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Comment by amluto | Hacker News Reader

I wonder if CA has noticed that electricity prices in the investor-owned-utility regions are so out of whack that a heat pump with a COP of 4 is no longer economical compared with a reasonably efficient gas-fired appliance.

The solution isn’t more regulation or incentives, IMO. It’s to fix the utterly broken electricity market.

(This is a great example, BTW, of how public-private partnerships can be dramatically worse than full public control. Palo Alto, Santa Clara, and Los Angeles are doing quite a bit better.)

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Agreed. I live in the CA, and am a homeowner. I love the efficiency of heat pumps. I have a high personal incentive to install cool efficient tech. I have the 20k lying around to install a heat pump (or 5-7k for a mini split). Yet I will never install a heat pump, because PG&E is running a racket on electricity prices. In fact, I’m considering instead installing a new wood stove / masonry heater.

CA needs to get its incentives aligned to meet any of these goals. You want people to electrify? Just make it cheaper to run in the long term, and everybody will just do it by default.

PG&E is charging you to pay for wildfire lawsuits and to bury power lines so that people can keep building cities in forests.

The state should pay for that out of general taxes rather that shifting the economic incentives of power use

IMO the state should have forced PG&E into liquidation, bought all the assets, and converted the whole mess to a public utility. It would surely take some time to learn how to operate PG&E’s disaster of a system, but it’s not as though PG&E can competently operate its own system right now.

I hated this idea at the time, but have come around to it. Im fairly libertarian, but understand that competition is difficult for the power distribution network.

As much as I think the state is inefficient, a cost plus regulated monopoly is even worse. Municipal power companies in CA run $0.10-0.20 per kwh, while PG&E is $0.40-0.50 cents, and going up.

It would be amusing to require PG&E to match the average rates of the municipal utilities plus 10%. And then liquidate them when their stock goes to zero as a result :)

Which leads to opening up a whole nother can of worms regarding forest mismanagement and lack of controlled burns.

They are also regulated to have a 10% profit margin, so that only way to increase revenue is to drive up costs year after year.

>Just make it cheaper to run in the long term, and everybody will just do it by default

That's how you get exorbitant taxes on the alternatives

On top of this, the CPUC lowered incentives for solar last year:

https://calmatters.org/environment/2023/11/california-solar-...

California was paying rooftop solar owners far too much. Poor people who couldn’t afford solar were subsidizing the grid for solar owners.

Yes, this is what the CPUC said but was a ridiculous argument in favor of raising profits moreso than helping lower income people.

The climate should take precendence over everything else. Incentives for rooftop solar should increase, incentives to help lower income people should increase, electricity record profits should not be a thing.

This is entirely due to regulatory capture, not some "good will towards poor people" that the electricity industry is pushing.

It doesnt make any sense to force utilities to pay retail prices for electricity when wholesale prices are 10x lower. There are much more efficient ways to encourage renewables.

Net metering actually increases both costs and profits.

Power companies have a fixed margin of 10% and a captive market.

If power costs them $1, they make $0.1. If power costs them $5, they make $0.50.

Rooftop solar costs 10X what commercial solar does. Every kw of rooftop power they buy means 10kw of commercial solar isnt built.

> electricity record profits should not be a thing

Unless the electricity consumption is falling faster than inflation, I'd expect the regulated-profit electric utility to be having record profits essentially all the time.

> The climate should take precendence over everything else.

That's an argument for moving from rooftop solar subsidies into storage subsidies, because its already at the point where renewable output sometimes exceeds 100% of demand. (And the strong solar mandates will contnue to add supply without subsidy, especially—and this adds to the pile of reasons that this needs to happen—if housing construction stops being held back by zoning constraints.)

I guess they fixed the glitch by moving to income based utility bills

Which is simply a hidden tax hike, and a wild market distortion.

which is basically incetivizing even more electricity usage by subsidizing large electricity users and punishing electricity savers.

there's nothing more evil than forcing people to pay flat rate for services (electricity) that we should all be cutting back on, not using even more.

The proposal is to set the fixed portion of the bill to vary with income. The usage portion is still billed per kWh.

California CPUC is out of control.

They wanted the state to impose a tax on people using solar panels.

https://krcrtv.com/news/chico-residents-on-possible-solar-pa...

Solar net metering is a weird subsidy. The solar panel owners are not paid for the full value of the electricity they provide. The utility is not paid for the full value of the electricity distribution they provide (you can pull 240V x 200A on demand).

Net metering can only form a small part of the retail market before the fixed costs of distribution get concentrated on remaining customers in a death spiral. A population that is generally less able to take advantage of tax credits (because their tax liability is not high enough), and has less access to capital in the form of homeownership or financing for the solar system.

This is analogous to the "problem" of fuel efficient car owners paying less fuel tax. Some states have added higher registration fees on hybrids and EVs to offset the "lost" revenue. Another similar situation is water utilities that encouraged efficiency through higher rates. Customers saved water and then the utility had to increase per unit rates to maintain enough baseline revenue to cover fixed expenses of maintaining the distribution network to every home.

I don't think that is correct. With net metering residential solar owners are overpaid for the value of their power. More than commercial solar plants selling at the same time.

Homeowners may get paid less than their panels cost, but rooftop solar is tremendously expensive and there is no way that it would recoup the cost at actual market prices

It's somewhere in-between: residential solar, when feeding back into the grid, is only using a small fraction of the transmission compared to a commercial solar plant (in terms of length of wiring and number of transformers used to transmit a given amount of power). In fact, it will generally be (unless in a neighbourhood where nearly every house has solar installed) reducing the overall load on the grid. So it's not reasonable to expect that the value of that electricity is the same as that of the same amount coming from a large utility, but it's still probably not worth retail prices, either (though maybe it is, in certain circumstances. In cases with a very overloaded grid it may conceivably be worth more!)

the grid is a fixed cost, which is needed unless we are willing go without power every night and winter. Once it is in place, it costs the same if it is sitting idle or being used.

There are absolutely no savings from an unreliable local power source.

How is a mini-split $5-7K in the US? A 6kW Mitsubishi Electric mini-split is $1800 (US$1200) here in Australia and you’ll pay another $650 (US$420) to get it installed… My 5 kW air to water heat pump was about $6K (US$4K) before a $900 (US$600) rebate but they are less common here so I think still cost a bit more than in Europe or the UK.

Yeah so basically the guideline here is 25 btus per sqft, which is 270 btus per m2, house is 110ish m2, so it’s roughly 30k btus. So then get a 30k btu condenser, about $3400, plus three 12k air handlers ($600 each or so), plus labor and the rest of the random parts. Could be overkill, I’m just following guidelines for the estimate.

HVAC companies bid as if they're entitled to $4K of labor/profit for a half-day of on-site work. It's maddening.

Im frustrated with HVAC and solar too, but I suppose that as long as nobody else wants to do the work, they are indeed correct.

Indeed. Not helping are all the "get a heat pump installed and receive a $6K rebate"s (which drive up the bid price by around $5K-$6K).

Yep, same story with solar rebates, most of it goes to the installer.

Home construction work is really interesting, because the transaction costs are so high around locating and comparing the service providers.

It is easy to say there isnt enough competition, but im not sure that is actually true. I think more likely is that most consumers dont collect 10+ quotes and compare, so the price signal is weak.

Second biggest issue with California is the contractors licensing system ended up creating a system of guilds.

First biggest is high rents drives up the cost of labor.

>First biggest is high rents drives up the cost of labor.

Tell me about it. I just got quoted 80k to landscape my residential backyard.

For 1 year of my take home salary.. I'll do it myself.

Yeah 40k of that 80k goes to the workers landlords.

Would you say HVAC companies are more or less "entitled" to that labor/profit, compared to, say, a company that prints business cards for those kinds of small businesses?

Any business is entitled to the profit they’re able to compete for and satisfy their customers, HVAC, lending, printing, whatever, even selling pictures of your butthole on the internet.

When regulation serves to limit via licensing and multi-year apprenticeships is where you get into market distortions that sometimes serve consumers and sometimes harm them. This happens to some degree in licensed trades (price out a drywall crew, painting or carpet [not licensed or at least licensed without apprenticeship in most places] vs a plumber, electrician, or HVAC).

Part of the problem is that buying refrigerant requires a certification/license.

Also in Seattle, only an HVAC company can pull a permit for refrigeration, even though plenty of heat pumps/mini splits are pre-charged and you'll never need to touch refrigerant.

The EPA 608 universal takes about 90-120 minutes online and is free at SkillCat (no affiliation, but I tossed them $50 as a thanks). The 609 (for autos) takes way less time but costs $25 online.

I’ve bought refrigerants online several times over the years without showing any license (even though I hold an EPA 608 and 609). It’s legal to buy for resale, which is probably how suppliers get around checking.

How do you get it installed for $420? You can barely get an HVAC technician to come and say hi for $420 in California.

It's a pretty big market here I guess - this is for a simple installation, of course, with the mini split on a wall back to back with the external wall, running the piping down and hooking up and gassing. But that's about the standard price everyone was charging for that when I put my last one in two years ago. If you were putting in a ducted system obviously it would cost more.

Charged around 1.5k AUD for a recent back to back install in Melbourne. Tradies have bumped up their rates by quite a high margin citing cost of living and with it their profit margins.

You don't. At least not for an install these days. Their data point must have been from a few years earlier.

My experience having installed one a couple of months ago is that the installer charged around 1.5k AUD just for the installation(by my calculation using retail prices) for a back to back "simple" install for the same brand and size mentioned. This is in Melbourne, Australia.

I did get multiple quotes that were the same and this was before peak summer season. The ones that were lower were either not licensed or wanted to do it for cash - meaning they wouldn't declare and pay taxes on it so the customer gets it for cheaper. It also means they won't give you an invoice and good luck claiming damages without evidence.

They blame the high cost of living but knowing some insiders, the margins are huge.

I agree with you that the electricity market in CA (and a lot of other places) is broken and should be fixed.

But we also need to stop waiting for intractable economic problems to be solved to address climate change. In the long run, the economic and human cost of not addressing this will far outstrip short-term costs.

Yeah, in a parallel comment I noted that in most of the country an 80% gas furnace is cheaper to operate.

Even when you include the cost of carbon emissions in that fossil gas being burned?

The subsidies on the gas drilling, production, purification, transport, and infrastructure should also be accounted for.

How do you calculate policies specifically for gas?

There are tax advantages allocated to fossil fuel exploration, but not specifically for gas - and mostly just exploration.

You would need a tax or heat pump allowment to adjust for that.

Indeed, we could make electricity cheaper relative to gas to encourage HP usage, but the cost delta is high, you need electricity under 10c kWh to be competitive.

Carbon emissions don’t cost anything to the person doing it.

Even if you add a carbon tax a 200 dollars a ton, because of the relative inefficiency of generation and transmission, natural gas ends up being cheaper.

Right now 50% of the power I can buy at any given time is generated by burning natural gas - this is true in 80% of the country.

So it doesn't really matter - it might if we build some nuclear or whatever, but right now, it doesn't.

Right, you're not paying the true cost of that energy [1] [2]. I'm saying, what happens when you have to. That changes market signals, perhaps drastically, assuming the per ton cost of CO2 emitted (which is optimistically ~$50/ton but likely closer to $200/ton, assuming the only two ways to handle emitted carbon are to either not emit it or direct air capture and sequester underground ie Climeworks and company).

When consumers must pay for the externalities of their fossil fuel consumption, it's no longer economically competitive. If you can't pass carbon taxes, have to outlaw new gas service like many jurisdictions are attempting to do. High level, looking at the cost of natural gas alone is insufficient for these discussions; you have to look at the entire supply chain and externalities to arrive at a true "apples to apples" comparison.

(matters now, but won't as the blended cost of renewables and storage [firm generation] declines below the floor fossil gas needs to sell at to keep the infra running, and that infra already leaks like a sieve [3])

[1] https://energypost.eu/new-u-s-study-damage-per-ton-of-co2-co...

[2] https://www.nature.com/articles/s41586-022-05224-9

[3] https://www.edf.org/climate/methanemaps

In a sensible world, i.e. not California IOU-land, you are of course correct.

In California, for IOU customers, electric rates are pushing $600/MWh. You can figure out how exactly you want to apply the emission factors:

https://www.epa.gov/energy/greenhouse-gases-equivalencies-ca...

But you will have a hard time making the math come out in favor of electricity. Unless you have a really nice heat pump, your electricity is 100% carbon-free, and you rule out gas-fired heat pumps [0] or cogen [1], you’re probably better off burning natural gas and using the money you save to offset your carbon usage in some more effective manner than throwing it at your local utility so they can burn it.

Fundamentally, carbon pricing can work when CO2 emissions are expensive and the clean alternatives are reasonably priced. California has a major problem with the latter requirement.

[0] They exist but seem very rare.

[1] Reputable companies make these, but the devices are large and are not friendly for residential installations.

In a parallel comment I ran the numbers - and you're absolutely correct here.

Even if you price CO2 emissions in, both electricity and natgas rise - because of how much electricity is generated by gas - and how inefficient thermal generation is.

1 metric ton of carbon is about 19 Mcf of gas burned.

19 Mcf of gas contains about 1.65MW of electric power (assuming combined efficiency of generation and transmission of 30% - if you can provide a framework for better electricity efficiency I'm open to it).

It'd add about $121 to the price per MW or 35 cents per 10,000 BTU

It'd add about $10 to the price per Mcf of gas or about 10 cents per 10,000 BTU

Assuming that 50% of your power has a carbon surcharge on it, we can halve those numbers - 17.5 cents per 10,000 BTU.

So once I plug those into my HP Calculator - that raises assumed electricity prices to 90 cents per 10,000 BTU and gas prices to 24 cents per 10,000 BTU.

The heat pump still ends up being more expensive over the entire operating range - note that HP efficiency goes down with temperature.

So at 40f it costs 35 cents on my 5T HP to generate 10,000 BTU of heat, at 10f 65 cents per 10,000 BTU of heat. Gas however is steady at 29 cents per 10,000 BTU of heat - no matter the operating temp.

Thank you.

The "but fossil fuel externalities!" crew can't seem to comprehend just how efficient, cheap and abundant fossil fuels are, and that we can't simply shut them off or double their price tomorrow without massive economic consequences.

Bear in mind, I'm pro alternative energy, I'm a major advocate for nuclear - because once all of fossil fuels externalities are priced in - its very attractive pricing wise.

But fossil fuels are not going anywhere, and no one (but me) seems to have any great appetite for nuclear construction.

Heat pumps are much more efficient than furnaces. Even if 100% of the electricity generation was coal you’d use less energy to heat your home with the pump so there’d be less emissions.

That depends on the outside air temp (OAT)*. At OATs below 30°F, the heat pump is capable to heat the home, but the coefficient of performance might be 2.0 or less.

For a fossil fuel plant that might convert fuel to electricity with ~35-40% efficiency, a heat pump with a CoP of 2.0 will be less efficient overall than a 90% gas furnace.

* More precisely, on the spread between the OAT and the indoor temp, but since the latter is basically a fixed figure...

This just isn't accurate - you use less electricity yes, but not less energy.

1 kWh of electricity run thru a resistive heater will generate 3412 BTU

1 Ccf of gas contains the equivalent energy as 29 kWh, but will only generate 8.7 kWh when run thru thermal generation (assuming 40% efficiency and 10% transmission losses).

If you're just trying to make heat, directly burning the gas will consume much less energy - and make fewer emissions - than gas > electricity > heatpump > heat.

Why are you talking about a resistive heater? Heat pumps dont make heat, they just move it around.

If you're trying to compare the caloric content of two forms of energy, knowing what you can get out of the energy by itself is helpful.

In the end, the HP will be up to 30% more efficient than strip heat (in my case the crossover point is under 10f where strip heat is cheaper to operate).

I built a breakdown chart showing cost per kWh for both heat pump and strip heat, then added gas to it as a comparison.

>are so out of whack that a heat pump with a COP of 4 is no longer economical compared with a reasonably efficient gas-fired appliance.

Orthogonal, but I point this out all the time re: electric vehicles, when people claim "they are so cheap to operate!".

Do you really think that will continue to be the case when they are 10%, 25%, 50% of the market? The government will squeeze every dollar "saved" out of you. If you're lucky it will be equivalent to what you used to spend on gasoline.

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