This June was the hottest in American history. The 116 degree heat melted power cables in Portland, Oregon, and smashed previous temperature records.
Seattle recorded an all-time high of 108 degrees, as to British Columbia at a whopping 121 degrees. So it should come as no surprise that as the world
warms, more and more people are installing air conditioning. Global energy demand for cooling has more than tripled since 1990. And without stricter
efficiency standards, it could more than double between now and 2040.
Globally, it's expected that 4 billion people will buy their first air conditioner by 2050.
But air conditioning itself is a major contributor to global warming. It uses a massive amount of electricity, and can leak potent greenhouse gases
into the atmosphere,
You actually will get into this pretty strong feedback effect where you know, it's hotter, people want more air conditioning, and it just gets
worse and worse,
Altogether, building operations, that is heating, cooling, and lighting, account for 28% of the world's total greenhouse gas emissions. That's more
than the entire transportation sector.
We realized that we were making progress on the transportation side, we were making progress on the generation side, but the elephant in the room
was the fact that buildings used so much energy and emitted so much carbon and there was no real solution for it.
But SkyCool, Gradient, and a number of other companies are working on it, figuring out how to apply new technologies to the traditionally inflexible
heating and cooling industry, finance the upfront costs, communicate the value to property owners, and make sure that it's all done equitably.
The reason why people aren't adopting these technologies is because one, it's too much of a hassle, and two, it's too expensive. And so we set out
to solve those two problems.
We're trying to upgrade and modernize and digitize. How do you apply computer science to the problem of analyzing buildings? And if you can do
that, can you get Wall Street and pension funds and infrastructure funds and the federal government to invest the trillions of dollars that we need
to reduce greenhouse gas emissions?
The energy that it takes to heat and cool buildings, and where that energy comes from, doesn't get a ton of attention, but this is how it works. AC
runs on electricity, a lot of it. A small window AC unit can consume more power than four refrigerators, and central AC in a single home consumes
more power than 15. While the U.S. electric grid is getting greener as more renewables come online, most of the country's electricity is still
generated by fossil fuels, with natural gas being the most common. And in places like China and India, where the urban middle class is soaring and
demand for AC units is too, their electric grids rely heavily on coal, the dirtiest fossil fuel of all.
And so right now, between 5 and 10% of people in India have air conditioners. And by 2050, the expectation is that 70 to 80% of the
population will. And so that's literally going to be almost a billion people that are going to buy air conditioners.
Right now, air conditioning accounts for about 8.5% of global electricity consumption. And researchers have predicted that by mid-century, the global
energy demand for cooling will overtake the global demand for heating. But currently, heating still reigns supreme in terms of energy use, and that's
a big problem too. Central heating for commercial buildings and homes mainly relies on natural gas, which means a greener electric grid won't
solve the problem here. Basically, we need to find a fundamentally different way to heat buildings. And while better insulation and
ventilation should be implemented, the crux of the issue is how to electrify space and water heating.
A lot of people are very familiar with the need to electrify cars and vehicles, but there's a much smaller focus on buildings. And there's been
very slow adoption of existing technologies, that the current rate and pace that we're at, it will actually take 500 years to retrofit every home in
America. And that pace is way too slow.
Many companies in this space are particularly excited about heat pumps, an all-electric device that despite its name, can both heat and cool homes
much more efficiently than traditional systems, and have seen technical improvements in recent years that allow them to work better in cold
climates. Essentially, they work just like an air conditioner that can run in reverse.
Basically what a heat pump does is it lets the internal refrigerant cycle go in both directions. And so it's the addition of a valve that can send
the hot refrigerant to the indoor side instead of the outdoor side. It pulls heat from the cold outdoor air and it pushes it into your room. When
it works as an AC, it pulls heat out of your room and then pushes it to the outdoors.
You can plug it into your windows or walls or there's giant ones that you plug into your roof and your ventilation system of your building. But the
key is they run on 100% electricity.
Baird is CEO of BlocPower, a Brooklyn-based climate startup working to retrofit buildings in low-income neighborhoods. The company installs heat
pumps for no money down and property owners pay BlocPower back over a 10 to 15 year period. These monthly payments are ideally offset by the energy
efficiency savings that owners see on their energy bills.
Heat pumps are like two to four times typically more efficient than the traditional technologies.
That's a big win for the environment, especially when it comes to heating, since tapping into the U.S.'s partially green electric grid is far better
than the alternative.
Even today, if you replace your fossil fuel heating system with an electric heat pump, given the carbon intensity of the electricity grid, you can
reduce emissions by about 70%. As we move to a cleaner electricity grid that number will only get better.
Romanin's company, San Francisco-based Gradient, is building heat pumps that the customer can install themselves in their window, thereby
eliminating high install costs, which Romanin says account for about two-thirds of a heat pump's total price. Depending on the size, layout, and
location of a building, the total cost of a ductless heat pump can vary widely, but according to EnergySage, it averages between $3,500 and $5,000
per unit, compared to an average of about $550 for a window AC unit. Ductless heat pumps, like window ACs, control the temperature for a
particular room instead of the whole building.
The install cost of heat pumps is huge. And so what our system does is it packages a lot of the high efficiency components that exist today in other
parts of the sector in a really simple to install and really pleasant to use device.
Romanin says that Gradient's system is about 30% more efficient than traditional window ACs. Plus the refrigerants that it uses are 70% less
carbon intensive than standard hydrofluorocarbon refrigerants, which are powerful greenhouse gases that often leak into the atmosphere at some point
during the lifecycle of an air conditioner. Gradient's initial product will cover about half of a customer's heating load, and Romanin says that the
next product will be capable of fully replacing fossil fuel heating systems.
So by eliminating gas and fossil fuel in the homes and electrifying those end uses, and then coupling that with things like onsite solar coupled with
storage, can you know further help so that we don't have to exercise some of those emergency dirtier sources.
But heat pumps aren't the only exciting tech in this space. Another Silicon Valley company, SkyCool, is designing panels that take advantage of a
natural phenomenon known as radiative cooling, in which certain materials are able to cast heat into space in the form of infrared light, and can
therefore stay cooler than the surrounding air.
So the system itself only uses electricity to run a pump. That pump is used to circulate water through our panels. Relative to the other systems, other
electricity consuming components in air conditioners or refrigeration systems, the pumps are using a much smaller amount of electricity. The
cooling effect itself is passive, so it really just needs to be outside and exposed to the sky.
SkyCool's panels are covered in an advanced plastic film which radiates heat into space and reflects nearly all the sunlight hitting it. When a
liquid like water or another refrigerant is circulated through the panels, it sheds heat and naturally cools. That's useful because air conditioning
and refrigeration systems expend a lot of energy cooling refrigerants. SkyCool's ability to passively cool liquids means that it could integrate
with these traditional systems and improve their efficiency. SkyCool currently has six live deployments, and their next will be at a data center
in Sacramento.
Really the businesses that we're going after have cooling loads that are dominant. So these are cold storage facilities, they're supermarkets,
they're convenience stores, and you know, data centers and data closets. So these are the buildings that have the highest energy use of all the
buildings that are out there, essentially.
We have the tech and the know-how to put buildings on a path to full decarbonization. What's standing in the way is mostly a matter of upfront
costs, and a lack of awareness from players across the supply chain about the benefits and availability of all-electric, energy efficient appliances.
It's in getting the pricing down through that volume of production and having the market to absorb that volume. But in the meantime, having tax
credits and incentives to buy down and create that market, along with creating the awareness and education from the homeowners or the end users
to the installers or the plumbers.
New York-based startup Sealed is trying to address the upfront costs as well as consumer education. Like BlocPower, the company provides no money
down heat pump installations, as well as weatherization measures like improving insulation and air sealing, and smart home tech like LED bulbs.
The value of this type of home retrofit averages $15,000 to $20,000, and Sealed gets paid back directly through the homeowner's energy savings.
So what we're doing is we're radically aligning our interest with homeowners and also the planet. Because if we don't recommend the right
improvements or the right contractors, we don't end up making any money.
BlocPower doesn't tie its profits directly to energy savings the way that Sealed does. Instead, building owners agree to a set monthly payment
schedule. But the conviction that green retrofits will pay for themselves over time is the driving concept behind BlocPower's financing model too,
and a number of prominent VCs, including the Goldman Sachs Urban Investment Group, and Andreessen Horowitz have bought in. The type of projects that
BlocPower is interested in, retrofitting places like apartment buildings, churches, and community centers, can cost hundreds of thousands or even a
million dollars. But the company reduces the costs associated with building inspections through its software, which analyzes spaces to predict what
changes will be most impactful.
We've built a software system that has a digital model for millions and millions of buildings across the country. So before someone sets foot in
your building, we've scraped all of the government records, all of the financial records, all of the engineering records, all of the blueprints,
and aggregated them into a database that allows us to make predictions about the kind of green energy equipment that make the most sense for your
building.
When it comes to marketing, BlocPower touts the environmental impact of green tech, but also emphasizes how it will make a building more
profitable. And Salz says that the secret to getting homeowners to decarbonize is focusing on how retrofits will increase comfort.
I think the historical messages of, "Save money on your energy bills" or "Save the planet" have actually undersold the value of the improvements
themselves, which is improving people's quality of life at home.
Romanin agrees that this is the approach to take.
When people shop for an AC today, we almost never see the efficiency or environmental impact come into their decision. And so what we've seen is
what people do want to buy now is a better experience, and that for most window AC customers means getting your window back and having a quiet
system.
In the end, whatever gets property owners to go green doesn't really matter. It's just that they do it one way or the other. The U.S. definitely
can't reach its ambitious goal of carbon neutrality by 2050 unless we electrify buildings, make them a whole lot more energy efficient, and fully
green the electric grid, as President Biden hopes to do by 2035.
So we need to have a moonshot goal, because unless you set up an audacious goal, solutions don't come out. So I'm very optimistic that we can get to
decarbonize our new buildings perhaps by 2030, 2035. But getting the existing building stock completely decarbonized is the one that's going to
take a little bit longer. But I feel by 2040, 2050, we have to be there.
In May, the White House announced the Initiative for Better Energy, Emissions and Equity. Known as the E3 initiative, it invests $10 million in
accelerating the research and adoption of heat pump technologies, while also focusing on developing greener refrigerants, and smarter tools to
diagnose problems and inefficiencies with heating and cooling systems. And while Biden's original infrastructure bill called for bold investment in
climate adaptation and clean tech, even if Congress doesn't pass these initiatives, Baird says there's still plenty of ways that policymakers and
the private sector can work together to decarbonize buildings.
I think that President Biden can lead a charge to aggregate data and get the buildings into an open source database so that any contractor or any
firm that wants to come in and help fix their building can access the data easily and give them a set of solutions. We can lead the charge of computer
scientists and developers who are alarmed or concerned about climate change to interrogate that data, to clean it, to start to analyze how to deploy
clean energy.
Certainly incentives like tax credits and subsidies for property owners, manufacturers, and installers who opt to go green would help too. The same
can be said for federal procurement programs, in which the government commits to buying a set amount of a particular product, be it an electric
car or an electric heat pump, thereby de-risking the production of clean tech, driving manufacturing scale-up, and lowering costs. But because the
politics of the energy transition are always messy, many say they just don't want adoption of their tech to be dependent upon government action.
One of our goals is to build a system that's attractive to customers because of the experience, even without incentives, because we don't have
time to wait. We have to start now.
But not to be all doom and gloom about it. The buildings are an opportunity for us that should be harnessable with technologies that are ready and at
hand.