Supply Chain Engagement for Increasing Packaged Unitary Heat Pump System Adoption

The Supply-Chain Engagement for Increasing Packaged Unitary Heat Pump System Adoption Focused Pilot aimed to understand the barriers limiting greater adoption of commercial heat pump rooftop units (HP RTUs) in California and overcome them through a midstream incentive approach. According to the U.S. Energy Information Administration (EIA) commercial building survey results, approximately 64 percent of all commercial buildings in the Pacific region of the United States used packaged air conditioners (AC RTUs) to provide space conditioning (EIA 2022) (EIA 2018) . Compared with conventional packaged RTUs with natural gas heating, HP RTUs are estimated to reduce greenhouse gas (GHG) emissions and energy costs by up to 50 percent (U.S. Department of Energy 2025). However, despite the prevalence of replacement-ready AC RTUs, HP RTUs have not reached widespread adoption in the commercial sector.This project provides a market characterization of the commercial heat pump market to identify challenges and opportunities to transform the commercial RTU market in favor of HP RTUs. To complete this market characterization, the project team engaged with market actors across the supply chain to gain insights into barriers to sales, design, and installation of HP RTUs, and to explore potential interventions to mitigate these obstacles. The team also researched HP RTU technologies available in the market, their technical specifications, California code requirements, California Technical Resource Manual (TRM) requirements (electronic TRM for deemed measures), and the Comfortably California incentive structure to better understand the current program challenges and develop technical program requirements that will help with program adoption. This market research helped guide the development of the focused midstream pilot offered in support of this project.The focused midstream pilot component of the project was designed to address program participation barriers including difficulties collecting customer contact information at the midstream level and low incremental measure cost (IMC) coverage for HP RTUs. A midstream HVAC program pays incentives to and collects data from distributors of HVAC equipment. The project team ran a focused midstream pilot offering enhanced incentives and creating a more streamlined program experience to boost HP RTU participation.