In this episode: more heat pumps! Jane Melia, co-founder and CEO of Harvest, discusses the advantages of teaming a high-end eat pump with a large thermal battery, to coordinate the timing of electricity consumption. Shifting the heat pump load can help reduce both costs and emissions.
Text transcript:
David Roberts
As listeners have no doubt figured out by now, I am extremely excited about heat pumps, which are the main way we are going to decarbonize home heating and cooling. Heat pumps are not just one thing, though. There are many different kinds, for many different purposes and building types, using many different materials and fluids, trying out many different innovations. I am not going to turn Volts into a heat pump podcast, but I do want to cover at least some of these varieties.
Last month, I had Paul Lambert from the startup Quilt on the pod to talk up the merits of heat pump “minisplits” for ductless heating and cooling. With a minisplit system, there is an outdoor unit connected independently to several smaller freestanding wall units inside.
Most houses still have ducts, though, where a heat pump would typically replace a furnace as a source of warm air distributed by fans through the ducts. There’s cool stuff going on in that area too!
Which brings us to today's guest: Harvest co-founder and CEO Jane Melia. Harvest does not make heat pumps, exactly — it makes coordinators for systems of which a heat pump is a part. The idea is for a heat pump to run when electricity is cheap (often at night), storing its heat in a large water tank, aka, a thermal battery. The water from that tank is used both for hot water and to heat the air in the home, via an air exchanger.
By shifting the timing of electricity consumption, Harvest claims its systems can save on both money and emissions. But I will let Melia describe the details.
So, with no further ado, Jane Melia from Harvest. Welcome to Volts. Thank you so much for coming.
Jane Melia
Hi David, it's a real pleasure to be here, and thanks for that introduction. I can't wait for our conversation.
David Roberts
First, let's get a bead here on Harvest. Sort of, where are you in the journey? I know you and your husband sort of had this wild hair idea several years ago to do this thing, and it's one of these old-fashioned "start it up in your basement" startup ideas. Where are you now? Are you producing things, selling things to actual customers in actual markets? Like, what stage are you at?
Jane Melia
So yeah, it's been quite a journey, and I'd love to tell you more about it. Yes, we are up and running. Our systems are sold in several hundred homes now, so we have lots of real customers who have no affiliation with the company, deploying our system and really loving it. We get great customer satisfaction — people talk about the net promoter score sometimes to try and measure, are we really meeting a customer's need? It's that response to the question, "Would you recommend this system to a neighbor or a friend?" And we're close to 90%. I guess what that really means is it works.
You get hot water, your house is nice and warm, it's steady, it's easy to use, and you save money.
David Roberts
And this is in just California right now, or are we expanded beyond that?
Jane Melia
It's primarily in California because that's where I'm sitting. Right. So, it makes sense to start your company where you are because that's where your reach is. And of course, we're a startup, we're a small team, and you've got to try and use your resources as efficiently as possible. But we're not just a California company. We do currently have systems in Oregon, in New Mexico, up in Edmonton, Alberta, ultra-cold Edmonton, Alberta, and we expect to be deploying some more in the northeast and in some of the colder states in the US in the coming months.
David Roberts
Interesting. Okay, so let's talk about then what it is. What is the system? So maybe you could talk about it by way of talking about how you discovered the need for it. Sort of like, what dilemma were you trying to solve when you came up with this, and what is the solution?
Jane Melia
Absolutely. So, the first dilemma was we had an old gas furnace, like many folks out there, right? Much of the heating and hot water heating in our homes in the United States is from burning gas, sometimes fuel oil, sometimes electric resistance. But we were in that case with many of the listeners where we had a gas furnace that was getting old. Now, I've been working in the clean energy space since 2008, in solar, in energy storage, in solar cells. And my husband also has been working in this space as well.
David Roberts
You're both engineers, right? Not like you weren't working in customer service or something. You had your hands on machines.
Jane Melia
We are both engineers, but we had both moved over to the business side. So, I was really on the business development side. I did start off life as a civil engineer. I have a graduate degree in fluid mechanics. One of my very first jobs was actually working on wind turbines a long way back. But you know, you know how life takes you in different directions. And so, in those startups, I was firmly on the business side, which was a lot of fun. So, what happened? So, old gas furnace was about to die. We were not going to replace a gas furnace with another gas furnace.
You know, we have to walk the talk. This is what we've been doing much of our careers. And so, the thing was, well, let's put a heat pump in and that's fine. You know, heat pumps are just magnificent devices. They're the heroes of building electrification, right? They're moving heat rather than generating it, as you know, so much more efficient than anything else out there. But there is a — I'd say the dirty secret of heat pumps is that particularly for heating, they're going to add load to the grid at inopportune times, often when there's a peak demand, for example.
So, they tend to add load to the grid. They can also operate at times when they're least efficient. For example, it's actually better to run a heat pump in the middle of the day for heating because it's going to run much more efficiently than if you have to run it at 5:00 a.m. We realized that if everybody shifts from gas to heat pumps as they are today, we'll all add a huge load to the grid at the morning and at nighttime. And that's really difficult.
David Roberts
And that is the famous duck curve, of course, the spike in demand in the morning and then in the evening, just as the sun's going down. Right. Like solar power is plunging downward. Right as everybody's cranking up their showers, their heat pumps, and their stoves and stuff in the evening.
Jane Melia
Yes, absolutely. In fact, you get this dilemma, you know, what do I do? Do we clean up our buildings and then add a load at night in the morning? And then what's the grid going to do? Have to have peaker plants for those times, right? Or do we clean up the grid? And we had that problem where it's kind of this fratricidal battle, do you do one or the other? And what Harvest is doing is saying, "No, no, wait a minute, you can do both." Combine a high-performance heat pump water heater with some thermal storage and some really, really good controls, and you can run that heat pump whenever makes the most sense for the grid, whenever it's most efficient and whenever's going to save the most money. Store that heat in the thermal battery.
David Roberts
Right. And this is just a classic model that's popping up all over the place, right? You're just time-shifting, you're saving the heat and using it later.
Jane Melia
That's right. We're time-shifting. And of course, the devil is in the details of how you do that to make sure you don't run out of water, to make sure you don't waste energy, to make sure you operate efficiently. But, yeah, that's what it's all about, is time-shifting, load-shifting.
David Roberts
So then, say you had a customer, and his name was David. He had one of those aging natural gas furnaces and an electric water heater. That's my setup currently. I've told this story on the pod before. I replaced a big old oil furnace with a gas furnace about ten years ago. Just because the economics did not work out. It was impossible to find a contractor who knew about heat pumps, etcetera. Things have changed considerably since then. So, if you were coming to me as a customer, I have a gas furnace and an electric water heater and a ducted heating system.
What would you take out? Like, if I go to Harvest and say, "I want your system," what would you take out and what would you put in?
Jane Melia
Quick question. Is that an electric resistance water heater that you have?
David Roberts
Yes.
Jane Melia
Okay, so we'd say, "Okay, David, let's take out that gas furnace, and wherever that's located — I don't know if that's in a closet or in your basement or somewhere. Typically, wherever that is, we're going to put in the air handler. That way it's going to be right next to the plenum of your ductwork." So we put the air handler there. Now, wherever your electric resistance water heater is, it's a tank somewhere, maybe corner of a garage or —
David Roberts
I just want to pause to make sure listeners know what an air handler is. Basically, just like the hot water from the tank is circulating in pipes, the air handler just blows air over that pipe, thus creating warm air for your house. That's what the air handler is.
Jane Melia
Perfectly said. So, wherever your tank is, we're going to put the tank, which is the Harvest thermal battery, and then the heat pump water heater. It's a split system, so the heat pump, the compressor side of that, is going to go outdoors. And then, of course, the Harvest pod, the control box, which is about the size of a large shoebox, is going to go close to your tank, above it, beside it, depending on your configuration. We're going to put it somewhere nice and close to that tank.
David Roberts
Got it. So, the furnace comes out, and there's an air handler where the furnace used to be. The water heater comes out, and a heat pump water heater/tank goes in where the water heater used to be. And then there's this shoebox thing on the wall. And then outside, I have the main heat pump and the compressor for the heat pump water heater. Is that it?
Jane Melia
Well, so outside, you're going to have the compressor for the heat pump water heater. The inside tank is just a tank, right? There's no heating element on it. So it's just the heat pump water heater outdoors. Now, many of the homes we deploy, not all, they will want cooling. So there might be an AC unit or a heat pump outdoors for cooling. Either an existing one or if you want to add it, we can add it.
David Roberts
I saw on the site that you're now offering cooling. That's new a year ago, a couple of years ago. But it looks like you're doing it via an additional heat pump. So, does that make two heat pumps in the system? And if so, why not — I thought the whole thing about heat pumps is they could heat or cool. Why not just use the one heat pump for both?
Jane Melia
So, the heat pump water heater that we're choosing to work with is a CO2-based heat pump, which is an amazing device. It's got very, very high efficiency. It also performs well at cold temperatures. It's got a low GWP (global warming potential) of one, which is about as good as you can get. So, it's got a lot of good, good things about it.
David Roberts
And that's using CO2 as the refrigerant, as the fluid in the —
Jane Melia
That's right, as a fluid inside the outdoor unit. One nice thing is the refrigerant is fully encased in the outdoor unit. The only pipes going into your house are water, hot water, and returning cold water. So we're using that heat pump, which has so many good attributes that we can really leverage in our system. But one drawback is it doesn't do cooling. It heats the water only. It does not cool it. And that's fine. I mean, what we're doing is addressing the problem of the gas furnace and the gas water heater. But of course, in real life, people also need cooling.
And so, for cooling, we integrate either with a heat pump system or an AC unit, if you already have one. And we can control that also from the Harvest pod.
David Roberts
Got it. So, if I wanted cooling, I would have two heat pumps outside my house. Basically, two boxes.
Jane Melia
You would have two boxes outside your house. Now, often, if you want to electrify your home, you're going to have at least one device for your HVAC and a heat pump water heater, which may either be integrated or a split system. So we've got the same amount of heat pumps, in a way. But what we're doing is saying, for all your heating and hot water load, we can load shift, whereas the conventional system just can't do that. And so, you know, you can't save money and you can't save emissions in the way that a Harvest system can.
David Roberts
Right. And so, of all that hardware, you are just making the box, the Harvest pod, the box that coordinates these other machines, and you're just buying these other machines from other manufacturers. Is that correct?
Jane Melia
Yes, absolutely. I mean, we're a small, lean team. We've chosen to focus on where we really add value. What we do is we're taking heat pumps and we're making them better, cleaner, cheaper, smarter, and more grid-friendly. So that's what we really focused our energy and our efforts on. We let other folks who really have bigger R&D budgets than ourselves focus on refining heat pumps, refining tanks and so on. And that's great because it allows us to grow with them, follow the curve, and always use the better heat pumps as they emerge into the market.
David Roberts
Right, right. And you are also, I assume, as a startup, as a small team, not directly employing teams of people to go install these things either. So this is very much, you are coordinating a bunch of contractors with a bunch of third-party devices, and they are installing the system per your instructions and diagram. Is that the basic model?
Jane Melia
Absolutely. And I think the nice thing about this, first of all, is that it's pretty easy to do. Right. This is standard HVAC technology. It's a tank, it's an air handler. Our contractors are very, very experienced and talented at doing this. We've now got over 30 trained contractors deploying our systems, and many of them have done 5, 10, 15 systems. Right. So they're coming back. What that means is it makes sense for them. They enjoy installing it, customers like it, and, yeah, so we've built these really good partnerships with those. And what that means is we have the right documentation, the right support to really help them do their job well.
David Roberts
Right. So, if you're going to move into a new market, then do you first have to train a contractor or a set of contractors in that market? Like, you need specially trained contractors wherever you are operating. Is that true?
Jane Melia
Yeah, I mean, I think part of growth, really, for any HVAC product, is really training contractors in that region on that product. If Daikin launches a new product, that's what they're going to be doing: teaching you about this product and making sure that contractors in that region have that support. We've got a good network of contractors. We've got a really good training platform, a lot of experience at doing that, and we welcome new contractors. And if any of your listeners are contractors, reach out and we'd love to figure out if it would be a good fit. And if so, we'd be happy to train you up.
David Roberts
Another thing I was wondering about, the contractor part is part of what they're doing is electrical, but because it involves water, part of it is plumbing.
Jane Melia
Yes.
David Roberts
Are you employing two kinds of contractors? Is there like a team? How does that work, mixing electrical and plumbing?
Jane Melia
Yeah, so the actual rules depend on a state-by-state basis on who can do what. In California, where we started, the same contractor, as long as they have the right licenses, can and does do both the electrical and the plumbing side. In different states, they might have to sub the plumbing side, but it's pretty seamless. Nearly all of the contractors we have in California have both licenses, and some of them don't, in which case they're just going to sub to a plumber for that part of the work.
David Roberts
Right. Right. Okay. And let's talk for a minute about the water tank, which seems like a crucial part of this. I have what I think of as, I guess, a standard water heater. As I was reading about this, it occurred to me just how little I know about my water heater. But it's just a normal water heater. This tank that would replace it, is it special in some way? Does it look different than my normal water heater? Is it bigger than my normal water heater? Is this an off-the-shelf product that already exists, or is this something that you had to go about making?
Jane Melia
So, it is an off-the-shelf tank, and that's actually really important. You know, we've been able to use an off-the-shelf device and use it for our system. And what that does is really deliver good value to the customer. Right. It's very cost-effective to use an existing off-the-shelf tank rather than have to customize it.
David Roberts
What are they used for? What is their other use?
Jane Melia
Yeah. So, the heat pump water heater that we use for our system can also be sold just for water heating.
David Roberts
I see.
Jane Melia
And this is the tank that goes alongside with that.
David Roberts
And this is presumably bigger than my water heater because it's got to hold enough heat to —
Jane Melia
It's going to be bigger, but not as big as you might imagine. So most of our homes are using a 119-gallon tank. So that's going to be 28 inches in diameter, about five feet tall. And basically, that fits into the space of most tank closets, most corners of the garages, it's a little bit bigger, but it's not huge. And there's a reason why. And it's because we're heating the water to a higher temperature than you typically do with a heat pump water heater. So a typical heat pump water heater using, say, R410A or R32 is going to be heating water to about 120 degrees.
We're heating water to 150 degrees. Now, that might not seem like a huge difference, but it means a lot because most people are going to be taking a shower somewhere between 110, 115 degrees. So, if you're storing water at 120, you're not doing any dilution, right? That water is just coming straight out into your shower effectively. If your water is stored at 150, what that means is you're going to mix that one to one with utility water to get down to 115. So, it's like it's got twice the capacity. So, that 119-gallon tank is giving you as much hot water as if you had 240 gallons of a regular water heater.
So, this energy density is enabled by that hotter water that we're using.
David Roberts
Interesting. So it's a 119-gallon tank likely to fit where most water heaters fit, even if it is a little bit bigger than most water heaters. And this is an existing model of a heat pump water heater that theoretically could stand on its own. But you're just integrating it.
Jane Melia
Yeah, correct. I mean, many listeners may already be putting, say, heat pump water heaters in that are kind of the integrated device with the compressor on top. If you can fit that in, you can fit our tank in.
David Roberts
That's what I envision when I hear "heat pump hot water." It's the hot water tank with the thing sitting on top of it. So, in your system, that thing is outside the house?
Jane Melia
That's right.
David Roberts
And the only thing inside the house is just the tank.
Jane Melia
Yeah. So, it gives us a bit more space. You know, if you can put a regular heat pump water heater, you can usually fit our tank in. And also for smaller homes, we can use different tanks. You know, we've done some condos, some townhomes, some smaller homes with an 83-gallon tank, which is a much skinnier tank, a little bit taller, but skinnier. And it fits into smaller closets. So we have choices. We've even done larger homes where they'll put, say, one large and one small tank in series just to get that more — they happen to have plenty of space.
They're going to say, "Okay, I want to maximize my load shifting. I want to minimize my costs and emissions." They put in two tanks side by side and it works just, just great.
David Roberts
But for an average household, the 119-gallon tank that will hold enough heat that you can — like, say I ran my heat pump all night, stored all the heat it gathered in this tank. How long could my house heat its water, get hot water and hot air off that tank without recharging it, basically? Like, it's a sort of capacity heat wise?
Jane Melia
So, I mean, you could think about the capacitive tank as about a similar capacity to what you'd get from a Tesla Powerwall. So that's about the amount of energy that we're able to shift, you know, about 14 kilowatt-hours. In wintertime, what you're going to be doing is you're going to be loading that tank up twice in the course of 24 hours. And that's allowing you to then shift the load of 14 kilowatt-hours of energy. So the nice thing is then you're able to run the heat pump in the warmest times of the day.
So, it's going to be most efficient. Store that water up and deliver that heating in the colder times at night and in the morning. And so, it's got the capacity of a Tesla Powerwall, which is roughly a good rule of thumb for the amount of energy we're shifting.
David Roberts
And this system is designed originally, I think, for ducted houses, houses with heat ducts. But you can also work with houses with radiant floor heating, that's right? Those are the two kinds. And between ducted houses and houses with radiant floor heating, like, what percentage of all the houses is that? What are the other kinds of houses? What are the houses where you can't do your system?
Jane Melia
So, most homes have forced air. It depends on the state. It's going to be somewhere between 60% and 80% of the numbers I've been seeing. Looking at some states, and that's the kind of range I'm seeing. So, that's nice. That's a majority of homes. And what we're seeing is about 5% to 10% of homes will have a radiant floor system. And that you're seeing more in the newer homes.
David Roberts
Yeah. Right. Kind of a trendy thing.
Jane Melia
That's right. And so I'd say the majority of homes have forced air. Not all, though, by any means.
David Roberts
Right. And this heat pump that is integrated into the system, there's the water heater heat pump, but then there's just the normal heat pump. Can any heat pump work with your system, or do you have a particular heat pump you use, or is it a particular kind of heat pump? What? Tell us a little bit about what the heat pump needs to be.
Jane Melia
So, the second heat pump, the one that can deliver cooling and supplemental heat if you want it, that can be any brand, right? We're fully interoperable.
David Roberts
The AC one?
Jane Melia
The AC one, yeah. So, if your contractor prefers Mitsubishi, we can do that. If the builder prefers Carrier, we can do that. It's super flexible and we can work with pretty much any device. And one thing which is nice about that is that we're able to shift the load of that one as well. Right. You know, we can be running that one in the middle of the day while we're storing up water in the tank for the nighttime using the other device. So, both devices are optimized in terms of efficiency. So, it makes a big deal in terms of performance.
David Roberts
So, the second one can be any kind of heat pump. What about the first one? The first one is a?
Jane Melia
The first one is a specific CO2 heat pump that is just really high performance and has nice temperature characteristics that just really optimize a thermal battery. You could, in theory, work with other ones, but this one is just, you know, you've got the right temperature. It's a single pass, so you get the temperature lift. And so, we much prefer working with that one.
David Roberts
What is the company, what is the heat pump?
Jane Melia
So, SANCO₂.
David Roberts
SANCO₂. Oh, it's a CO2 also.
Jane Melia
That's right.
David Roberts
Okay, so you have, you're installing your preferred sort of heat pump. Presumably, you got to deal with this company, this manufacturer, and they're supplying you with heat pumps. A particular kind of heat pump water heater. And then an air handler — I'm going to just assume the air handler is just a normal air handler and there's not much to say about it.
Jane Melia
Correct.
David Roberts
And then there's the refrigerants. The fluid in the system is CO2, which is, I think, in terms of heat pumps, the highest performing and lowest emission potential refrigerant that you can get, right? I mean, that's pretty much as good as it currently gets.
Jane Melia
Absolutely. I mean, the global warming potential of R410A, which is the most common, is about 2000. CO2 is one. Even the global warming potential of even R32, which is the next best, most common best thing is around 650. So yes, it's many hundreds of times better than that. But also, I wanted to add that in terms of refrigerant lines, this heat pump that we're using, the refrigerant is fully encased in the unit. The only fluid going from the unit to the house is water. And so, you don't have to run those refrigerant lines inside the house, which a lot of people like, right. Not having to run those additional refrigerant lines to the house.
David Roberts
And you're starting with single-family homes. You said you've done some condos and apartments. What about multifamily or larger buildings? What are the sort of considerations when you think about what would be required to do what you're doing with a large, say like a twelve-apartment building or something like that?
Jane Melia
Yeah, it's always a question of focusing and figuring out where do we play? So, first of all, the residential sector has a real need for good solutions, and we all have a need for good solutions that can scale without killing the electric grid. Right. So, that load shifting is super important. We focused on that 75% of homes that are either single-family or small multifamily — I think townhomes, condos, garden styles, duplexes, homes with individual heating systems. So, that's where Harvest can today come and meet the need. We don't yet do central systems for, say, apartment buildings.
Maybe in the future, we may do that, but it really is just a question of focus for the team. It's already a big market and we'd rather focus on that and do that really, really well, and then maybe expand later on to those other sectors.
David Roberts
But conceptually, there's no reason it couldn't work on a large building, right? I mean, you just sort of need a really big tank, right? Is that all there is to it?
Jane Melia
Well, you need the right tank. And what the pod is really doing is understanding the need of the household, the need of the home. That becomes a little more complex when you have multiple households, although you could find that may well average out. So it may actually end up becoming, you know, we'd need to analyze that. But that comes down to part of what the pod is doing, which is, you know, what's the weather forecast for the next 24 hours? How does this household typically behave under different weather conditions? How much heat is this house going to need in the next 24 hours?
And based on that, when and how much should I run that water heater so that I have that energy ready on hand in that tank to deliver to the household whenever they need it?
David Roberts
Right. So this is what the pod is doing. The pod is where the intelligence resides. Presumably, it's just computing, right, and transistors and an Internet connection, I'm guessing?
Jane Melia
It's all of that. But, you know, we call it the brains and the heart of the system. So it's got the brains, it's got the software that controls, you know, the electronics board, control board, but it's also got plumbing components, flow meters, temperature sensors, a mixing valve. Right. To bring it down to the right temperature, circulator pump to control the speed of flow to the air handler to optimize the heat delivery. So there's a lot of things in there. In fact, all the water from the tank to the heating system goes through the pod.
David Roberts
Oh, interesting.
Jane Melia
And we're measuring. We're measuring and monitoring because, you know, a key thing here is we talk about the tank as a thermal battery, and we're managing it like a battery. We're understanding its state of charge. We're continuously modeling what's happening in there, how much heat is in there, and how well is this tank stratified? Because knowledge means that then you have control, then you can say, "You know what? I expected this house is going to need so much heat. But hey, David's household is using a lot more hot water today than I normally expect. Before David even knows it, we're going to be adjusting the schedule of that heat pump water heater to top you up, so you're never going to run out, and you will never know that."
David Roberts
Got it? So there's hardware and software in this thing?
Jane Melia
Absolutely, yeah.
David Roberts
And I'm just assuming, I mean, what do I know? But I'm just assuming that just a straight tank full of water is simpler than an electrochemical battery to monitor and to understand and to predict and whatever. I mean, it's just water and heat.
Jane Melia
Correct, correct. I mean, one really nice thing about it is it's really durable, it's not going to degrade over time, and it's really cost effective. You're not using any rare earth minerals. It's got a lot of things for it. And you know what? If you wanted to do this load shifting with a conventional heat pump system, you'd need what we have anyway, right? You'd need a heat pump for the water. You need a heat pump for your HVAC. You need a tank, and you need one or two lithium-ion batteries. And what we're saying "Is just use the tank. You need that anyway." We can turn that tank into the battery.
David Roberts
I guess one question. I mean, the alternate way to do this would be like, your battery is downstream of the output of the heat pump. If you had a battery upstream of the heat pump, you could do sort of the same thing. Like, you could absorb electricity when it's cheap and then run the heat pump, you know, when you need it. Like, you could use an upstream battery rather than a downstream thermal battery. Are you confident that, like, lithium-ion batteries are getting very cheap? You're confident this is the model that's going to endure?
Jane Melia
Yeah, I mean, I think there are a number of reasons, right? Because, you know, when you try and find something which is functionally similar, that is the model which is closest to being functionally similar. But with that system, well, there are a couple of challenges. One, lithium-ion batteries do degrade over time, whereas your hot water tank does not, which is really nice. So it's going to keep on going.
David Roberts
It's just insulation, right? It's just metal and insulation.
Jane Melia
That's right. That's right. Yeah. And then the other thing is that with the other setup, you need all the equipment that we have to install, and you need the lithium battery on top of it. I mean, you need the heat pumps, you need the tank, you need the air handler, and you need the lithium-ion battery or two, because we're talking of the biggest load of the house, right? Two thirds of the energy of the house. And in our case, we're saying, you know what? You've got that tank anyway. Let's turn it into a lithium-ion battery in terms of capacity and function.
So, it's inherently always going to have that cost advantage.
David Roberts
Right. So, the main thing that pod is doing is then shifting your time of use. So, a couple of things about that. One is, you claim that saves emissions, and that seems easy enough to understand, right? Like, typically, grids are more emissions-intensive during the day, during those peaks of demand, right? Because that's when the peaker plants are getting turned on, then they are off peak, right? So, you're using less emissions-intensive electricity. That seems obvious enough. In terms of the cost savings, though, like, I've been thinking about this, like, you need time-varying rates to save money with this, right.
Because, like, not everyone has time-varying rates. And just for listeners' benefit, you know, like, this is — it gets arcane quickly. But, like, you know, some utilities charge more for electricity basically during those busy times than they do during off-peak times. And some utilities don't. Some utilities just charge a flat rate throughout the day, which is dumb and old-fashioned, but nonetheless remains the case in many places. Do you need time-varying rates to make the economics work for this thing?
Jane Melia
This is a great question. And there are actually two ways that Harvest saves money for people. One is overall efficiency. We have the luxury of being able to choose when to run that heat pump, and heat pumps are more efficient when it's warmer. And so, we can choose to run that heat pump at 11:00 a.m., noon, 01:00 p.m. when there's solar on the grid, which is one thing. But even putting aside that it's warmer outside than it is at 05:00 a.m. or 04:00 a.m. when another heat pump is going to operate.
David Roberts
Air-to-air heat pumps, as opposed to ground source, just work better when the air is more temperate, basically, like when the air is closer to the temperature you need. Otherwise, they are doing more work to extract the heat.
Jane Melia
Yeah. So, that's actually quite significant. Right? You're able to, you know, all year round, you're always going to optimize for efficiency, whereas an air-to-air heat pump can't do that. They've got to run into —
David Roberts
So, that just means you're using less electricity.
Jane Melia
That's right. And that's about half of the savings we get are from that. So even if you don't have time-of-use rates, we can help you save from that because we're always going to shift the load to make it more efficient. And then the other half is indeed from, you know, do you have time-of-use rates? And, and that certainly, you know, we're able to do the arbitrage. And that's important, you know, because the reverse can be quite painful, you know, if you have time-of-use rates and you have, you know — I'm in California. Two years ago, we had the coldest winter in 25 years.
And what that meant was people were using a lot more heat than normal. So people with heat pumps were running the heat pumps at those peak times in the evening. And their bills were going up.
David Roberts
You're stuck doing it; you can't get around it.
Jane Melia
And Harvest customers weren't right. They were running the heat pump a lot more than normal, but they were avoiding the four to nine time. We were just not — barely running at those times. And so, the folks' bills didn't go up or didn't go up much compared to a typical year. So, the time-of-use rates are part of it, but the other half is efficiency. But also, I think this is the question really for you, David. What are you seeing? Is that my conversations I'm having with grid operators and so on is that solar electricity is now such a cheap way to generate electricity and a lot of grids and utilities and states are saying, "We have to clean up our grid."
So, the duck curve is just becoming more and more part of normal life, and it's going to get more so and even more. And what that means is that time-of-use rates are an appropriate way for the grids and utilities to try and help encourage the behavior that's going to allow them to execute and deliver electricity reliably. Right. Because we all want to avoid blackouts. And so, we did a quick survey of the top ten utilities in the US, and they all offer some type of time-of-use rate. They're not necessarily as generalized as they might be in California, for example, but it's available.
So, those customers choosing a Harvest system would opt in to the time-of-use rates and make those full savings.
David Roberts
But I think it's fair to say that, like, the more variable the temperature is, the climate is, and the more variable rates are, the more money you'll save using one of these systems. And conversely, if you — because I'm sort of wondering, what if you have a place where they don't have time-of-use rates and you have a relatively temperate climate all around? Because that's what we have in the Pacific Northwest. Do you have some sort of — I mean, it's somewhat diminished the amount of money you can save with one of these systems in that kind of climate, yeah?
Jane Melia
Well, I mean, there's still a meaningful difference between your noontime temperature and your, say, midnight or 5:00 a.m. temperature, and that would be the main driver. Right. That's where you'd get about half of the savings that we capture.
David Roberts
Another question about the shifting. So, right now, it sounds like the value you're getting is mainly by avoiding the higher rates when you have time-varying rates and using the lower rates instead. Have you thought about participating in demand response programs where you could get paid for shifting or paid for being available? Basically, have you looked into that as another source of revenue?
Jane Melia
Absolutely. In fact, every single Harvest pod has what they call a CTA 2045 port or an EcoPort on it. We are demand response ready, and we have demonstrated this with the California Energy Commission as part of their CalFlexHub program, very successfully shifting the load, responding in particular to a day-ahead price signal. The utility saying, "Here's the next 24 hours, here's a price signal," which is basically saying, "We don't want you to draw electricity at these times." We can integrate that price signal into our algorithms with the other things and then figure out when's the best time to run the heat pump?
And I think the key thing there is, we can do this and we can get that revenue, which is really important. But most importantly, we are fully shifting that load, all the heating and hot water load, to whenever makes the most sense with zero negative impact on the comfort of the homeowner.
David Roberts
Yeah, that's good. Are you doing that anywhere yet? I mean, demand response programs, I guess, are pretty nascent, generally speaking. But like, are you participating in any of them yet, or are you just there ready when they come calling?
Jane Melia
So, we are technically ready to do them. We are not yet participating. This is something that we want to be doing, though, in the next 12 months or so.
David Roberts
Everybody, when you talk about heat pumps, I'm constitutionally required to ask this question. What about if it's cold? What if I live in a very cold place? People worry about heat pumps keeping up in the severe cold. Just intuitively, it seems like even in a cold place there are daily differences in temperature. So, you could still run your heat pump when it's warmest and charge the thermal battery. So, I still see some advantage. But, how do you think about cold climates and how the system works in them?
Jane Melia
You nailed it, David. I mean, this is a cold climate heat pump, right? It operates down to -25, but like every heat pump or every air source heat pump, its capacity is going to decrease with temperature. But we have that edge over regular air source heat pump systems so that we can choose when to run it. And we're going to be able to run it primarily in the middle of the day and stock up that hot water tank in the middle of the day, and therefore benefit from a higher efficiency compared to other systems. But we can also become a hybrid system and integrate with some backup heat, as many heat pump systems do.
We can operate those to make sure that we always optimize for our system and only use that backup heat.
David Roberts
The backup heat theoretically hooks into the pod too. And the pod controls that as part of the suite?
Jane Melia
The pod controls it, yeah, absolutely. So, we always, always optimize for your costs and your emissions.
David Roberts
Right. And what about a ground source heat pump, could you integrate? I mean, I guess with a ground source heat pump, when you run it in terms of efficiency, it makes much less difference because it's basically always the same temperature down there. Efficiency-wise, I can see how you could still avoid the higher rates. Have you thought about how to integrate with a ground source heat pump or done that anywhere?
Jane Melia
So, I've been through the mental model, the intellectual model of thinking through it, because, yes, they don't struggle as much with the varying outdoor air temperature, but they do operate instantaneously. So, if you're in a grid which has high peak loads, which is capacity constrained, that can be an issue, and we haven't done it, but in theory, there's no reason why that couldn't be integrated with this type of load shifting that we're doing. It's just then a question of — right now, I'd say most heat pumps installed are air sourced, and that's really the majority of the market. So, that's what we're focused on.
David Roberts
Yeah. Interesting. I mean, it doesn't seem like it's — like hot water coming into the house. Is hot water coming into the house, wherever it's coming from? It seems like there's no reason you couldn't do it. No obvious reason.
Jane Melia
That's the conclusion we came to as well. But it's not something we've really focused on, though, from a practical perspective.
David Roberts
Right, so let's talk then about cost, which is what everybody really wants to know. It's everybody's first question. You know, I threw this out on Twitter, and of course, that was the bulk of the questions. On its face, buying one of these systems is buying more hardware than I would typically buy, and very high-end hardware, you know, sort of high-end heat pump. So I'm guessing the capex, the sort of upfront cost, is higher than competing systems. And I'm guessing you make up the difference over operational savings over time. How does that all pan out from the homeowner's perspective?
What's your message to homeowners about the cost?
Jane Melia
Well, we've got some really good news there, because it pans out really well for the homeowner, even from a first cost perspective. And you're right, we're installing a similar amount of equipment, plus the pod, than you would for a typical system. The water heater that we've got is a high-performance water heater. So, it is a high-end system. But because our system combines thermal storage and because it's got a high GWP refrigerant, because it's got a lot of good things, we're really capturing a lot more in terms of, I'd say, taxpayer money, you know, incentives and taxpayers.
David Roberts
What are all the incentives here? What are all the tax credits you can get out of this?
Jane Melia
You know, this qualifies for Section 25D, which is a 30% tax credit on the overall system. I would say, speak to your tax advisor when you check that.
David Roberts
So not just the heat pump?
Jane Melia
The overall, fully installed system. It's an investment tax credit. So that's a big deal. And that's because it's adding the value of that storage, right. That's what that tax credit is all about. And to be honest, even without incentives, this is like a relatively high-end system. But it's not off the charts, right. It's not crazy expensive. It's a bit higher than a median system. But once you add the tax credit or other incentives, depending on where you're sitting, there might be other incentives in your state. Then it comes very much either at parity or even cheaper than a median heat pump system.
David Roberts
That's comparing buying your system versus buying a heat pump and a heat pump water heater. Right. The two together. But let's be real. Like most people, like me, for instance, I would probably just replace my furnace with a heat pump. Like, I wouldn't, that's not my live alternative, I wouldn't be buying a heat pump water heater if I wasn't buying your system. It is a bigger commitment.
Jane Melia
Well, the stack of incentives is quite interesting. Let's talk about a household who only wants to replace their HVAC. With Harvest, you're replacing HVAC and you get a heat pump water heater thrown in, which is great, and you get the tax credit on the whole thing. What that means is we were looking at data in the Bay Area because we've got a lot of data around what it actually costs to install heat pumps in California because the tech program means that there's a lot of public data out there. So we know what's going on.
So, if you were to install just an HVAC heat pump in the Bay Area, compared to a full Harvest system, Harvest costs less than $1,000 more.
David Roberts
Hmm. That's interesting. Is that cause of the incentives?
Jane Melia
Yeah. Well, first of all, I mean, the system is, it is a little more expensive, but it's not outrageously expensive. It's a high-end system. But then you get the tax credit and you get better rebates. And so that means it's very compelling and you've got your hot water so you don't have to, in two, three, or five years' time, worry about replacing your water heater. And you're saving on bills not just for your heating, but also for your water heating for all that time. We certainly don't have many cases of customers who haven't done it because of that.
Water heaters typically have a shorter life than a furnace. It might be somewhere between 8, 10, 12 years. So, once you've gone through five or six years and you're only maybe a few years away, people are like, "You know what, I'll do it at the same time, then I don't have the hassle of doing it later. I get the better tax credit, I save bills." They're usually good with it.
David Roberts
When I think about what you could do to bring costs down over time — I mean, there's obviously stuff you could do as a company — but I'm just wondering, like over time, it seems like the need for this kind of shifting is just going to rise. It's going to rise everywhere. It's going to rise some places faster than others. California in particular is already verging on crisis because of the duck curve, because of this very problem. So, California is already placing a high premium on the ability to shift load, but eventually that'll come everywhere. And do you think, like sort of over time, because that is becoming more valuable, your system will become more valuable and sort of less expensive?
It'll be more compensated?
Jane Melia
Yeah, I mean, honestly, I think, you know, as we try and electrify as many homes as possible, it's going to be really difficult to scale unless we have load shifting. And so, I see the future of HVAC systems as having load shifting and thermal storage is really the most cost-effective, durable, sustainable way to go. And so, I would expect thermal storage to become pretty standard. Right. Use your electrochemical batteries for your electric load, thermal storage for your thermal load, smart controls to be able to respond to the grid. What's really exciting to us at Harvest is just the amount of energy that we can actually shift.
You're probably aware of the Nest thermostat or other smart thermostats, and they can shift by preheating the house or turning down the thermostat. And you might be able to shift maybe 5-10% of the energy use of the house because beyond that, you're impacting the comfort of the occupants. Right. And there's only so far you can go. With Harvest, we're able to shift basically 90% of your full heating load.
David Roberts
That's crazy.
Jane Melia
To whenever it makes sense with zero negative impact. And that's why this is really scalable, because you can shift it all and you don't harm, you know, you save people money, you help the grid people stay comfortable, and that's really important. So, I kind of see this as becoming pretty standard. Particularly, it can be cost-effective. So, I see this as becoming pretty widespread.
David Roberts
So, you install these on a thousand houses. Have you thought at all about centrally coordinating this shifting in a way like VPP style, virtual power plant style? Is that on the horizon at all?
Jane Melia
Yeah. So just to clarify, it's a couple of hundred houses, not yet a thousand.
David Roberts
Well, I'm just talking about our bright future.
Jane Melia
I mean, we'll be hitting that as soon as possible, but yeah, I mean the whole VPP opportunity I think is a really important one. It's one that we're going to be digging into in the coming months. Our devices are able to incorporate that. I mean, essentially, it's just another signal that we can respond to, right? What's the weather forecast? What's the household performance? You know, what is the cost profile? What is the grid signal? These are just signals that we can incorporate quite easily and operate the heat pump. So, the next step is how we aggregate that and how we start to monetize that and share that value with our customers as well.
David Roberts
Back on the cost reduction thing, obviously shifting will become more valuable, but also scaling. You'll just do this more and bring down costs by doing it more. Where are you targeting? Where do you think you can reduce costs? Is there any thought at all about manufacturing your own devices beyond the pod, more custom designed, or do you have big ideas on the horizon about how to reduce costs?
Jane Melia
Yeah, there's a lot of interesting opportunities there. And first of all, we're at super low volume, so even just the pod, we've got a lot of opportunity there. The good thing is that the Harvest team has done this before. My head of manufacturing has ramped up multiple manufacturing startups from zero to millions of units. So, he's really tracking very carefully, very systematically down that path. So, that's wonderful to have that awesome team working on that. But then there are other opportunities that we could well be implementing in the near future, which is why not integrate the pod into the tank? Less plumbing in your house.
David Roberts
Oh yeah, right.
Jane Melia
You know, just things like that. How do you just simplify the installation? How do you make it easier, more streamlined, and so on to install? There's some relatively low-hanging fruit there that we're certainly going to be looking into in the coming year or so.
David Roberts
Interesting. So, you're targeting single-family homes and you're just working to get these systems more standardized, bring down the costs. What's next for the company after you — ? Obviously, you need to expand and get confident and make a profit and master the business you're in. But if there's a next step, once this step is in hand, let's say, where are you looking? Do you have grand future plans or are you just nose to the grindstone right now?
Jane Melia
Well, I would say there's an urgency. There's an urgency for all of us because every time a new gas furnace is installed, it's a missed opportunity because it's going to stay there maybe for 20 years, unless we can figure out a way to swap it out ahead of time. But that's a long time. And, you know, heating hot water: two-thirds of the energy use at the home, 10% of US emissions are just home heating in hot water. So, I feel an urgency from my side into delivering a really good product that's going to delight customers so that we can get as many systems in homes that's going to cut those emissions, but at the same time be affordable.
Right. You know, affordable from an upfront cost perspective and save bills, which is so important month after month to save bills for many, many people. So, it's really all now about, we've got the product, we've got really happy customers, contractors are, you know, really delivering and we'll continue to scale there. It's now building those next stage partnerships with, say, distribution with new home builders and so on, just to really help this scale.
David Roberts
I assume most of what you're doing now is retrofits on existing homes. You're replacing or enhancing existing HVAC systems. I wonder, A) are you thinking about how to get these designed into new homes as they're built? And then B) are there savings that you envision or can imagine by designing it into the home when it's first built? Like, are you going to be able to, are there ways to make the system better? If you can, if you have a blank slate.
Jane Melia
You're right. So, we started with retrofits. That's been the shortest path to market and that's where most of our systems have been deployed. But, we have done quite a few new homes. Many of them have been custom homes, although we have deployed a system at a KB Home development in the Central Valley in Manteca, California, and actually very proud to say that we jointly won the winner of the Golden Nugget award, which will be coming out in the middle of June, for that design, for sustainable design. So, we're very excited about that. So, we've done some new home building and absolutely we want to support builders as they transition from gas to electric solutions and as they try and deliver solutions that are going to save people money.
We are learning a lot in the process, though, because if you put a system in a home from new, you're going to approach it very differently, to your point, than if you're putting it in as a retrofit. And so, we've learned a lot on how you group product, when and where you ship it. Just the nuts and bolts of how you work with a new home builder to fit into the way they do business. And it's been a really great learning opportunity.
David Roberts
It also occurs to me, and maybe this is beyond what you have time to think about right now, but if I were building a new neighborhood, a new group of houses, I'm thinking about, could they share one big water tank, you know what I mean? And get all kind of the same benefits of, they all have their heat pumps, but all the heat is getting dumped into a central water tank. Is that, you know, is that something you've thought about at all?
Jane Melia
That is a really interesting idea that's going to probably keep me awake all night thinking about it. It's a good one. It's a good one. Thank you, David.
David Roberts
I know. Because thermal, you know, like, you've said this already, but I, you know, I'm an enthusiast. So, I have to say it again, thermal storage is really amazing. Like, I think when people think about batteries, you put electricity in, you get like 85%, 90% of the electricity out, but with thermal batteries, you're getting like 98%, 99% of the energy out that you put in. It's incredibly effective storage. And I feel like we're just sort of at the front end of figuring out all the different ways we could make use of it.
Jane Melia
I mean, it's such an exciting time because renewables have grown so much and are now part of the electric grid. The technology is there to electrify and clean things up. And so now we've got this blend of the renewable technologies, we've got the electrochemical storage technologies, we've got heat pump technologies that have developed. We've now got thermal storage technologies, and we've just got to figure out the best way to fit these pieces together for different applications.
David Roberts
That's the fun stuff, though, right? I mean, that's like, that's like engineering. Like, you know, I've said this so many times, but like, so much technology these days is digital and opaque and nobody really knows how it works and nobody can do it themselves. But we've somehow sort of like, gone backwards to an era where, like, it's big mechanical stuff and figuring out how big mechanical stuff works with other big mechanical stuff is just like, you can just have a clever idea still, like, you know, you and your husband, you just had a clever idea and did it in your, figured it out in your house.
So, it's just like, for engineers in particular, these are just salad days. I feel like there's just so much to be done.
Jane Melia
It is. And the fun thing is, is that, you know, whereas 10-15 years ago, people could say, "You know, we don't have the technology to fix it," where, "You know, it's difficult." We can do this. You know, we can clean up the grid with renewables that are variable. You know, they're going to vary. And we can still electrify homes without negative impact on comfort. And while saving people money, we can do all that. And we can have our electrochemical batteries for various things. We can piece all this together in a really smart way that's going to help beat the challenges of climate change and still have comfortable, safe homes.
David Roberts
And honestly, like, better homes, more comfortable homes than before.
Jane Melia
Agreed.
David Roberts
Well, I love all this, Jane. I love the "We had a good idea and tinkered in our basement and now we have a company" story. I love this whole concept here. I love all of this. So to finish, I'm sure a bunch of people out there listening are thinking, "This sounds cool. I'd like one of these." So you're in California now. You're in a couple of other states. Like, if I — I'm in Washington. If I wanted one of your systems, do I just wait for you to show up? Do I sign up? Or like, what's the... How do people keep track of where you're available and when?
Jane Melia
I would say, please sign up. There is a "Get Harvest" — you actually go to harvest.green is the easiest way to go there. Click on "Get Harvest" and we will obviously take a record of where you are and let you know if you've got contractors in your area. We do actually have contractors now in Washington, by the way. We're just beginning there as well, so that might just work out. And we are actively training contractors. So if you're a contractor listening, get in touch as well and we can chat and see if it makes sense to deploy in your area, et cetera, et cetera.
So, yeah, I think the key thing is to let us be known because that is like a vote that "We want you in our area" and we'll definitely do what we can to make that happen.
David Roberts
Awesome. All right, well, thank you so much, Jane. Thanks for coming on. This is a really clever idea. Thanks for talking us through it.
Jane Melia
Thank you, David.
David Roberts
Thank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf. So that I can continue doing this work. Thank you so much, and I'll see you next time.
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