Ven Sonata’s query is simple: If the falling cost of installing a photovoltaic (PV) system has killed off the viability of solar hot water systems, as GBA senior editor Martin Holladay believes, does it also represent a threat to the beloved ductless minisplit for heating and cooling?
“Is it possible that heat pumps themselves are at least wounded?” Sonata writes in a Q&A post at GreenBuildingAdvisor. “PV at $3.50 [per] watt installed. Note that heat pumps are still great for all places where PV is impossible.”
Efficient, relatively inexpensive, and able to function even in below-zero temperatures, ductless minisplits have become a first choice for many builders specializing in high-performance houses. But is it possible that electric resistance heat powered by PV is now a better choice?
That’s the question for this Q&A Spotlight. Be prepared to crunch some numbers.
Wounded, maybe, but far from dead
Even though the cost of solar electricity has dropped dramatically, the numbers still aren’t there for a wholesale conversion from heat pumps to PV-powered resistance heating, writes Dana Dorsett. At least for the moment.
“Heat pumps are only wounded when the cost of electricity (from PV or any other source) falls to such a ridiculously low level that the up-front cost of the heat pump relative to resistance heating is not viable on a lifecycle cost basis,” he writes. “At 3 US cents/kWh, that may be compelling, but most of the world is paying three to 10 times that much for electricity.”
The levelized lifecycle cost of grid-tied PV, Dorsett continues, is typically greater than 10 cents/kWh for residential systems, much greater in some areas, even as large-scale arrays can produce power for less than that.
That said, there are signs the cost of PV will continue to fall as more efficient solar panels enter the marketplace.
The long-term trend, Dorsett writes, is a 20 percent to 25 percent drop in cost every time the installed base of PV doubles. Plus, a type of PV in development called perovskite/silicon should make panels with efficiencies of greater than 30 percent commercially available within the next one or two decades.
“There is at least a remote chance that a levelized cost of electricity of 3 cents/kWh will be realized with next-generation PV technology within the next 20 years, at which point heat pumps have to be really cheap or really efficient to compete in heating applications,” Dorsett adds.
Calculating the cost over time
To Sonata, it is question of comparing the cost of heating directly with electricity in a resistance heater to the cost of using the electricity to power a heat pump.
His reasoning goes like this: Suppose the cost of electricity is 15 cents per kWh, and that because of its efficiency a minisplit cuts 60 percent of the power bill. “So, it’s like electricity at 6 cents per kWh that you are heating with,” he says. “Add in the cost of the heat pump over 12 (?) years. Now you are at maybe 8 cents per kWh… So if PV can produce for 8 cents per kWh or less, then that’s it for heat pumps.”
To take it a step further, if PV can be installed for $3 per watt, and the system produces 1,500 kWh of electricity per year, it comes out to 6.6 cents per kWh.
There are, as other GBA readers quickly point out, a number of other variables. For instance, Charlie Sullivan notes, as solar becomes more widely distributed, the strains on the electric grid grow more pronounced. “As more people use solar + electrically driven heat, whether it’s heat pumps or resistors,” he says, “there is going to be a big load on the grid on cold February nights, without any help from all of those solar panels.” In the end, he adds, electric rates will have to be structured in such a way that consumers reduce winter-time heat loads. A superinsulated building envelope, or a hydronic heat pump that stores some of its heat in a tank of water, become more attractive.
In comparing the cost of heating water with a conventional resistance heater and a heat pump water heater, Sonata adds, costs are about the same when the cost of PV is $3.74 per watt. As PV gets cheaper, the advantage goes to the resistance heater.
“Does this apply to all air-source heat pumps?” he says. “Yes. The math is that although PV produces half the amount of energy for the same price as the heat pump, the PV lifespan is twice as long as the heat pump (at least twice as long). “
The higher the grid price of PV-generated electricity, the greater its advantage.
Yes, but don’t forget about net-metering rules
Holladay understands Sonata’s logic, but he adds this: “There is a fly in the ointment: Some U.S. states are undermining net-metering agreements, piling new fees on PV owners. Until batteries get a little cheaper, homeowners in these PV-hostile states are between a rock and a hard place.”
As a recent regulatory decision in Wisconsin points out, Holladay adds, a change in net-metering policy can greatly affect the economics of investing in residential PV. When homeowners are paid the wholesale rate for electricity rather than the full retail rate, as is now the case in Wisconsin for new systems, residential systems don’t look as attractive.
“And even good batteries,” Holladay adds, “won’t let PV owners use electricity generated in August to stay warm in January.”
Grid business models come into play
Inevitably, the conversation takes a deeper look at the way electric utilities charge customers and how they pay for the grid itself: the poles, wires, and other parts of the distribution system that are needed by solar and non-solar customers alike.
Dorsett advocates “demand charges” for residential bills that would base rates on a period of highest-use rather than rates based on a fixed cost per kWh of electricity. “With the standard block fixed rate type structures, power-sippers who use the same amount of energy as power gulpers pay the same amount, but the guy with the heat-pump water heater and 2 or 3 tons of modulating minisplit only needs a small fraction of the grid capacity/infrastructure of the customer with the electric tankless hot water heater and 8-ton air conditioner who uses the same amount of total energy,” Dorsett says.
“It’s a serious cross-subsidy of power-sippers toward power-gulpers, since it’s the gulpers that define just how much capacity the distribution lines transformers and substations need to be, whereas the power sipper is paying for grid capacity that they don’t actually need or use.”
Some utilities “have heard the bell and are very supportive of distributed power,” Dorsett adds, by making changes in their business models to accommodate solar customers. Others haven’t been as quick to react. “As has been happening in Germany,” he says, “utilities that fight back too long without writing down some of their no-longer-needed assets and adjusting their business models will fail financially.”
A battle of competing numbers
Grid politics become a factor for all grid-tied PV systems. But leaving that issue aside for the moment, this question becomes a comparison of two sets of numbers.
Dorsett sees it this way:
Resistance heating (100 percent efficient) gets 3,412 Btu of heat for every kWh of electricity used. A “pretty good” minisplit in Boston would get 10,236 Btu for every kWh of electricity it consumes because of its higher efficiency (its “coefficient of performance”).
“Calculate the lifecycle cost of the 6,824 Btu difference when produced by PV, against the lifecycle cost of the same 6,824 Btu when provided by a minisplit,” Dorsett writes. “At the current cost of PV in Boston, the minisplit is still winning (for now). Heat pump water heaters still win, too.”
But Sonata sees a convincing case in data provided by Marc Rosenbaum, director of engineering at the South Mountain Company on Martha’s Vineyard, and a frequent contributor at GBA.
As much as likes minisplits, Sonata finds the evidence is for PV. “After coming across Marc Rosenbaum’s fabulous data on his eight-house net-zero community in New England, all kinds of revelations unfold out of that document,” Sonata writes. “What is nice is that it involves both PV and air-source heat pumps, and the heat pumps are high quality Daikin, and they are measured in actual use, not just manufacturers’ claims.”
Although the numbers might not be as compelling with a different house, in this case, the electric bill was 1,700 kWh lower with the heat pump than it would have been with resistance heat only.
“I do not know the exact cost installed of the heat pumps, but I am guessing around $5,000,” Sonata adds. “If the kWh grid price in Massachusetts is 15 cents then the savings per year is $255. Oh, oh! It takes 20 years to pay off the heat pump! But the heat pump died sometime around year 15-17. Conclusion, heat pump is a net loss over resistance electric heater!”
The picture may be different where cooling is a factor
The comparison changes, writes Nathaniel G, when a heat pump is used for air conditioning in the summer, not just heat during the winter. “Once you go into a climate with cold winters and warm summers, you can consider that the heat pump represents a free air conditioner,” he says. “Likewise, in places that are hot most of the time with mild heating loads (like the American South) where the heat pump can become a heater when needed… you don’t have to install a whole separate system.
“And in places where you’re both heating and cooling a lot (the Midwest, the Rocky Mountain states, the Middle Atlantic, the high desert, etc.), the same is even more true.”
The more a heat pump runs, the more it saves you, replies Sonata. “In a warm climate it doesn’t run as much in the winter but it runs more in the summer,” Sonata adds. “Add together and compute [the] total kWh saved for the year. Take that number and compute to replace those kWh with PV. If the price is equal, PV is half the cost, because [it has] twice the lifespan.”
Our expert’s opinion
Here’s what GBA technical director Peter Yost had to add:
I think the perspectives above have done as able a comparison as is possible and have also pointed out the inherent difficulties built into the comparison. But I thought I should check in with some colleagues of mine at the Energy Center of Wisconsin and National Grid.
They point out that this comparison is fraught with both technical and policy challenges but both stated that sooner or later, the utilities will need to deal with how differently PV/resistance heat and heat pumps use the electric infrastructure of the grid.
My buddy from the Energy Center of Wisconsin argues:
There’s a marginal value of electricity that should determine your decisions (including investing in more efficient AC, etc).
With utility-connected PV, the marginal value is the price of buying it from or selling it to the utility. (These might be the same or different. Plus time-of-day and seasonal rates can vary, but you can estimate the specifics for any scenario.) It has essentially nothing to do with your cost of generating electricity. (The cost of the PV system is sunk if you have already purchased it.)
If you can produce PV power at 2 cents a kWh, and can sell it at 18 cents, the value of electricity to you is 18 cents. If you figure you’ll buy a less efficient HVAC system since your production cost is low, you lose out on the amount you can sell back to the utility at 18 cents, and the economics still hold. The low cost of producing PV power means it’s more attractive to install more PV and make more money by selling more back to the utility, but doesn’t determine the value of installing efficient appliances.
When you go off grid it’s different
This all changes if you go off-grid – then the economics are divorced from utility pricing, net metering, etc. But that’s rare, and for good reasons; e.g., that even a net-zero building won’t have enough energy available for periods in the coldest darkest weather without really big storage capacity. This, I think, is the economic basis for suggesting that simple net metering is a boondoggle for PV owners.
I would just like to add these two important differences in the systems that make the comparison apples to oranges:
- Heat pumps heat and cool, and baseboard electric does not. All kinds of comparison difficulties arise from this aspect of the comparison, for us nerds but most importantly, for consumers.
- High-efficiency air-source heat pumps are ideal for open floor plans and more centralized distribution, whereas resistance heat is perfect for zoning and controlling each room. Interior layouts, occupancy patterns, number of occupants, and setback strategies will affect this comparison, even if we do confine the comparison to space heating.
And in the Northeast, where minisplit heap pump incentives are driving building owners from fossil fuel to electric forms of heating, the utilities will also have to deal with new summer peak loads as those same heat pumps provide central air conditioning for the first time to all those folks!