Pump Up the Volume: Heat Pumps Warming Up

November 22, 2022

University of Maryland:

Launched today in Nature Energy, a new study led by the Center for Global Sustainability (CGS) researchers examines the cost of heat pump installation in American households and the effect on house prices and home values. They find that heat pumps not only offer an energy-efficient source of electrified heating and cooling but also increase the value of the average home by adding on average a US$10,400–17,000 price premium for households in nearly half of the U.S. states. 

Canary Media:

Dandelion, the Google spinout making geothermal heating and cooling for homes, just raised $70 million to grow its operations as market demand surges.

The startup focused on heat pumps well before the building-decarbonization tool arrived at its current moment in the spotlight. Dandelion powers heat pumps with slimmed-down geothermal drilling in a household’s backyard. By drilling hundreds of feet into the ground, Dandelion taps a secure reservoir of heat in the winter, and in the summer, the pump removes heat from the house to cool it. 

Now the company is tapping deeper reservoirs of capital. The financing was led by the venture arm of national homebuilder Lennar and the energy transition investing division of NGP. Breakthrough Energy Ventures participated alongside several other investors. 

This round was intended to be an extension of last year’s $30 million Series B, but ​“there was just more demand than we anticipated,” CEOMichael Sachse told Canary Media. As a result, this B-1 raise surpassed the total $65 million that the company raised previously.

“There is a lot of understanding that heat pumps are going to be a big part of the solution” to decarbonizing buildings, Sachse said. ​“Investors are trying to understand how they might play in the heat pump space.”

In 2017, Dandelion graduated from Google’s ​“moonshot factory,” X, with some promising IP around residential-scale geothermal. Prior to that, people could hire a local contractor to drill a well in their yard, but nobody had tackled home geothermal as a technology problem and innovated on it with Silicon Valley–style R&D. 

Tech is great, but Dandelion needed to prove customers actually wanted this. The startup shifted operations to New York state, where it could go head-to-head with gloppy old fuel-oil heating, offering cleaner heat and fuel cost savings. In Westchester County, utility Con Edison can’t even supply new gas hookups to homes, so Dandelion jumped in to fill the gap. By now, it’s installed 1,000 systems across New York, Connecticut and Massachusetts, and tripled its commercial operations since the start of 2022. 

Meanwhile, macro trends have made Dandelion’s offering all the more appealing. More households recognize energy costs as a pain point, due to general inflation and energy-specific price spikes stemming from Russia’s invasion of Ukraine. Congress included thousands of dollars in tax creditsfor home electrification in the Inflation Reduction Act, and groups like Rewiring America have been pounding the pavement evangelizing the benefits of heat pump technology.

The easiest way to install home geothermal heating is to do so as part of new construction — hence the value of having Lennar as a strategic investor. Dandelion will spend some of its new capital developing a new-build market in partnership with homebuilders, Sachse said.

Thus far, Dandelion mostly retrofits onto existing homes, and it honed a relatively less invasive drilling rig to fit into customer yards. But it still has to confront the challenge of timing: Homeowners who recently paid for fossil-fueled heating are loath to rip it out and replace it before it breaks. And when heating equipment does break, people generally want the quickest and easiest replacement.

Dandelion’s product also costs roughly double the price of a new fossil-gas furnace and air-conditioning system, Sachse said. But once installed, the geothermal system costs one-third to operate compared to traditional heating and cooling. 

Currently, customers can get a loan from Dandelion so they can access those monthly energy savings without paying a fat sum upfront. The system typically pays for itself in seven years, Sachse said, after which customers enjoy much lower heating and cooling bills.

But a new federal policy in the Inflation Reduction Act could soon give customers more financing options. The landmark climate legislation gives households a 30 percent tax credit for ground-source heat pumps like Dandelion’s, while third-party-owned systems get a 40 percent credit if they meet the criteria for domestic manufacturing. Prior to that legislation, third-party-owned heat pumps could only access a much lower tax credit. 

Once those credits are flowing, companies like Dandelion could finance heat pumps, monetize the higher tax credit and get paid back over time by customers. That could expand the pool of customers who want to adopt this technology.

“From a company standpoint, we think that if we’re able to do 2,500 to 5,000 homes a year, that is public-company scale,” Sachse said. He added that electrifying home heating and cooling is a big enough market to support multiple billion-dollar companies, as regions such as Europe and states including California, Washington and more push to eliminate fossil-fueled heating.


5 Responses to “Pump Up the Volume: Heat Pumps Warming Up”

  1. renewableguy Says:

    On our cottage in Michigan, we had electric base board heat. We installed a 3 head heat pump that heats the cottage comforably. Each head is individually controlled by temperature. They have to be all heating or all airconditioning. One cannot air condition while the other heats. Our bottom temperature is -15*F. Since we close up for the winter, this is plenty of room to heat our cottage. Should we decide to be there year round, this unit should do the trick.

  2. rhymeswithgoalie Says:

    If you loosen one bottleneck (say, subsidies to make heat pumps more affordable), you often hit another.

    Shortages of skilled trade labor (in this case, electricians) is a problem in the US.

    • renewableguy Says:

      Change does take time.

      • rhymeswithgoalie Says:

        Change does take time.

        Aye, that.

        As for S-curves, those tend to be zippier for end consumer goods (including drop-in appliances like refrigerators) than for infrastructure—whether household, municipal, or regional—that requires arranging specialized labor.

  3. John Oneill Says:

    Does anyone know what refrigerant Dandelion uses ? Air-source heat pumps are nearly universal in New Zealand, where the temperature extremes are much easier for them to cope with than those common in North America. Trouble is, they usually only last about eight years, and there’s no mandatory scheme here for degassing and safe disposal of the coolant. Same for refrigerators – they just get junked, or the metal’s recycled. The most common refrigerants now are much better than freon for the ozone layer, but last I heard they still had high global warming potentials.

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