “playing an active role in the development of SAF at commercial scale.” Now, with alliance members serving as limited partners in the venture fund, they’ll benefit from the technical and commercial expertise of one of the sector’s most influential VC firms.
When I asked the BEV team to what degree the current political and economic uncertainties were making partnerships like this more valuable, Eric Toone, another BEV managing partner, responded with a refrain I’ve become familiar with — that the firm only backs technologies that “can ultimately compete on their own merits.” Yet it’s undeniable that the federal government tore up its decarbonization agenda at a moment when many climate tech firms’ investments are almost ready for deployment, a stage when government support can make all the difference.
“Many promising SAF technologies already exist, but they are stuck between lab success and commercial scale,” Roberts told me. “This is the moment when they most need capital, technical rigor, and committed offtake to bridge that gap.” While the Trump administration did maintain and extend the tax credit for clean fuels, it also reduced the maximum credit amount for SAF from $1.75 per gallon to $1, while private funding for SAF production and distribution infrastructure remains inadequate.
Given this landscape and the urgency airlines face in meeting their clean fuel targets, Toone told me the firm is open to backing companies “that are further along than what a typical BEV fund might pursue.” And while sustainable fuels are the first technology to benefit from this type of thematic focus, Roberts said that BEV is already eyeing other sectors where it plans to apply this same funding model.
As of early September, the firm is also part of the All Aboard Coalition. This elite group of venture firms is aiming to raise a $300 million fund by the end of October that will match investments in later-stage venture rounds, filling a gap known in climate tech circles as the “missing middle.” Assembled by Chris Anderson, an entrepreneur and primary convener of the TED Talks conference — which has featured many inspiring climate visionaries — the group includes 14 members such as Khosla Ventures, Prelude Ventures, DCVC, Gigascale Capital, and Energy Impact Partners.
“One of the consequences of being in the front row seat at TED all these years is you get persuaded of certain things,” he told me. “And I definitely got persuaded that climate is the outstanding, major problem we really have to fix.”
The bulk of the capital for the coalition will come from outside investors, though some members will contribute as well, Anderson told me. The goal is to incentivize these hotshots to co-invest with each other, providing a one-to-one funding match if they do so.
“First-of-a-kind rounds seem out of reach for a lot of people in the chain,” Anderson explained, referring to the network of investors that must come together to help a company fund expensive new infrastructure. At this stage, its tech has progressed beyond the capital-light, early-stage rounds but is still considered too risky for traditional infrastructure investors to take on. Companies might be seeking $100 million or more from venture firms that are used to writing checks for orders of magnitude less. “Really the purpose of the fund is to create a collective belief that there is a pathway to getting these companies funded. If you have that collective belief, then it’s much easier for a lead investor to step forward and to pull a few other people in.”
Anderson acknowledged that a $300 million fund will not go “nearly far enough.”
“It’s a starter fund. It’s a proof of concept,” he told me. “The world needs to make a couple hundred of these bets at some point.”
Other coalitions, such as the Climate Tech Atlas, are working to steer the sector towards the best bets. This group — which also includes Breakthrough Energy Ventures, alongside others such as the nonprofit investment platform Elemental Impact, the consulting firm McKinsey, and Stanford University’s Doerr School of Sustainability — has mapped out the technological milestones it sees as the clearest pathways to decarbonization. The aim is to help investors, founders, policymakers and academics alike direct their energies towards the most relevant and investable opportunities, regardless of political headwinds.
“The scale at which the government participates in the development of these new technologies — or puts a thumb on the scale for technologies in particular — will vary,” Sonia Aggarwal, CEO of the policy firm Energy Innovation, which is also a member of the alliance, told me. “But certainly that has no real bearing on the fundamental fact that innovators are out there right now thinking about these grand challenges, and there are exciting new ideas for technologies that can get to that commercial scale in the coming years.”
And indeed, sometimes the most promising ideas can take shape in moments of deep uncertainty. Some of the biggest success stories of recent tech history — Uber, Airbnb, WhatsApp, and Square — all got their start during the 2008 financial crisis or its aftermath. “Some of the strongest companies and founders are building in uncertain times,” Dawn Lippert, founder and CEO of Elemental Impact, told me. “That’s very much what we see right now.”
These groups are far from the only private-sector actors coming together to help navigate industry headwinds. When the Environmental Protection Agency withdrew support for the most widely used U.S.-based carbon accounting model for estimating scope 3 emissions, leading emissions accounting platform Watershed partnered with Stanford University’s Sustainable Solutions Lab to launch an initiative that ensures continued access. And recognizing the difficulty that early stage climate tech startups face in securing insurance, the nonprofit GreenRE Coalition and the philanthropic funder Trellis Climate partnered to create a new type of bond tailored to the needs of climate tech startups.
Whether it will all be enough to accelerate or even sustain much-needed momentum in climate tech funding is impossible to predict. But at least the private sector seems to agree that, in this moment, good old teamwork is worth one heck of a try.