Incentives Needed for Air-to-Water Heat Pump Conversions in Multifamilies: An Open letter to the Program Administrators of Mass Save

By Eric Weld, MassLandlords, Inc.

We applaud the work of Mass Save in recent years to help nearly 100,000 Massachusetts residents, as well as rental property and business owners, convert their buildings away from fossil fuel energy to electric heat pumps. We have, in fact, participated in devising policy used by Mass Save through our state seat on the Equity Working Group (EWG) of the Department of Energy Resource’s (DOER) Energy Efficiency Advisory Council, which was tasked with developing the Mass Save three-year plan for 2025-2027. We fully and publicly support that plan.

Many older triple-deckers, like these multifamilies in Worcester, use forced hot water heating systems, which radiate heat through baseboard or steel radiators or under-floor pipes, fueled by oil, gas or propane. Massachusetts hosts tens of thousands of these buildings. We propose a Mass Save pilot program that incentivizes owners of these types of properties to convert to electric air-to-water heat pumps. Image: cc by-sa John Phelan Wikimedia commons

Unfortunately, the progress made so far is not nearly enough to reach our state’s carbon neutral goals. Rental property owners, especially landlords of older buildings with forced hot water heating, are consistently lagging single-family owners in converting to electric energy systems, for several reasons.

We would like to propose that Mass Save incentivize multifamily owners with hydronic heating to replace their gas-, oil- or propane-burning boilers with air-to-water heat pumps, allowing them to convert to electric relatively cheaply while leaving their hydronic systems in place.

This proposal would preferably be introduced within the current three-year plan, but could also work as an added feature of the three-year plan beginning in 2028.

We explain our proposal in detail below.

Forced hot water baseboards like this unit produce high-quality, consistent heat by radiating warm air through a tightly aligned series of aluminum fins, as shown in the bottom frame. The top two frames show the baseboard radiator’s cover with top vent closed and open. A drop-in air-to-water heat pump would allow owners of these types of systems to keep them in place in their homes and rentals. Image: cc by-sa Tomakkermans Wikimedia commons

Air-to-Air vs. Air-to-Water Heat Pumps for Multifamilies

Massachusetts hosts tens of thousands of multifamily residential buildings, many of them built a century or more ago. Boston alone has 15,000 triple-deckers; there are another 4,000 in Worcester. Among all types of multifamily buildings, including condos, there are more than 60,000 in our state, with more than 600,000 dwellings, according to the 2022 Census of Multifamily Buildings published by the Energy Efficiency Advisory Council.

A large share of old multifamily buildings use forced hot water systems to heat their interior spaces, powered by fossil fuel combustion. Warm water is distributed through baseboards or steel radiators. A few have installed subfloor pipe networksDrop-in replacement of an air-to-water heat pump for a boiler is a relatively simple job.

Alternatively, replacing these hydronic energy systems with air-to-air heat pumps, as incentivized through Mass Save, is often not cost-effective or the most efficient choice, for a few reasons. These old buildings typically have lots of walls and unusual room configurations with angles that obstruct air flow. They often have odd extensions, enclosed porches and breezeways equipped with baseboards supplying dedicated heat for a small space. Most of them also lack ductwork or the wall space to install ducts.

Because of these idiosyncrasies, which many find charming, heating interiors of these buildings with ductless mini-split air handlers is not an ideal match, especially when water-based systems are already in place and only in need of a drop-in replacement heat pump. One rental unit in some buildings might require eight or 10 mini-split heads with two exterior condensers, at high cost to Mass Save.

Worse, performance contractors don’t advise installing mini-split heads in the bathroom, where heat is vital to prevent frozen pipes. Instead, they recommend electric resistance, a less efficient system and an added grid stressor.

Further complicating air-to-air heat pump installation is the need to enter tenants’ rental units, or even relocate them temporarily, at additional steep cost. Installing a drop-in replacement air-to-water heat pump in the cellar of a multifamily would avoid that expense and inconvenience.

Finally, there’s the quality of the heat. Hydronic systems produce high-quality, consistent, more radiant heat in comparison to mini-split handlers. Many multifamily owners would like to convert to electric heat. They want to eliminate fossil fuel combustion, improve safety in their properties and free their businesses from volatile fuel prices, all while retaining their hydronic systems.

All these objectives are attainable, but not cost-efficient for rental property owners within the current incentivization structure. We see this conundrum as a looming barrier to achieving our state’s carbon reduction goals.

This old boiler (blue) is similar to many that are ideal candidates for air-to-water heat pump replacement. The copper forced hot water lines are at left of frame and insulated. The boiler, gas line (center of frame) and combustion exhaust can all be removed. A refrigerant line set can be run from this location to an exterior condenser a few feet away. The heat pump can be placed where the boiler and exhaust once stood. There would be no need to enter any of the rental units above. In the background, a heat pump water heater stands in the place of a gas water heater. CC BY-SA 4.0 MassLandlords

Our Proposal: Support Air-to-Water Heat Pumps for Interior Heating

The above reasons inform our proposal for Mass Save to offer a carve-out efficiency standard to permit air-to-water heat pump conversions for owners of multifamily buildings with hydronic systems.

As part of our proposal, we also suggest adjustments to current efficiency thresholds for qualifying for rebates, tax breaks and interest-free heat loans through Mass Save. Coefficient of Performance (COP) levels currently set by Energy Star and Mass Save that determine eligibility for financial incentives will likely not pertain to many air-to-water heat pump system purchases.

We realize that many hydronic heating systems require an energy source that can heat up supply water to a very high temperature, around 180 degrees Fahrenheit, in order to achieve convective air flow from radiators. The high supply water temperature is necessary to generate interior heat at desired temperatures during cold outside weather.

A few heat pumps on the market are capable of producing high supply water temperatures, but because of their high output temperature, they are not as efficient as air-to-air heat pumps that can operate at lower temperatures in order to simply create warm air flow through a space. These heat pumps’ COP ratings may run below a 3, rendering them ineligible for Mass Save incentives.

We suggest an adjustment, or carve out efficiency standard, for high-temperature air-to-water heat pumps in order to incentivize these conversions at low cost.

Added Incentives for Installing Solar

Because of high-temperature air-to-water heat pumps’ lower efficiencies, installing thousands of them in accordance with the state’s carbon neutrality goals would add load to the energy grid. We understand, according to DOER reporting, that the energy grid is designed for peak load in summer and, as a result, has plenty of capacity in winter, and would not be unduly stressed by our proposal for lower efficiency air-to-water heat pumps.

However, long-term (in a decade or so), the added energy load may catch up with grid capacity.

We propose that Mass Save consider incentivizing or requiring solar or battery storage where air-to-water conversions are preferred. Solar energy would more than make up for any added grid load as a result of installing lower efficiency air-to-water heat pumps, and is, of course, a more efficient form of electric power generally.

Consider, as a representative example, the typical triple decker. By our internal analysis, the roof of these buildings can accommodate a solar panel array to produce approximately 8,000 kilowatt hours per year of energy.

According to our heat pump vs. furnace calculator, installing a Mitsubishi air source heat pump (the most popular heat pump brand) would require about 6,000 kWh/year to operate.

Specific load differences between air-to-air and air-to-water heat pumps depend on many variables and are difficult to calculate. Installing air-to-water heat pumps in our typical triple decker described above could be one-third more in kilowatt-hours, or 2,000 added kWh/year, over air-to-air. Solar power would completely mitigate that added load.

More Production for Equal Budget

Air-to-water heat pumps are commonly used through Europe and Japan with low-temperature output. Sanden and Nordic are two brands that could be installed here but would likely require modifications to baseboards to work with lower supply water temperatures. This kind of in-unit expense is what we propose to avoid entirely.

There are two market-ready, high temperature choices in the U.S. today.

We have written before about two products available to American property owners: Arctic Heat Pump’s Extreme High Temperature model, and the Daikin Altherma model.

Both these heat pumps can produce supply water of temperatures near 180 degrees Fahrenheit, high enough to achieve effective radiant heat through forced hot water baseboards, radiators and under-floor grids.

The Arctic Extreme model uses R-410A refrigerant, a gas with high Global Warming Potential, which is not legal for commercial use in the U.S. (residential HVAC use of R-410A remains legal for the moment). Arctic has stated that even in the event of a phaseout of R-410A in the U.S., their models can easily convert to accommodate new refrigerants.

MassLandlords members have experience with Daikin products, having worked with representative Dan Smith in 2023 on a successful pilot installation of its Altherma heat pump in a member’s six-family property. Daikin products use R-32 refrigerant, which is widely used in U.S. products and not scheduled for phaseout.

Our pilot proposal would suggest Arctic and Daikin as first-stop collaborators that have had air-to-water high temperature heat pumps on the market for several years.

Working with brands like Arctic and Daikin, a statewide Mass Save air-to-water carve-out efficiency standard could substantially increase production and the rate of installs, thereby lowering per-install costs. In fact, for Mass Save, the cost of supporting air-to-water heat pumps for multifamilies would be much lower than providing incentives for air-to-air systems for these buildings. Heating apparatuses are already in place, so expenses would only include the installation of the heat pump systems, cutting the need for interior air handlers or minisplits.

Lower installation costs and higher volume, coupled with DOER winter rates, could have the welcome effect of holding energy bills constant for property owners switching to air-to-water, even with lower efficiency heat pumps in comparison with air-to-air. Multifamily owners will help their bottom line by freeing their businesses from the unpredictability and instability of fossil fuel prices.

These conditions could set the stage for more production for the same budget, and more greenhouse gas reductions for the same budget, by incentivizing air-to-water heat pump conversions for multifamily owners with hydronics. A pilot will tell us for sure.

Cooling Still Needed

We also want to acknowledge that our proposal, while much less costly than switching from hydronic systems to air source heat pumps, will not provide multifamily owners with cooling. While it’s possible to cool using baseboard forced hot water pipes, a costly update of the pipes would likely be needed to insulate them and add feedback loops to control the water temperature. Without such an update, condensation and mold will always be a threat whenever the pipe temperature falls below the dewpoint. In this regard, air-to-water loses out to air-to-air, which does provide cooling.

But using one dual system heat pump for both heating and cooling can be problematic. To install air-to-air heat pump systems for both heating and cooling a triple decker interior requires very high-powered products, in order to provide enough heat for the very cold outside temperatures of mid-winter. When it comes time to cool in summer, those high-powered systems are overpowered for cooling. The high-powered cooling cycle tends to overwhelm the inside space with humidity, resulting in condensation, the potential for mold and requiring regular heat pump cleaning. This is the so-called “short-cycling” problem and is well documented.

For cooling homes with hydronic systems, it makes more sense to use window air conditioners or invest in air source heat pumps strictly for cooling.

Also, having separate heat pumps for interior cooling would require fewer air handlers or minisplits inside than a dual heating-cooling system. And some heat pumps designed only for cooling tend to be cheaper than those intended for both heating and cooling.

For many multifamilies, it’s more efficient to have separate systems for heating and cooling, whatever the type of system. The goal is rapid decarbonization – not air conditioning – and drop in air-to-water offers a possible step-change in cost per install.

Owners just need adequate incentive policies to make the switch.

Also Needed: Hot Water Heat Pump Incentivization

It’s also important to acknowledge that our proposal pertains to air-to-water heat pumps for interior space conditioning (heating) only, as distinct from heat pump water heating. Water heating is an equally important issue, and one that too often takes a back seat to ongoing campaigns to convert to heat pumps for interior space conditioning.

It makes sense to prioritize replacement of space heating fossil fuel boilers. In general, interior heating and cooling consumes nearly twice as much energy as water heating needs, for showers, faucets and laundry.

That said, a significant number of homes and businesses in Massachusetts (and nationwide) continue to heat water using gas, oil or propane. Incentivizing these property owners to convert to heat pump water heaters will soon need to take higher priority in order to meet the state’s decarbonization goals. And, like an air-to-water drop-in for space heating, heat pump water heaters are, in many instances, drop-in replacements as well.

Incentive Policy Shift Needed for Conversion Goals

Between 2020 and 2025, Mass Save has admirably implemented an infrastructure with incentives to assist tens of thousands of customers in converting away from fossil fuels. Now, in the five years leading to 2030, the state’s goals are set significantly higher: to convert 500,000 additional households to heat pumps. In order to meet conversion goals, several times more households will have to convert to electric power in the next five years.

Among those, tens of thousands are multifamily owners, many of them landlords of rentals in older buildings with hydronic heating, difficult to convert to air-to-air heat pumps. A lag among these property owners, who lack cost-effective incentives, could jeopardize the state’s decarbonization goals.

The gap in conversions for multifamilies will certainly be exacerbated by recent cuts to the Mass Save electric conversion budget by the Department of Public Utilities in response to customer complaints of high heating costs. The DPU cuts resulted in a $500 million reduction for Mass Save, much of which was slated to support multifamily owners in 21 selected communities convert to heat pumps.

The importance of our proposal is multiplied in the wake of the recent Mass Save budget cut.

Most multifamily owners want to convert away from expensive, unpredictable and polluting fossil fuel heating for their rentals. Current incentives for air-to-air are likely sufficient, but at what cost to the public? Air-to-water might get the job done for a fraction of the planned cost.