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Silicon Valley is betting better design will bring heat pumps to the masses.
Gleaming solar panels, soaring wind turbines, sleek electric cars. These are the Avengers of the climate technoverse, the most widely recognized symbols of the fight to kick fossil fuels and halt global warming. But the lineup is incomplete. Clean electricity and transportation are covered, but what about heat?
There’s a clear emerging hero waiting in the wings to warm our buildings without emissions. It’s called a heat pump, and it’s a technology that’s been around for decades. The problem is that heat pumps are still largely unfamiliar to most Americans, and the process of trying to get them installed can be a nightmare.
A new cohort of Silicon Valley entrepreneurs is trying to change that by applying a proven formula. The idea is not just to build a better heat pump, but to make one that’s as attractive, convenient, and envy-inducing as a Tesla.
“That’s the only way you win, right?” said Paul Lambert, the founder and CEO of the startup Quilt, which recently raised $9 million in seed funding from Lowercarbon Capital and other investors. “You almost need, like, this Trojan horse. You need to be able to convince people who are skeptical. It needs to be better on its own merits.”
Heat pumps are key to tackling climate change because they run fully on electricity, are far more energy efficient than furnaces and boilers, and function as air conditioners in addition to heaters. Rather than warming a room by means of an electrical current or a flame, they move latent heat around, transferring it either inside or outside of the building, depending on the season.
Only about 16 percent of American homes use heat pumps today, according to the advocacy group Rewiring America. In a recent report, the organization estimated that in order to achieve the U.S. climate goal of net-zero emissions by 2050, heat pump sales need to grow three times faster than they’re expected to by 2032 and to take over the entire residential heating market by 2035. New federal tax credits and rebates created by last year’s Inflation Reduction Act will help, but likely won’t be enough.
“It's going to require lots of new choices for people and continued improvement in all aspects of product design,” Rewiring America’s head of market transformation Stephen Pantano told me. “So the more people investing in this and paying attention to this, the better.”
Despite their technological wizardry, heat pumps are rather dull looking. Some are big metal boxes that get hidden in an attic or closet and push hot or cool air through ducts and vents, while other models require mounting a rectangular hunk of plastic on the wall of every room. Quilt is redesigning the latter.
It’s unclear whether a heat pump could ever achieve the cultural capital of a sports car, no matter how nice it looks. Pantano recalled the scene in Home Alone where Kevin goes looking for his parents in the basement, and the glowing maw of the furnace sends him running. “I think that represents the way a lot of people think about their heating systems, which is that they don't, until they have to, which is usually when it breaks.”
Nonetheless, the heat pumps on the market now aren’t exactly turning heads.
“Whenever we do want to put a unit on the wall, we always get pushback from the consumer regarding the aesthetics,” said Larry Waters, the president of Electrify My Home, a heat pump installation company in Northern California. That’s one of many reasons Waters prefers selling systems that use ductwork. But every building is different, and that isn’t possible in all cases.
That’s especially true for small apartments or for renters who have no power over their HVAC system. Another startup, Gradient, is trying to serve those segments of the market with an attractive heat pump that sits in the window like an air conditioner. It doesn’t require a professional to install, and hangs over the sill like a saddle, solving a key drawback of the average AC by allowing continued use of the window. Last year, the company won a contract to provide 10,000 units for New York City public housing developments.
A Gradient heat pump.Courtesy Gradient
When I spoke to Gradient’s founder Vince Romanin in the summer of 2021, he also compared his approach to Tesla’s. “People didn’t start off buying electric cars because they’re better for the environment, but because they provided a dramatically different and better experience,” he told me.
Gradient’s heat pump recently hit the market. Emily Grubert, a civil engineer and sociologist at the University of Notre Dame, told me she got one for an unheated and un-air conditioned room in her house where her pet rabbits spend most of their time, and where the temperature fluctuates from below freezing in the winter to more than 100 degrees in the summer. It cost $2,000, took about an hour to install, and so far has maintained a comfortable temperature “through multiple days of 90-plus degree weather.”
A third design-forward heat pump startup, Electric Air, was founded by a former Tesla thermal engineer, and is literally advertising itself as “The Tesla of home heating and cooling.” The company’s other selling point is that it plans to combine regular heat pump functionality with improved air purification.
Electric Air heat pump.Courtesy Electric Air
I recently visited Quilt’s headquarters just south of San Francisco to see how the company’s device was shaping up. There I met Lambert along with his two co-founders, Bill Kee and Matthew Knoll. The trio got acquainted while working at Google, and also all recently became fathers, which they said was a big part of what inspired them to leave the tech giant to work on climate solutions. They guided me over to a wall mounted with a few iterations of heat pump designs, as well as a Mitsubishi mini-split, one of the most popular models currently on the market.
Lambert praised the unit’s efficiency, near-silent operation, and ability to heat and cool a room very quickly. “On the other hand, it’s kind of cheap plastic,” he said, rapping his knuckles on the casing. “And it’s quite tall, which is an issue because in a lot of American homes you can’t fit this in the place where people most want it.”
Quilt’s design is certainly more sleek, but it’s by no means a total overhaul. The company doesn’t plan to make its design public until early next year, so I can’t share much, but the improvements are subtle: A slightly smaller frame, a customizable aesthetic, and a few other bells and whistles added based on feedback from focus groups.
Design wasn’t the only factor in Tesla’s success, and Quilt is working on a number of other upgrades, like user experience. Today, when people install wall-mounted heat pumps in multiple rooms in their house, they each come with a separate remote control that has a ton of buttons and looks straight out of the 1980s. In addition to building a more convenient app to control the settings, the company is developing software that will help customers optimize efficiency based on how they use their homes.
“The areas of efficiency that have been exploited in this space have largely been at the mechanical level,” said Kee. “But we think there's a major gain to be made in efficiency by managing the system with intelligence.”
Quilt is also trying to improve the sales process. In addition to being new fathers, Lambert, Kee, and Knoll all recently went through a great deal of trouble trying to get heat pumps installed in their own buildings. “I had people telling me categorically that they wouldn’t work, or that I had to use my ducts, or that I couldn’t use my ducts,” Kee said. “I was totally disempowered. I just became obsessed with the idea that like, this has to be easier for people to do.”
They hope that the direct-to-consumer model, with transparent pricing and predictable scheduling, will help. But it hinges on building an army of ace partner contractors who know the systems inside and out, which could be quite a challenge. The team at Electrify My Home runs heat pump trainings for other contractors in California. Alex Sloan, the company’s vice president of business operations, told me it’s already an uphill battle getting the workforce to adopt existing technology, and to learn to do higher quality installations.
That just may be the one issue a Tesla makeover alone can’t solve.
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If the Senate reconciliation bill gets enacted as written, you’ve got about 92 days left to seal the deal.
If you were thinking about buying or leasing an electric vehicle at some point, you should probably get on it like, right now. Because while it is not guaranteed that the House will approve the budget reconciliation bill that cleared the Senate Tuesday, it is highly likely. Assuming the bill as it’s currently written becomes law, EV tax credits will be gone as of October 1.
The Senate bill guts the subsidies for consumer purchases of electric vehicles, a longstanding goal of the Trump administration. Specifically, it would scrap the 30D tax credit by September 30 of this year, a harsher cut-off than the version of the bill that passed the House, which would have axed the credit by the end of 2025 except for automakers that had sold fewer than 200,000 electric vehicles. The credit as it exists now is worth up to $7,500 for cars with an MSRP below $55,000 (and trucks and sports utility vehicles under $80,000), and, under the Inflation Reduction Act, would have lasted through the end of 2032. The Senate bill also axes the $4,000 used EV tax credit at the end of September.
“Long story short, the credits under the current legislation are only going to be on the books through the end of September,” Corey Cantor, the research director of the Zero-Emissions Transportation Association, told me. “Now is definitely a good time, if you’re interested in an EV, to look at the market.”
The Senate applied the same strict timeline to credits for clean commercial vehicles, both new and used. For home EV chargers, the tax credit will now expire at the end of June next year.
While EVs were on the road well before the 2022 passage of the Inflation Reduction Act, what the new tax credit did was help build out a truly domestic electric vehicle market, Cantor said. “You have a bunch of refreshed EV models from major automakers,” Cantor told me, including “more affordable models in different segments, and many of them quality for the credit.”
These include cars produceddomestically by Kia,Hyundai, and Chevrolet. But of course, the biggest winner from the credit is Tesla, whose Model Y was the best-selling car in the world in 2023.
Tesla shares were down over 5.5% in Tuesday afternoon trading, though not just because of Congress. JPMorgan also released an analyst report Monday arguing that the decline in sales seen in the first quarter would accelerate in the second quarter. President Trump, with whom Tesla CEO Elon Musk had an extremely public falling out last month, suggested on social media Monday night that the government efficiency department Musk himself formerly led should “take a good, hard, look” at the subsidies Musk receives across his many businesses. Trump also said that he would “take a look” at Musk’s United States citizenship in response to reporters’ questions about it.
Cantor told me that he expects a surge of consumer attention to the EV market if the bill passes in its current form. “You’ve seen more customers pull their purchase ahead” when subsidies cut-offs are imminent, he said.
But overall, the end of the subsidy is likely to reduce EV sales from their previously expected levels.
Harvard researchers have estimated that the termination of the EV tax credit “would cut the EV share of new vehicle sales in 2030 by 6.0 percentage points,” from 48% of new sales by 2030 to 42%. Combined with other Trump initiatives such as terminating the National Electric Vehicle Infrastructure program for publicly funded chargers (currently being litigated) and eliminating California’s waiver under the Clean Air Act that allowed it to set tighter vehicle emissions standards, the share of new car sales that are electric could fall to 32% in 2030.
But not all government support for electric vehicles will end by October 1, even if the bill gets the president’s signature in its current form.
“It’s important for consumers to know there are many states that offer subsidies, such as New York, and Colorado,” Cantor told me. That also goes for California, New Jersey, Nevada, and New Mexico. You can find the full list here.
Editor’s note: This story has been edited to include a higher cost limit for trucks and SUVs.
Excise tax is out, foreign sourcing rules are in.
After more than three days of stops and starts on the Senate floor, Congress’ upper chamber finally passed its version of Trump’s One Big Beautiful Bill Act Tuesday morning, sending the tax package back to the House in hopes of delivering it to Trump by the July 4 holiday, as promised.
An amendment brought by Senators Joni Ernst and Chuck Grassley of Iowa and Lisa Murkowski of Alaska that would have more gradually phased down the tax credits for wind and solar rather than abruptly cutting them off was never brought to the floor. Instead, Murkowski struck a deal with the Senate leadership designed to secure her vote that accomplished some of her other priorities, including funding for rural hospitals, while also killing an excise tax on renewables that had only just been stuffed into the bill over the weekend.
The new tax on wind and solar would have driven up development costs by as much as 20% — a prospect that industry groups said would “kill” investment altogether. But even without the tax, the Senate’s bill would gum up the works for clean energy projects across the spectrum due to new phase-out schedules for tax credits and fast-approaching deadlines to meet complex foreign sourcing rules. While more projects will likely be built under this version than the previous one, the basic outcomes haven’t changed: higher energy costs, project delays, lost jobs, and ceding leadership in artificial intelligence and manufacturing to China.
"This bill will hit Americans hard, terminating credits that have helped families lower their energy and transportation costs, shrinking demand for American-made advanced energy technologies, and squeezing new domestic energy production at a time of rising demand and prices,” Heather O’Neill, the CEO and president of the trade group Advanced Energy United, said in a statement Tuesday. “The advanced energy industry will endure, but the downstream effects of these rollbacks and punitive policies will be felt by American families and businesses for years to come.”
Here’s what’s in the final Senate bill.
The final Senate bill bifurcates the previously technology-neutral tax credits for clean electricity into two categories with entirely different rules and timelines — wind and solar versus everything else.
Tax credits for wind and solar farms would end abruptly with no phase-out period, but the bill includes a significant safe harbor for projects that are already under construction or close to breaking ground. As long as a project starts construction within 12 months of the bill’s passage, it will be able to claim the tax credits as originally laid out in the Inflation Reduction Act. All other projects must be “placed in service,” i.e. begin operating, by the start of 2028 to qualify.
That means if Trump signs the bill into law on July 4, wind and solar developers will have until July 4 of 2026 to “start construction.” Otherwise, they will have less than a year and a half to bring their projects online and still qualify for the credits.
Meanwhile, all other sources of zero-emissions electricity, including batteries, advanced nuclear, geothermal, and hydropower, will be able to continue claiming the tax credits for nearly a decade. The credits would start phasing down for projects that start construction in 2034 and terminate in 2036.
While there are some potential wins in the bill for clean energy development, many of the safe harbored projects will still be subject to complex foreign sourcing rules that may prove too much of a burden to meet.
The bill requires that any zero-emissions electricity or advanced manufacturing project that starts construction after December of this year abide by strict new “foreign entities of concern,” or FEOC rules in order to be eligible for tax credits. The rules penalize companies for having financial or material connections to people or businesses that are “owned by, controlled by, or subject to the jurisdiction or direction of” any of four countries — Russia, Iran, North Korea, and most importantly for clean energy technology, China.
As with the text that came out of the Senate Finance committee, the text in the final bill would phase in supply chain restrictions, requiring project developers and manufacturers to use fewer and fewer Chinese-sourced inputs over time. For clean electricity projects starting construction next year, 40% of the value of the materials used in the project must be free of ties to a FEOC. By 2030, the threshold would rise to 60%. Energy storage facilities are subject to a more aggressive timeline and would be required to prove that 55% of the project materials are non-FEOC in 2026, rising to 75% by 2030. Each covered advanced manufacturing technology gets its own specific FEOC benchmarks.
Unlike the text from the Finance Committee, however, the final text includes a clear exception for developers who already have procurement contracts in place prior to the bill’s enactment. If a solar developer has already signed a contract to get its cells from a Chinese company, for example, it could exempt that cost from the calculation. That would make it easier for companies further along in the development process to comply with the eligibility rules.
That said, these materials sourcing rules come on top of strict ownership and licensing rules likely to block more than 100 existing and planned solar and battery factories with partial Chinese ownership or licensing deals with Chinese firms from receiving the tax credits, per a BloombergNEF analysis I reported on previously.
Once again, the details of how any of this will work — and whether it will, in fact, be “workable” — will depend heavily on guidance written by the Treasury department. That not only gives the Trump administration significant discretion over the rules, it also assumes that the nTreasury department, which is now severely understaffed after Trump’s efficiency department cleaned house earlier this year, will actually have the bandwidth to write them. Without Treasury guidance, developers may not have the cost certainty they need to continue moving forward on projects.
Up until today, the Senate and House looked poised to destroy the business model for companies like Sunrun that lease rooftop solar installations to homeowners and businesses by cutting them off from the investment tax credit, which can bring down the cost of a solar array by as much as 70%. The final Senate bill, however, got rid of this provision and replaced it with a much more narrow version.
Now, the only “leasing” schemes that are barred from claiming tax credits are those for solar water heaters and small wind installations. Companies that lease solar panels, batteries, fuel cells, and geothermal heating equipment are still eligible. SunRun’s stock jumped nearly 10% on Tuesday.
Other than the new FEOC rules, which will have truly existential consequences for a great many projects, there aren’t many changes to the advanced manufacturing tax credit, or 45X, than in previous versions of the bill. The OBBBA would create a new phase-out schedule for critical mineral producers claiming the tax credit that begins in 2031. Previously, critical minerals were set to be eligible indefinitely. It would also terminate the credit for wind energy components early, in 2028.
One significant change from the Senate Finance text is that the bill would allow vertically integrated companies to stack the tax credit for multiple components.
But perhaps the biggest change, which was introduced last weekend, is a twisted new definition of “critical mineral” that allows metallurgical coal — the type of coal used in steelmaking — to qualify for the tax credit. As my colleague Matthew Zeitlin wrote, most of the metallurgical coal the U.S. produces is exported, meaning this subsidy will mostly help other countries produce cheaper steel.
It looks like the hydrogen industry’s intense lobbying efforts finally paid off: The final Senate bill is the first text we’ve seen since this process began in May that would extend the lifespan of the tax credit for clean hydrogen production. Now, projects that begin construction before January 1, 2028 will still qualify for the credit. This is shorter than the Inflation Reduction Act’s 2033 cut-off, but much longer than the end-of-year cliff earlier versions of the bill would have imposed.
The tax credits for electric vehicles and energy efficiency building improvements would end almost immediately. Consumers will have to purchase or lease a new or used EV before September 30, 2025, in order to benefit. There would be a slightly longer lead time to get an EV charger installed, but that credit (30C) would expire on June 30, 2026.
Meanwhile, energy efficiency upgrades such as installing a heat pump or better-insulated windows and doors would have to be completed by the end of this year in order to qualify. Same goes for self-financed rooftop solar. The tax credit for newly built energy efficiency homes would expire on June 30, 2026.
The bill would make similar changes to the carbon sequestration (45Q) and clean fuels (45Z) tax credits as previous versions, boosting the credit amount for carbon capture projects that do enhanced oil recovery, and extending the clean fuels credit to corn ethanol producers.
The House Rules Committee met on Tuesday afternoon shortly after the Senate vote to deliberate on whether to send it to the House floor, and is still debating as of press time. As of this writing, Rules members Ralph Norman and Chip Roy have said they’ll vote against it.
On sparring in the Senate, NEPA rules, and taxing first-class flyers
Current conditions: A hurricane warning is in effect for Mexico as the Category 1 storm Flossie approaches • More than 50,000 people have been forced to flee wildfires raging in Turkey • Heavy rain caused flash floods and landslides near a mountain resort in northern Italy during peak tourist season.
Senate lawmakers’ vote-a-rama on the GOP tax and budget megabill dragged into Monday night and continues Tuesday. Republicans only have three votes to lose if they want to get the bill through the chamber and send it to the House. Already Senators Thom Tillis and Rand Paul are expected to vote against it, and there are a few more holdouts for whom clean energy appears to be one sticking point. Senator Lisa Murkowski of Alaska, for example, has put forward an amendment (together with Iowa Senators Joni Ernst and Chuck Grassley) that would eliminate the new renewables excise tax, and phase out tax credits for solar and wind gradually (by 2028) rather than immediately, as proposed in the original bill. “I don’t want us to backslide on the clean energy credits,” Murkowski told reporters Monday. E&E News reported that the amendment could be considered on a simple majority threshold. (As an aside: If you’re wondering why wind and solar need tax credits if they’re so cheap, as clean energy advocates often emphasize, Heatmap’s Emily Pontecorvo has a nice explainer worth reading.)
At the same time, Utah’s Senator John Curtis has proposed an amendment that tweaks the new excise tax to make it more “flexible.” The amendments are “setting up a major intra-party fight,” Politicoreported, adding that “fiscal hawks on both sides of the Capitol are warning they will oppose the bill if the phase-outs of Inflation Reduction Act provisions are watered down.” Senators have already defeated amendments proposed by Democrats Jeanne Shaheen of New Hampshire and John Hickenlooper of Colorado to defend clean energy and residential solar tax credits, respectively. The session has broken the previous record for most votes in a vote-a-rama, set in 2008, with no end in sight.
The Department of Energy on Monday rolled back most of its regulations relating to the National Environmental Policy Act, or NEPA, and published a new set of guidance procedures in their place. The longstanding NEPA law requires that the government study the environmental impacts of its actions, and in the case of the DOE, this meant things like permitting and public lands management. In a press release outlining the changes, the agency said it was “fixing the broken permitting process and delivering on President Trump’s pledge to unleash American energy dominance and accelerate critical energy infrastructure.” Secretary of Energy Chris Wright said the agency was cutting red tape to end permitting paralysis. “Build, baby, build!” he said.
Nearly 300 employees of the Environmental Protection Agency signed a letter addressed to EPA head Lee Zeldin declaring their dissent toward the Trump administration’s policies. The letter accuses the administration of:
“Going forward, you have the opportunity to correct course,” the letter states. “Should you choose to do so, we stand ready to support your efforts to fulfill EPA’s mission.” It’s signed by more than 420 people, 270 being EPA workers. Many of them asked to sign anonymously. In a statement to The New York Times, EPA spokesperson Carolyn Horlan said “the Trump EPA will continue to work with states, tribes and communities to advance the agency’s core mission of protecting human health and the environment and administrator Zeldin’s Powering the Great American Comeback Initiative, which includes providing clean air, land and water for EVERY American.”
At the fourth International Conference on Financing for Development taking place in Spain this week, a group of eight countries including France and Spain announced they’re banding together in an effort to tax first- and business-class flyers as well as private jets to raise money for climate mitigation and sustainable development. “The aim is to help improve green taxation and foster international solidarity by promoting more progressive and harmonised tax systems,” the office of Spanish Prime Minister Pedro Sanchez said in a statement. Other countries in the coalition include Kenya, Barbados, Somalia, Benin, Sierra Leone, and Antigua & Barbuda. The group said it will “work towards COP30 on a better contribution of the aviation sector to fair transitions and resilience.” Wopke Hoekstra, who heads up the European Commission for Climate, called for other countries to join the group in the lead-up to COP30 in November.
In case you missed it: Google announced on Monday that it intends to buy fusion energy from nuclear startup Commonwealth Fusion Systems. Of course, CFS will have to crack commercial-scale fusion first (minor detail!), but as The Wall Street Journal noted, the news is significant because it is “the first direct deal between a customer and a fusion energy company.” Google will buy 200 megawatts of energy supplied by CFS’s ARC plant in Virginia. “It’s a pretty big signal to the market that fusion’s coming,” CFS CEO Bob Mumgaard told the Journal. “It’s desirable, and that people are gonna work together to make it happen.” Google’s head of advanced energy Michael Terrell echoed that sentiment, saying the company hopes this move will “prove out and scale a promising pathway toward commercial fusion power.” CFS, which is backed by Bill Gates’ Breakthrough Energy Ventures, aims to produce commercial fusion energy in the 2030s.
All the public property owned by Britain’s King Charles earned a net profit of £1.15 billion ($1.58 billion) last year. The biggest source of income? Offshore wind leases.