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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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This week’s conversation is with Grant Gutierrez, head of community impacts at carbon management company Carbon Direct. This week Carbon Direct published a white paper Gutierrez authored on opposition around data centers he’s studied. His research reinforces much of what Heatmap Pro has uncovered, but I was particularly intrigued by a topline finding – that transparency is the most common thread in the 46 data center fights he looked into. Was he seeing what I’ve been seeing? So I asked him to hop onto a Zoom call and let me know his thoughts.
The following conversation was lightly edited for clarity.
If you were to explain the findings in your white paper to someone at a bar… how would you put it?
What I would say is that we were really interested in the kinds of concerns communities were articulating as they were opposing or resisting data center development in the U.S. To answer and explore those questions, we developed our own data center cancellation tracker where we looked for cases where we could find a strong correlation between cancelation or withdrawal status and opposition. Then we did high-level analyses of the demographics surrounding those data centers, using standard best practices from environmental justice methodologies and pulling sociodemographic and environmental burden characters from EPA’s EJScreen tool. We were mostly looking at public records. Press materials. City council meeting minutes. Things you wouldn’t have to dig too hard to find.
The kinds of communities we saw successfully resisting data centers tracked across the demographic middle of the United States – slightly more middle income, slightly more white than a majority of the American community, but mostly what you’d consider the average American community.
What is the intended audience of this paper and what are you hoping to communicate?
I think it’s important for data center developers and the capital behind them is that they need to move their engagement to early stage, responsible design. A second audience is regulators, city councils, and local zoning commissions about how to engage with developers and advocate for the right disclosure requirements from industry.
The key topline message is that developers who treat community engagement as a permitting formality instead of a critical early stage input are burdening communities, breaking trust. This is resulting in reputational risk for developers, stranded assets, losing capital – and the loss of future opportunities as developers want to build 21st century infrastructure.
Walk me through what you saw evaluating these projects. What’s the development pattern that leads to such opposition?
We saw five key themes. Some of them you might expect – concerns around natural resources, water impacts, electricity rates, land. The rural character came up quite consistently. And then there was a lack of transparency through the use of NDAs.
The NDA example I was surprised to see was the most consistent in all of our case studies. Communities are largely concerned with the process that unfolds as much as the impacts. That’s a very important signal that transcends political lines. Communities want to be heard, involved in the process. They want large infrastructural development with impacts to listen to their concerns. When those decisions are made behind NDAs or with no transparency or equitable engagement, communities quickly mobilize and organize at a hyperlocal level and are successful in opposing these data centers.
I know there are a number of companies out there – without naming names – that are putting responsible development principles forward. The ones we advocate for across our business, whether we’re working in carbon removal or other things. I see companies leading and saying, if we’re involved in this infrastructure, we are not going to sign an NDA. Those who are pushing forward renewable energy commitments, community benefit agreements, and local public-private partnerships are leading with transparency and equity in their engagements.
How any of this carries in the broader industry is yet to be seen.
In your report you point to various ways opposition can crop up to a project. One of those ways was due to the presence of co-located gas – you note that gas power at a data center engendered environmental opponents, which then strengthened those fighting a data center. Can you elaborate on whether you think a new gas power presence is making it harder to get a data center built?
The case you’re pointing to, that’s the Ballico case where on top of the data center there was a 3,500 megawatt co-located gas plant. That quickly led to major community concerns and a partnership with the Southern Environmental Law Center, which became the legal anchor for thinking through the opposition here and commissioned the technical evidence, and provided the legal [support] there.
You see a broad coalition coalesce around not only the data center concern but the climate concerns that arise. I wouldn’t be surprised if we saw a repeated concern around the expansion of fossil energy and combustion sources going hand in hand with community opposition and organizing on data centers. But that remains to be seen.
What in your research have you seen when you compare opposition to data centers and campaigns against, let’s say, fossil fuels? Or mining? Or renewables?
What I think about with data centers is they’re the highways of the 21st century. As we know through the highway projects in the U.S., there were major disproportionate impacts on communities of color. I think there’s potential for data centers if they follow that playbook to have that same impact.
When it comes to comparing these, that’s something I have not done yet. But I think there’s a few things happening. I think the scale and scope of the buildout is taking the American public by surprise. Articulation around impacts to natural resources and electricity prices in a heightened political climate and a difficult economy. It’s also the existential problem AI introduces, which is the role AI plays in society. This is unique compared to other kinds of extraction, which feed technologies already at play.
How do you feel about the fact that so many of us in energy, environment and climate are now talking about data centers all the time?
Never in my career, working in carbon removal and nature based solutions, I never thought data centers would be a major focus in my career as an environmental justice advocate and social scientist.
Data centers are probably emerging to be one of the biggest environmental justice problems of our time so while it’s not something I planned to work on, I am emboldened to see the response from the nonprofit community and others trying to wrap their heads around this. What is the right kind of information? What does the public need to know? How do we advocate for our communities and build the world we would like to build?
While data centers are moving fast, I’m encouraged to see communities organizing and advocating for their own needs as well. Over the next few years, the story will tell itself.
Last question – what was the last song you listened to?
DtMF by Bad Bunny.
Plus, a look into the future of solar and wind tax credits.
Heatmap AM and Daily will be off tomorrow for the July 4 holiday, but we’ll see you back here on Monday.
We’re staring down the barrel of a holiday weekend here in the United States, so I’ll keep it quick. Two things:
July 4 will mark the formal end of the solar and wind tax credits in the United States. These incentives — which date back in some form to 1978 — were repealed by President Trump’s tax cuts and spending law last year. In order to qualify for the last of these subsidies, solar and wind projects must “commence construction” by Saturday and be ready to generate power by the end of 2027.
Although the policies haven’t yet expired, there’s already chatter about bringing them back. Some Democrats want to revive the incentives should they win back Congress and the White House in two or six years. But 2029 or 2032 will likely look different than the earlier years of this decade, when the Inflation Reduction Act was written and passed: Power prices are higher now, the grid more congested, and the federal budget more constrained. So today, my colleague Emily Pontecorvo previews one of the next big questions in climate policy: Should Democrats try to bring back the solar and wind tax credits?
Her story is great, and one disconnect in particular stuck out to me. Among the climate and clean energy wonks Emily interviewed, “everyone” agreed that “in the near term, the most important thing Congress could do to help clean energy is break down some of the non-cost barriers to development through permitting reform.” Permitting reform, after all, has no fiscal cost and could be achieved during this Congress.
But Democratic lawmakers themselves sound far less sure about its importance. “I don’t think Democrats can engage in a serious way with Republicans on permitting reform,” Representative Jared Huffman, the ranking member on the House Natural Resources Committee, tells her. Read the rest of Emily’s story for more on how lawmakers are thinking about this question, which will only get more important as we get closer to ‘28.
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We’ve begun to get Q2 sales data for global automakers — and there’s actually decent news for electric vehicles. Some highlights:
Enjoy your holiday weekend, and remember: We’re now in Q3. Thanks, as always, for reading.
And not for the first time.
The Department of Energy proposed sweeping changes to its rules for updating efficiency standards for household appliances on Thursday. If finalized, they would hamstring future administrations from issuing tighter standards that would save consumers money as higher-performing air conditioners, stoves, washing machines, refrigerators, and the like hit the market.
While the agency portrayed the move as bringing an end to appliance standards writ large, that is not, in fact, what it is doing. The proposal would update the DOE’s so-called “Process Rule,” which governs how the agency develops standards, adding onerous requirements that will make it much more difficult to make any changes at all.
Under the Energy Policy and Conservation Act, the DOE is generally required to review existing standards every six years and assess whether recent technological advances warrant raising the bar for efficiency for any given product category. Updating the standards involves extensive technological and economic analysis, including looking at the cost to manufacturers and payback periods for consumers, as well as several rounds of public comment. After a new standard is issued, products that fail to meet that level of efficiency have to be taken off the market.
The new proposal delivers on the appliance industry’s request that President Trump restore the process he finalized during his first term, which Biden swiftly reversed. The changes include raising the minimum energy savings required to issue a new standard, adding several more steps and requirements to the rulemaking process for new standards, and using industry-developed test procedures to measure the efficiency of new products.
“This obstacle course of restrictions would hinder the department from carrying out its congressional mandate to protect consumers,” Andrew deLaski, executive director of the Appliance Standards Awareness Project, said in a statement. “We have products that keep getting more efficient and we need to embrace these technological advances, not reject them, especially as data centers strain our electric grid.”
Manufacturers welcomed the announcement. “AHAM applauds the Department of Energy for acting swiftly and delivering a proposed Process Rule that reflects years of constructive engagement with manufacturers, consumers, and other stakeholders,” Kelly Mariotti, the Association of Home Appliance Manufacturers’ president and CEO, said in a statement. The Air-Conditioning, Heating, and Refrigeration Institute also told me it “strongly supports DOE’s review” of the rules, although both groups said they were still working through the proposal.
The Energy Department issued a request for information last April seeking comments on potential changes to its procedures for revising energy conservation standards. At the time, the industry’s biggest trade groups urged the agency to “return to the 2020 version of the Process Rule.”
Trump has long been sympathetic to the industry’s ire over ever-tightening standards. He’s complained about dishwashers and heating systems that no longer work and showers that slow to a trickle. Now, Energy Secretary Chris Wright has joined in, grumbling about clothes dryers that run for multiple cycles.
The Process Rule changes threaten the potential to create significant consumer savings, however, according to the Appliance Standards Awareness Project. The group estimates that based on recent technological advances, the DOE’s next round of standard updates could save the average U.S. household $160 per year on their utility bills, and businesses a collective $15 billion in annual operating costs over 20 years. The group also projects that updated standards have the potential to reduce summer peak electricity demand 34 gigawatts by 2040, which would be like taking New York City off the grid. There are climate benefits, too, of course — an estimated reduction of 800 million metric tons of carbon emissions through 2050.
Even if finalized, Trump’s changes to the Process Rule will not be irreversible, and could continue to ping pong back and forth between administrations, “creating the kind of uncertainty and instability that makes it difficult for manufacturers to plan, invest, and innovate with confidence to the benefit of American consumers,” according to Mariotti of AHAM. The industry’s hope is for Congress to amend the underlying Energy Policy and Conservation act to “lock these reforms into statute,” she said. One such effort, the Don’t Mess With My Home Appliances Act introduced by Republican Representative Rick Allen of Georgia, passed the House in February.
The DOE’s proposal follows a memorandum of agreement the agency reached with the Environmental Protection Agency in March to take over as the lead agency running the EnergyStar labeling program, which identifies the most efficient appliances in a given category. The Process Rule changes will not affect EnergyStar, however.
The DOE is accepting public comments on its proposal for 30 days and will hold a public meeting on July 15.