A California Program Is Bringing Down the Cost of Heat Pumps by Buying Bulk

When heat waves descended on California this summer, Shreyas Sudhakar, founder and chief executive officer of heat pump installation firm Vayu, took his chance.

Just 54 percent of homes in the state have central air-conditioning, but rising temperatures are making cooling a must-have. Sudhakar saw the hot weather as an opportunity to sign up multiple households to a heat pump “group-buy” scheme, offering them a chance to purchase technology that provides carbon-free heating and cooling at a discount. After advertising the venture online, he was flooded with queries.

Heat pumps often cost more than cooling-only air conditioners, which is why adoption hasn’t been more widespread in the US. But the group-buy approach offers would-be purchasers a bulk discount that can defray part of the cost. Group-buys also mean installers can line up a tidy string of jobs—a win-win potentially enabling whole neighborhoods to switch to heat pumps.

Along with heat pump marketplace VoltHub, Vayu launched the first California Heat Pump Group Buy last year. “Nobody, to our knowledge, had done it in California,” recalls Sudhakar. “We thought, ‘Let’s try it out.’” The program is available around Los Angeles and the Bay Area.

Air-source heat pumps run on electricity. They work by harvesting heat from outside air and distributing it indoors, or gathering excess internal heat and dumping it outside.

This isn’t exactly rocket science. Except, perhaps, to a former rocket propulsion engineer.

“I tell people this all the time,” laughs Sudhakar, who previously designed rocket engines at Blue Origin. “At the end of the day, it’s a bunch of pipes and a heat exchanger moving energy from one place to another.”

Among the first group of roughly 10 customers in the initial group-buy scheme was Naoya Kanai, a data scientist who lives with his wife and toddler in the Bay Area city of San Mateo. Kanai stumbled on the group-buy online and jumped at the chance, knowing that federal rebates for carbon-free appliances would soon disappear under the Trump administration .

“It was one of the most affordable ways to get a quality system,” he says of the program. Kanai recalls thinking, “I can really sell it to my spouse.”

Once households are signed up to the group-buy, Sudhakar and his colleagues work out what equipment they’ll need for each installation. Then, they shop around for deals from distributors so they can make offers to participants. “We’re looking for what is the best value across the entire group,” he adds. “Typically, we’re getting 15 to 30 percent discounts on the equipment.”