Energy Intel 2nd Quarter 2026 | 1
2ND QUARTER 2026
Electrification Foundations Issue
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Jeff Brown, Public Service Company of Oklahoma
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Energy Intel 2nd Quarter 2026 | 3
TABLE OF CONTENTS
A Letter from the
Board Chair
Liz Haworth
Bridging Electrification
Ambition and
Affordability
Craig Henry
From Barriers to
Breakthroughs
Evan Kamei, Jeffery Liang,
Lillian Ross
Who Pays for the AI
Grid?
Stefan Daniel
Anim-Sampong
Survey on Fuel Substitution
Regulations for Ratepayer
Funded DSM in North America
Theo Love, Lauren McFeeley, Brett
Feldman, Chyanne Husar, Marissa
Steketee, Maelys Fillon, Derek Okada
Electrifying Solutions
Where Conventional
Heat Pumps Fall Short
Thomas Yeh & Cody
Glavey-Weiss
Designing for
Survival Mode
Jennifer González
How Installers Drive
Heat Pump Adoption
Melanie Coen,
Steve Jaslowich
Capacity Firming
with Levelized Cost
of Capacity
Andrew Bray
Building Trust
Through Language
Diana De Pierola
What the Field Teaches
Us About Commercial
Electrification
Steve Brennan
Financing for
Electrification When
Incentives Are Tight
Chris Kramer
Driving the Shift:
Policy and Funding as
Catalysts
Jeff Quigley
The Weakest Link in
Your Electrification
Program Isn't the
Incentive; It's the
Contractor Experience
Dave Treston,
Mitch Manacek
26
48
71
78
35
53
15
41
58
21
45
64
4 | Energy Intel 2nd Quarter 2026
As I step into the second issue of Energy Intel as Board Chair of AESP, I continue to be energized by the
conversations happening across our industry and by the people working every day to turn ambitious
electrification goals into practical, scalable solutions.
In my own work across energy efficiency and demand-side programs, I see every day that meaningful
progress depends on more than technology alone. Successful electrification requires thoughtful
program design, strong contractor networks, customer trust, affordability strategies, and collaboration
across the energy ecosystem. This issue of Energy Intel explores many of the foundational elements
needed to make electrification work at scale.
Building Practical Pathways to Electrification
One of the strongest themes throughout this edition is the importance of creating realistic and
accessible pathways to electrification. While long-term decarbonization goals continue to drive
innovation, several articles remind us that implementation often requires flexible, customer-centered
approaches.
Craig Henry’s article on hybrid pathways for industrial process heat highlights the complexity of
electrifying industrial systems while balancing operational realities and affordability. Similarly, Thomas
Yeh’s exploration of room heat pumps for multifamily retrofits demonstrates how practical, lower-
disruption technologies can help expand electrification opportunities in challenging building types.
Steve Brennan also offers an important field perspective on commercial electrification, emphasizing
that successful projects require thoughtful design, proper installation, and a clear understanding of
how buildings actually operate in practice.
Affordability, Equity, and Customer Trust
Another key theme throughout this issue is the relationship between electrification, affordability, and
energy burden. As our industry works to accelerate adoption, ensuring that customers can realistically
participate in the transition remains critical.
Jennifer González’s article on designing electrification programs for households operating in “survival
mode” offers a powerful reminder that program accessibility and equity cannot be treated as
secondary considerations. Diana De Pierola’s article on Spanish-speaking contractors further reinforces
the importance of trust, language access, and culturally aligned engagement strategies in helping
customers navigate electrification programs with confidence.
These articles collectively highlight that electrification success depends not only on incentives and
technology, but also on whether customers feel informed, supported, and included throughout the
process.
A LETTER FROM THE BOARD CHAIR
Energy Intel 2nd Quarter 2026 | 5
Enabling the Workforce and Contractor Network
This issue also highlights the increasingly important role contractors and trade allies play in advancing
electrification goals. As heat pump adoption and building electrification programs continue to grow,
contractor experience and workforce readiness are becoming essential drivers of customer satisfaction
and program performance.
Articles examining contractor enablement and heat pump installer networks demonstrate that strong
trade ally engagement requires more than financial incentives alone. Contractors need training,
support, clear program processes, and confidence that electrification solutions will deliver positive
customer outcomes.
Policy, Grid Impacts, and the Future of Electrification
Electrification also raises broader questions about grid readiness, funding, and regulatory strategy.
Articles exploring fuel substitution policies, virtual power plants, AI-driven load growth, and capacity
firming frameworks all point to the scale of transformation underway across the energy sector.
Together, the articles in this issue reinforce an important reality. Electrification is not a single
technology shift. It is a systems-level transition that requires coordination across policy, program
design, workforce development, customer engagement, and grid planning.
That collaborative spirit is what defines the AESP community. AESP continues to play an important role
in bringing together the professionals who design, implement, and evaluate the programs shaping the
future of energy.
I hope the insights in this issue of Energy Intel spark new ideas, new partnerships, and continued
collaboration as we work together to build a more practical, affordable, and equitable path toward
electrification.
Liz Haworth
Board Chair, AESP
Liz Haworth, VP of Marketing, CLEAResult
Liz serves as Board Chair of AESP and is Vice President of Marketing at
CLEAResult. She brings a background in marketing, brand development,
and stakeholder engagement across multiple industries, including energy
efficiency and financial services. In her role at Michaels Energy, Liz leads
marketing strategy and industry engagement efforts that expand awareness
of demand-side energy solutions, strengthen the company’s brand, and
connect utilities, partners, and customers across the energy ecosystem.
Earlier in her career, she led and grew a startup nonprofit foundation
within the credit union industry focused on advancing financial literacy
and creating pathways to homeownership for underserved members of
the community. She has also served as an adjunct professor of marketing,
teaching both undergraduate and graduate courses.
6 | Energy Intel 2nd Quarter 2026
Multifamily electrification is a capital-intensive, logistically complex undertaking. In dense, older
buildings, it is often the logistics, not the equipment, that decide whether a project gets done. Mini-
split and variable refrigerant flow (VRF) systems have become the default answer for apartment
electrification, and in many buildings, they are the right choice. But a large share of the multifamily
stock in the Northeast, particularly pre-war masonry buildings, high-rises with limited roof or façade
access, and affordable housing portfolios with long capital cycles, creates conditions in which split-
system retrofits are slow, expensive, and deeply disruptive to residents.
For those buildings, cold-climate-rated room heat pumps are emerging as a practical electrification
pathway. Designed to drop into existing windows or through-wall openings, they are unitary products
with no outdoor unit, no refrigerant piping to route through occupied apartments, and, in many
cases, no need for electrical service upgrades. This article examines where these products fit in the
multifamily retrofit toolkit, how they compare on installed cost and tenant disruption to VRF and
central air-to-water heat pump (A2WHP) approaches, and how the evolving regulatory and testing
framework — led by the proposed ENERGY STAR Version 7.0 room heat pump specification — is
helping program administrators identify which room heat pumps are genuinely cold-climate capable.
The retrofit gap conventional heat pumps leave behind
The conventional multifamily electrification playbook relies on two architectures. The first is distributed
split systems: mini-splits serving individual apartments, or VRF systems serving a line or riser of
apartments from a shared outdoor unit. The second is a central plant approach, such as one or more
large air-to-water heat pumps on the roof or in the basement, feeding a hydronic loop that serves
fan coils or in-unit hydronic terminal units in each apartment. Split-system retrofits depend on siting
outdoor units and running refrigerant line sets, condensate drains, and low-voltage controls from
those outdoor units into each apartment. In pre-war buildings with full lot coverage, landmarked
façades, or shared light-and-air shafts, there is often nowhere acceptable to put the outdoor units.
Even where siting works, threading line sets through occupied apartments requires coordinated
resident access, temporary relocations, patch-and-paint work, and, in many cases, electrical service
upgrades. Central A2WHP retrofits avoid the apartment-by-apartment refrigerant routing problem
but introduce a harder one: existing steam or hot-water piping generally cannot be reused for low-
temperature hydronic heat pump service without substantial rework, and installing new risers and in-
unit terminal units is a gut-level intervention that rarely pencils outside of a broader capital project.
Electrifying Solutions Where
Conventional Heat Pumps Fall Short
Affordable, low-disruption room heat pumps for
multifamily retrofits
Thomas Yeh, Cody Glavey-Weiss
Energy Intel 2nd Quarter 2026 | 7
These constraints are not just theoretical. The New York City Housing Authority (NYCHA) concluded
after earlier heat pump pilots that conventional split-system approaches would not scale across its
roughly 177,000-apartment portfolio on any realistic timeline, and that a different product form factor
would be needed to meet the city’s Local Law 97 obligations. That conclusion is what produced the
Clean Heat for All Challenge — a joint NYCHA, New York Power Authority (NYPA), and New York State
Energy Research and Development Authority (NYSERDA) effort to solicit heat pump manufacturers to
develop a cold-climate window heat pump that could be installed in under two hours, operate from
a standard 120V/15A outlet, and eliminate the façade penetrations, refrigerant piping, and service
upgrades that drive most of the cost of conventional retrofits [1, 2]. The program awarded production
contracts to Midea America (20,000 units) and Gradient (10,000 units), with 72 units installed at
NYCHA’s Woodside Houses for field monitoring beginning in 2023 [1, 3].
FIGURE 1: Retrofit architecture
comparison — side-by-side schematic
of a VRF apartment retrofit, a central
A2WHP retrofit, and a room heat
pump retrofit, highlighting outdoor-
unit siting, refrigerant/hydronic
distribution, resident access points,
and disruption points
What room heat pumps are,
and what they are not
“Room heat pump” is a convenient
shorthand for a family of unitary,
packaged products that condition a single
room from within the room’s own window
or wall opening. The category includes
window heat pumps: modern, variable-
capacity descendants of the window air
conditioner, in either traditional or saddle-
bag form factors, and packaged terminal heat pumps (PTHPs), which replace through-wall PTACs
in sleeves common in mid- and high-rise construction of the 1960s through 1980s. A third, smaller
subcategory consists of through-wall hydronic PTHPs, such as Ephoca’s product line, which sit in a
PTAC sleeve, but use an internal refrigerant-to-water loop to deliver heating and cooling.
What unifies these products, and what distinguishes them from split systems, is that they are self-
contained. The compressor, both heat exchangers, the refrigerant charge, and the controls all live
inside a single package. There is no separate outdoor unit, no field-installed refrigerant piping, and
no field refrigerant charge, which means no field leak testing, no line-set routing through occupied
apartments, and a much smaller refrigerant charge per apartment. Standard installation typically
involves installing one unit in each living room and bedroom, sized according to the room’s design
load. This setup creates zones based on each unit, allowing occupants to control their individual units
and room temperature directly.
The category is not a universal replacement for split systems. Room heat pumps serve a single room
from a single opening, so buildings with floor plans that lack openings in every conditioned room,
VRF retrofit
Rooftop ODU + risers
Central A2WHP retrofit
Rooftop plant + hydronic loop
Room heat pump retrofit
Unitary, no outdoor unit
Outdoor units (one per apartment line)
6-story section
A2WHP plant (roof)
6-story section
One unit per living room and bedroom
Disruption points
Rooftop ODU siting
3 refrigerant risers
Line sets in every unit
Apartment access × 72
Service upgrades likely
Disruption points
Rooftop plant siting
New hydronic riser
In-unit fan coils × 72
Existing distribution out
Gut-rehab scope typical
Disruption points
No outdoor unit
No risers or line sets
Existing openings reused
~2 hours per apartment
Typically no upgrade
VRF retrofit
Rooftop ODU + risers
Central A2WHP retrofit
Rooftop plant + hydronic loop
Room heat pump retrofit
Unitary, no outdoor unit
Outdoor units (one per apartment line)
6-story section
A2WHP plant (roof)
6-story section
One unit per living room and bedroom
Disruption points
Rooftop ODU siting
3 refrigerant risers
Line sets in every unit
Apartment access × 72
Service upgrades likely
Disruption points
Rooftop plant siting
New hydronic riser
In-unit fan coils × 72
Existing distribution out
Gut-rehab scope typical
Disruption points
No outdoor unit
No risers or line sets
Existing openings reused
~2 hours per apartment
Typically no upgrade
8 | Energy Intel 2nd Quarter 2026
deep units with interior bedrooms, open-plan lofts, or gut-rehab scenarios where ductwork is already
planned, will generally be better served by ducted, multi-split, or VRF solutions.
Room heat pumps are also generally sized at or below 12,000 Btu/h per unit, which limits their
applicability for very large rooms or spaces with high solar or ventilation loads. The appropriate
framing is not that room heat pumps replace VRF, but that they fill the multifamily retrofit gap where
VRF and A2WHP cannot practically be deployed.
FIGURE 2: Multifamily fit matrix
— where window heat pumps,
through-wall PTHPs, multi-
split/VRF, and central A2WHP
tend to fit best, organized by
building vintage, floor-plan
type, existing openings, façade
constraints, and resident-
disruption tolerance.
Where the affordability
really comes from
The equipment list price is
typically just a small part of the
total installed cost of multifamily
electrification. Public cost studies
from NYSERDA’s RetrofitNY
cost-compression work and
Steven Winter Associates’ retrofit
electrification technical assistance
under HPD–NYSERDA pilots have
consistently shown that the dominant line items in a conventional retrofit are not the heat pumps
themselves, but the associated work: outdoor-unit staging and structural supports, refrigerant line-
set routing, through-slab and through-wall penetrations, electrical service upgrades at the apartment
and building level, envelope patching, resident coordination, and, in occupied retrofits, the cost of
temporary relocations and unit turnover exposure [4, 5].
Room heat pumps attack that cost stack directly. A window or through-wall unit reuses openings the
building already has. It does not require new penetrations, new refrigerant piping, or new outdoor unit
locations. The majority of the product’s population is designed to operate on existing 120V/15A circuits
or PTAC outlets, eliminating the electrical service upgrade that accounts for a significant portion of the
conventional retrofit cost in older buildings. The Clean Heat for All Challenge cost specification that a
window heat pump installation must target an equipment cost of no more than approximately $3,000
per unit, and an installation time of under two hours, was not an arbitrary target but a determination
based on what was needed to turn NYCHA’s portfolio retrofit into a feasible capital plan [6].
Public documentation from the Clean Heat for All Challenge estimates that retrofitting NYCHA buildings
with packaged window heat pumps could cost on the order of one-third of a conventional split-system
retrofit, and in some cases less, primarily because the approach avoids street or building electric
Multifamily fit matrix
Where each retrofit architecture fits best across five screening criteria
Window heat pump
Replaces window AC
Through-wall PTHP
Replaces PTAC
Multi-split / VRF
Ducted or ductless split
Central A2WHP
Hydronic distribution
Building vintage
Pre-war, mid-century, newer
Strong fit
Pre-war buildings
with window ACs
Strong fit
Mid-century with
PTAC sleeves
Conditional
Better in newer
stock or gut-rehab
Conditional
Aligns with capital
improvement cycles
Floor-plan type
Openings in every room
Strong fit
Windows in LR
and each bedroom
Strong fit
PTAC sleeve in
every room
Strong fit
Handles deep or
interior-bedroom
Strong fit
Independent of
apartment geometry
Existing openings
Reuse windows or sleeves
Strong fit
Reuses existing
window opening
Strong fit
Drops into existing
PTAC sleeve
Poor fit
New penetrations
for line sets
Poor fit
Existing piping
generally unusable
Façade constraints
Landmark, airshaft, coverage
Strong fit
No new façade
penetrations
Strong fit
No new penetrations
or outdoor units
Poor fit
ODU siting often
blocked on landmarks
Conditional
Rooftop plant needs
structural capacity
Disruption to tenants
Occupied, limited access
Strong fit
~2 hrs per unit,
no specialist labor
Strong fit
Similar to
appliance swap
Poor fit
Multi-day access,
temporary relocation
Poor fit
Typically needs
gut-rehab vacancy
Fit rating
Strong fit — product aligns well with criterion
Conditional — works in specific project or building contexts
Poor fit — criterion is a barrier to deployment
Energy Intel 2nd Quarter 2026 | 9
upgrades, and is compatible with existing wall and window openings [7]. Published cost data from
conventional multifamily VRF and central A2WHP retrofits in the New York market commonly fall in the
range of roughly $30,000 to $60,000, or more, per apartment once all associated electrical, envelope,
and distribution work is included; cost benchmarks can vary significantly with building vintage and
project scope [4, 5]. Room heat pump projects, by contrast, target all-in installed costs closer to the
equipment cost, plus a modest non-specialist labor allowance for installation and start-up, possible
because most of the expensive line items simply do not appear in scope. The non-financial cost also
matters: a conventional split-system retrofit in an occupied apartment typically requires multiple days
of resident access, while a window heat pump installation is measured in hours per apartment, and
can be performed without specialized HVAC labor, which is a distinction that matters for portfolio-scale
deployments where a trained HVAC workforce is the ultimate constraint.
FIGURE 3: What drives
affordability? — a stacked cost-
breakdown chart comparing VRF,
central A2WHP, and room heat
pump retrofits across equipment,
outdoor-unit staging, refrigerant/
hydronic distribution, electrical
upgrades, envelope work, resident
coordination, and turnover/
displacement risk.
Separating cold-climate
capability from cold-climate
marketing
The category’s greatest weakness has
historically been that “heat pump” is
a label, not a performance guarantee.
Many window and through-wall units
have been sold as heat pumps for
decades, and until recently, most of
them were PTAC-format products,
which reverted to electric resistance
heat below roughly 40°F outdoor
temperature. A product that reverts
to electric resistance under design
conditions is not a cold-climate heat
pump in any meaningful sense,
regardless of its nameplate rating. The question for program administrators, utilities, and building
owners is how to separate genuinely cold-climate-capable room heat pumps from products that
merely carry the label.
The ENERGY STAR Version 7.0 framework: four room heat pump types
The most important recent development in answering that question is the ENERGY STAR Room Air
Conditioner Draft 1 Version 7.0 specification, proposed for an effective date of May 26, 2026 [8].
What drives affordability?
Illustrative per-apartment cost drivers for three multifamily retrofit architectures
Multi-split / VRF
Distributed split systems
Central A2WHP
Rooftop plant + hydronic
Room heat pumps
Unitary window / PTHP
Equipment
Heat pumps, terminals, pumps, tanks
Moderate
$6K–$12K
ODU share + heads
Moderate
$8K–$15K
Plant + fan coils
Moderate
$6K–$12K
2–4 room units
Outdoor-unit staging
Rigging, structural, MEP tie-ins
Major
$3K–$8K
ODUs + structural
Moderate
$2K–$5K
Dunnage, rigging
Minimal
—
No outdoor unit
Distribution
Refrigerant or hydronic piping
Major
$6K–$12K
Line sets, every unit
Major
$8K–$18K
New risers + branches
Minimal
—
No risers or line sets
Electrical upgrades
Service, panel, new circuits
Major
$4K–$10K
Service + unit panel
Moderate
$2K–$5K
Building service only
Minimal
$0–$500
120V/15A existing
Envelope work
Penetrations, chases, patching
Moderate
$2K–$5K
Line-set penetrations
Moderate
$3K–$7K
Riser chases, ceilings
Minimal
$0–$1K
Existing openings
Resident coordination
Access, noticing, scheduling
Major
$2K–$5K
Multi-day access
Major
$2K–$5K
Distribution in unit
Minimal
$200–$500
~2 hour install
Turnover / displacement
Resident relocation + lodging
Major
$3K–$8K
3–7 days lodging
Major
$5K–$15K
10–30 days lodging
Minimal
—
Resident stays in place
Total per apartment
Illustrative, varies by building
$25K–$60K
per apartment
$30K–$70K
per apartment
$6K–$14K
per apartment, ~$2K–$5K
per room
Cost-intensity tiers
Major Dominant cost driver in this category; typically above $3K per apartment.
Moderate Meaningful line item but not dominant; typically $1K–$5K per apartment.
Minimal Not a material cost driver; typically under $1K per apartment.
Figures are illustrative order-of-magnitude estimates; actual project costs vary widely by building vintage and scope. Turnover / displacement
assumes NYC extended-stay lodging at ~$200–$350/night plus moving and per-diem costs. Room HP totals exclude rebates and incentives.
10 | Energy Intel 2nd Quarter 2026
Version 7.0 formally recognizes room heat pumps as a distinct subcategory of the room air conditioner
product class, and sorts them into four types based on compressor cut-in and cut-out temperature,
and the presence of active defrost. Type 1 heat pumps either lack active defrost or have cut-in/cut-out
temperatures that are not both below 40°F, meaning they revert to electric resistance or shut off the
compressor above typical Northeast design temperatures. Type 2 heat pumps have active defrost and
operate with both cut-in/cut-out below 40°F, but not both below 17°F. Type 3 heat pumps operate with
both cut-in/cut-out below 17°F, but not both below 5°F. Type 4 heat pumps operate with both cut-in/
cut-out below 5°F [8].
For multifamily retrofits in New York State, and similar Zone 5 and Zone 6 climates, the Type 3 and
Type 4 designations are the most meaningful. A Type 1 or Type 2 unit will, by design, cease compressor
operation before outdoor temperatures reach the Northeast heating design day. Only Type 3 and
Type 4 products provide reverse-cycle heating across the full winter operating envelope (depending
on location). EPA’s Version 7.0 heating performance requirements reinforce the distinction: Type 3
products must achieve a minimum HEER of 8.3 Btu/Wh, a COP at 17°F of at least 1.75, and deliver
at least 70% of their 47°F heating capacity at 17°F. Type 4 products must achieve the same 8.3 HEER
and the same 70% capacity retention, but at 5°F rather than 17°F, with a minimum COP at 5°F of 1.75
[8]. The EPA notes that these low-ambient requirements are intended to align the room heat pump
specification with the ENERGY STAR Cold Climate air-source heat pump requirements.
The practical upshot for program design is that ENERGY STAR Version 7.0, for the first time, establishes
a clear regulatory shorthand for “this room heat pump will actually heat the building on a cold day.”
A product certified as Type 3 or Type 4 meets a verifiable performance threshold at low ambient
temperatures; a product certified as Type 1 or Type 2 does not, regardless of its marketing language.
EPA has also considered a consumer-facing label that graphically depicts the heat pump type: a
thermometer showing the unit’s operating temperature range, to make the distinction visible at the
point of purchase or specification [8].
How the performance is measured: CEER, HEER, and what they miss
Under Version 7.0, cooling efficiency continues to be rated as Combined Energy Efficiency Ratio (CEER),
measured under the DOE room air conditioner test procedure at 10 CFR 430 Subpart B Appendix F,
which in turn references ANSI/AHAM RAC-1-2020 [9]. Heating performance, HEER and the low-ambient
COPs at 17°F and 5°F, is measured under the ENERGY STAR Test Method to Determine Room Air
Conditioner Heating Mode Performance, finalized in 2024, which specifies the H1, H2, H3, and H4
heating mode tests at 47°F, 35°F, 17°F, and 5°F respectively, along with cut-in/cut-out temperature
determination [10]. Taken together, these two test frameworks represent a substantial improvement
over the prior ENERGY STAR Version 6.0 specification, which had no low-ambient heating performance
requirement at all.
However, what the CEER/HEER framework does not fully capture is how a variable-capacity heat pump
behaves under realistic part-load conditions with its native controls, and that is where the next layer of
standards becomes essential for the multifamily equipment specifier. The ENERGY STAR heating test
method does include provisions for variable-speed units, with nominal, intermediate, and full-speed
tests across the temperature bins, but it remains a steady-state point-test framework at prescribed
compressor speeds. It does not directly measure whether the unit’s own control algorithm will allow it
to modulate gracefully at low load, or whether it will hunt and short-cycle at the mild-weather part-load
conditions that dominate the heating-season hours in the Northeast.
Energy Intel 2nd Quarter 2026 | 11
Why controls and load-based testing still matter
Two additional standards address what CEER and HEER do not. The first is AHRI 210/240-2024, the
performance rating standard for unitary air-source heat pumps under 65,000 Btu/h. The 2024 revision
introduced a Controls Verification Procedure (CVP) that, for variable-capacity equipment, requires
the unit to operate under its own native controls during performance testing, rather than having its
compressor locked at prescribed speeds by the test technician [11]. This matters because the control
algorithm is increasingly where the performance lives. A variable-capacity heat pump with good
hardware, but poor low-load controls will hunt, short-cycle, and lose efficiency at exactly the part-
load conditions that dominate heating-season hours in the Northeast. Testing the hardware without
testing the controls over-predicts seasonal performance; the AHRI CVP is designed to close that gap by
verifying that these products are capable of true variable-load capacities.
The second standard is CSA SPE-07:23, “Load-based and climate-specific testing and rating procedures
for heat pumps and air conditioners” [12]. Rather than subjecting the unit to a fixed sequence of steady-
state test points with the compressor speed locked in place, SPE-07 puts the unit in a conditioned
chamber, imposes a simulated building load that varies with outdoor temperature, and allows the
unit’s native controls to respond. The result is a seasonal performance rating that captures how the
unit is more likely to behave across a realistic range of operating conditions, including whether it
modulates smoothly, cycles excessively, or enters defrost inefficiently at cold outdoor temperatures.
Early published results from load-based testing have shown large differences in part-load efficiency
between otherwise similar units. In one documented case, a 66% difference in measured COP
between two model-year iterations of the same product line was traced to improvements in low-load
modulation behavior [13].
For program administrators and specifiers, the practical implication is a layered screening approach.
ENERGY STAR Version 7.0 Type 3 or Type 4 certification establishes the baseline that the product can
reverse-cycle heat at the design temperatures that matter. Load-based and controls-verified data,
where available, establish whether the product will operate efficiently and avoid short-cycling under
real world operating conditions. Equipment specifiers should additionally confirm documented
modulation behavior at low part-load, the absence of short-cycling under design-day conditions, and,
where electric resistance is present as a backup element, a control strategy that prioritizes compressor
operation and locks out the electric resistance except at extreme cold or during defrost recovery.
The current product landscape
The room heat pump category is in an unusual moment: it has been largely inert for two decades,
but is now moving quickly; driven by public procurement at NYCHA, and by NYSERDA’s Clean Heat
for All: Room Heat Pump Program, with two active solicitations: PON 6037, the Window Heat Pump
Demonstration Program, and PON 5907, the Packaged Terminal Heat Pump Program [14, 15]. Both
solicitations support heat pump manufacturer development of cold-climate-rated products, and pair
awarded manufacturers with multifamily demonstration sites across New York State.
In the window heat pump segment, the two products developed under NYCHA’s Clean Heat for All
Challenge: Midea’s and Gradient’s saddle-bag window heat pump, are both cold-climate-rated and are
the products furthest along in field deployment, with production units now being installed at NYCHA
developments including Woodside Houses and, announced in 2026, Beach 41st Street Houses and
Bay View Houses [16]. Both products are designed for 120V operation, heating capability at low ambient
temperatures without electric resistance backup, and installation by non-specialized labor.
12 | Energy Intel 2nd Quarter 2026
Additional window heat pump products are in development or on the market from manufacturers
including Gree, GE, and Friedrich; these represent the broader direction of the category, though cold-
climate rating status varies by product, and should be verified against the relevant qualified products
lists.In the through-wall/PTHP segment, the category is somewhat more mature. Ephoca’s packaged
terminal and all-in-one (AIO) hydronic heat pumps are cold-climate-rated, and designed to replace
existing PTACs in sleeves without envelope modifications. Olimpia Splendid’s Maestro line is a through-
wall packaged heat pump aimed at the same retrofit niche. Gree and IceAir offer PTHP products that
are actively deployed in multifamily retrofits in the New York market, with additional cold-climate
PTHPs being advanced through NYSERDA’s PON 5907. As with the window heat pump segment, cold-
climate capability and control quality vary across the category, and equipment specifiers should look to
load-based or CVP-verified performance data as those become available.
FIGURE 4: When do room heat
pumps fit? Three screening
questions determine if room
heat pumps are a good fit:
Is the project an occupied
retrofit (not gut-rehab)? Does
every conditioned room have
a window or PTAC sleeve? Are
outdoor-unit siting options
limited? If all answers are
yes, use a cold-climate-rated
window heat pump or through-
wall PTHP, verified by ENERGY
STAR Version 7.0 Type 3 or 4
and properly sized. Any “no”
suggests considering central
air-to-water heat pumps for
gut-rehab with hot water
upgrades, or multi-split/VRF
systems for interior bedrooms
or available outdoor-unit siting.
Room heat pumps bridge
affordability and feasibility gaps
where traditional systems are
impractical.
Implications for program design
Program administrators designing multifamily electrification face a specific challenge with room heat
pumps: the savings narrative and the equipment narrative do not line up with how incentive structures
have historically worked. Most heat pump incentive programs are built around HSPF thresholds, and
whole-building or whole-apartment system replacement. A room heat pump portfolio retrofit is neither
— it is a phased, repeatable, room-by-room intervention where the per-apartment electrification
“system” is actually several unitary products.
When do room heat pumps fit?
A screening decision pathway for identifying good-fit buildings
Multifamily electrification retrofit
Existing 5+ unit building, space heat and cooling
Is this an occupied retrofit,
not a gut-rehab?
Residents remain in place during installation
Yes
Does every conditioned room have a
window or existing PTAC sleeve?
Living room + each bedroom, no interior-only rooms
Yes
Are outdoor-unit siting options
limited, blocked, or cost-prohibitive?
Landmark façade, full lot coverage, airshaft-only
Yes
Room heat pumps are a good fit
Unitary window or through-wall PTHP
Verify ENERGY STAR Type 3 or 4 designation
and confirm load sizing per room
Any "No" answer
Room heat pumps may not
be the best fit. Consider
alternative architectures:
• Gut-rehab or major
capital improvement
with DHW upgrade,
consider central A2WHP
• Interior-bedroom plans
or deep units, consider
multi-split or VRF
• Available outdoor siting,
consider multi-split or VRF
Why room heat pumps close the gap
The building stock where VRF cannot be sited and A2WHP cannot be funded is exactly where room heat pumps fit best
Pre-war and mid-century
Older masonry buildings with
existing window ACs or PTAC
sleeves in every room —
the dominant retrofit target
Occupied, non-displaced
Resident remains in place
during installation; ~2 hours
per unit, no specialized labor,
no temporary lodging costs
Scalable by unit, not project
Phased, repeatable, room-by-
room retrofit matching large
portfolio capital cycles and
workforce constraints
Decision pathway is illustrative. Actual architecture selection also depends on load profile, domestic hot water integration,
electrical service capacity, and financing structure. Building-specific analysis is recommended.
Energy Intel 2nd Quarter 2026 | 13
Program administrators can apply three design principles to account for these gaps. First, qualified
product lists for room heat pumps should reference ENERGY STAR Version 7.0 Type 3 or Type 4
certification as the cold-climate baseline, supplemented by load-based (CSA SPE-07), and controls-
verified (AHRI 210/240 CVP) data as those become available. Second, incentive structures should
accommodate per-unit installation counts, rather than per-apartment system replacement, reflecting
the one-per-living-room-and-bedroom installation pattern and the phased retrofit model. Third,
program administrators should be explicit with building owners about when and where room heat
pumps are the right fit: dense, older, hard-to-electrify multifamily buildings, with existing openings in
every conditioned room, and that room heat pumps are not a complete substitute for split-system or
central plant approaches in multifamily buildings which can accommodate those architectures.
Closing the multifamily retrofit gap
Affordable multifamily electrification will require a portfolio of solutions, particularly for the substantial,
persistent gap that mini-split, VRF, and A2WHP architectures cannot practically fill at the speed and cost
that the building stock, the workforce, and climate policy timelines allow. Room heat pumps provide a
cost-effective and logistically practical bridge to electrification for multifamily buildings by streamlining
installation time and minimizing tenant disruption, eliminating the need for most electrical system
infrastructure upgrades, and providing more consistent quality of life to tenants.
References
1 New York State Governor’s Office. “Governor Hochul Announces Installation of Window Heat Pumps for New York City Public
Housing Residents.” September 20, 2023.
2 NYCHA. “$70M Initial Investment Will Decarbonize NYCHA Buildings with New Electric Heat Pumps.” 2022.
3 NYCHA Journal. “First Set of Electric Heat Pumps Installed at Woodside Houses.” August 2, 2023.
4 NYSERDA. RetrofitNY Cost-Compression Study Phase Two: Mid-Rise Opportunities for Multifamily Residential Housing in New
York State. Report 20-16a.
5 NYSERDA. 2024 Update — Energy Efficiency & Electrification Soft Costs in the NY Market. Final Report, March 2025.
6 Grist. “How NYC’s public housing authority plans to transform the market for clean heat.” January 25, 2022.
7 Building Energy Exchange / NYCHA. Clean Heat for All program materials and slide deck, January 16, 2025.
8 U.S. Environmental Protection Agency. ENERGY STAR Program Requirements Product Specification for Room Air Conditioners,
Eligibility Criteria Draft 1 Version 7.0. Proposed effective date May 26, 2026.
9 U.S. Department of Energy. Test Procedure for Room Air Conditioners, 10 CFR 430 Subpart B Appendix F, incorporating by
reference ANSI/AHAM RAC-1-2020, Energy Measurement Test Procedure for Room Air Conditioners.
10 U.S. Environmental Protection Agency. ENERGY STAR Test Method to Determine Room Air Conditioner Heating Mode
Performance. Final, 2024.
11 AHRI Standard 210/240-2024 (I-P). Performance Rating of Unitary Air-conditioning and Air-source Heat Pump Equipment. Air-
Conditioning, Heating, and Refrigeration Institute.
12 CSA SPE-07:23. Load-based and climate-specific testing and rating procedures for heat pumps and air conditioners. CSA Group,
2023.
13 ACEEE Summer Study on Energy Efficiency in Buildings 2024. “Low-Load Efficient Heat Pumps: A field data and product
teardown exploration of why some heat pumps excel under part-load conditions.”
14 NYSERDA. Window Heat Pump Demonstration Program — Phase I (PON 6037).
15 NYSERDA. Clean Heat for All: Packaged Terminal Heat Pump Program (PON 5907).
16 New York City Mayor’s Office. “Mayor Mamdani, NYCHA Announce $38.4 Million Investment to Bring Clean, Reliable Heat Pumps
to Beach 41st Street Houses.” February 4, 2026.
14 | Energy Intel 2nd Quarter 2026
Thomas Yeh has been a consulting technical advisor to NYSERDA since
2017, recognized for his expertise in energy management and building
science. Thomas holds 20 US and international patents and possesses
numerous certifications from the Association of Energy Engineers, as well as
accreditation from the International Geothermal Heat Pump Association. He
earned both his bachelor’s and master’s degrees in electrical engineering,
along with a master’s in computer science, highlighting his extensive
technical expertise.
Cody Glavey-Weiss is a Project Manager on NYSERDA’s Market Scaling
team, where he leads the Clean Heat for All: Room Heat Pump program,
which is focused on developing and testing innovative electrification
solutions addressing market deployment gaps, and on scaling the adoption
of cold-climate heat pump technologies essential to decarbonizing New
York’s existing building stock. Cody’s background is in Electrical Engineering,
with 10+ years of experience at engineering consulting firms before joining
NYSERDA in 2021.
Energy Intel 2nd Quarter 2026 | 15
Capacity Firming with
Levelized Cost of Capacity
A Framework for Evaluating and Comparing Grid
Capacity Firming Options for Grid Interconnection
Andrew Bray
16 | Energy Intel 2nd Quarter 2026
1. Lazard. (2025, June). Lazard's LCOE+ Analysis. https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf
2. PJM. (2025, December). Brattle 2025 PJM CONE Report (Sixth Quadrennial Review), Revised Final. FERC Docket ER25-2002.
https://www.pjm.com/-/media/DotCom/committees-groups/committees/mic/2025/20250411-special/item-1-02-revised-cone-report-final.pdf
3. Mcconnell, Dylan & Sandiford, Mike. (2016). Winds of change - an analysis of recent changes in the South Australian electricity market. https://
www.researchgate.net/publication/306099979_Winds_of_change_-_an_analysis_of_recent_changes_in_the_South_Australian_electricity_market
1 Why Capacity Firming Needs a Standardized Cost Comparison
Interconnection bottlenecks and capacity firming remain among the most pressing challenges facing
energy project development today. As part of connecting to the grid, projects are evaluated for how
much energy capacity they can deliver or need. The results affect millions of dollars in project finance
economics and billions of dollars across a portfolio.
Large load and generation projects may seem entirely different, but both require the assessment of
capacity on the way through their respective interconnection queues. These developers need a way to
effectively compare different capacity firming options to make decisions on which ones to add to their
project.
Developers today face a fragmented landscape of firming options (gas turbines, battery storage,
demand response, regulatory relief, transmission upgrades), each with a different cost structure,
timeline, and degree of certainty. Current tools are insufficient for comparing them.
The Lazard LCOE+ framework1 benchmarks energy costs and even goes on to measure the cost to
firm each intermittent resource, but assumes a standardized firming option per market and doesn’t
compare the costs between different firming options.
The Cost of New Entry (CONE) is the method of measuring the cost-to-firm using Effective Load
Carrying Capacity (ELCC) to quantify the solution’s ability to deliver, providing a rigorous methodology
for a single reference technology in a single market2, but cannot compare between options.
Capacity markets clear prices that reveal what the capacity is worth. They don’t give information on the
cost of the capacity.
Additionally, all of these methods are restricted to technologies, disallowing comparisons to market,
policy, and transmission options.
An expanded LCOC evaluation can compare different firming options in a standardized manner.
2 The LCOC Framework Standardizes Capacity Metrics
The Levelized Cost of Capacity (LCOC) metric is not a new concept. It traditionally represents the
capacity price required for a project to have a net present value of zero given a target return,
often called the “Missing Money”.3 In a formula, it is the net annualized cost of a firming solution per
unit of effective firm capacity delivered:
Net Annualized Cost
Firm Capacity Delivered (MW)
LCOC =
Energy Intel 2nd Quarter 2026 | 17
LCOC Category Characteristics
Category
LCOC Formula
Lead Time
Primary Risk
Technology
(Project Cost − Revenue) /
(Capacity * ELCC)
2–7 years
ELCC accreditation uncertainty;
technology cost inflation
Market
Shutoff Cost / MW Avoided
Available when
ready
Value of Lost Load (VoLL)
estimation errors; capacity
market rule changes
Policy /
Regulatory
Campaign Cost / (MW
Unlocked × P(win))
1–7 years
Uncertain regulatory outcomes;
multi-year proceedings
Transmission
Transmission (Project Cost ×
Share) / MW Enabled
5–15 years
Permitting; Long-lead times
Net annualized cost takes gross costs then subtracts revenues (capacity payments, energy revenue,
avoided charges) and then annualizes the net costs using rate of return assumptions. Firm capacity
delivered is ELCC-adjusted output to account for the megawatts being delivered when they are needed
most. The result is expressed in $/MW-yr (or $/MW-day) allowing for direct comparison to capacity
auction prices, CONE values, and utility RA contract prices.
The LCOC can accommodate non-capital solutions by substituting shutoff costs, campaign costs or
other costs for capital expenditure. The calculation can be tailored to the decision-maker putting the
money in and what capacity value they receive.
3 The 4 LCOC Categories
The LCOC framework assigns a distinct formula to each of four solution categories, each reflecting the
nature of costs and capacity received in that pathway. All four produce a result in the same $/MW-yr
metric, enabling direct comparison.
CRF (Capital Recovery Factor) – Annualization factor incorporating cost of capital rates
and economic life
Fixed O&M (Operations & Maintenance) – Yearly set costs no matter how much it runs
E&AS Revenue (Energy and Ancillary Service) – Yearly revenue expected for the project
ELCC (Effective Load Carrying Capability) – Fraction of nameplate capacity counting toward
reliability requirements
3.1 Technology
Technology solutions involve capital investment in a technology solution, typically a generating or
storage asset. This category is the direct extension of CONE and the most familiar firming pathway.
CapEx × CRF + Fixed O&M - E&AS
Capacity Nampelate× ELCC
LCOC Tech =
18 | Energy Intel 2nd Quarter 2026
The equation conveys the costs for a unit of capacity after energy and ancillary service revenue
contributions. The ELCC is the normalizing variable that makes technology comparison meaningful.
ELCC is market-specific and evolves with the resource mix. The Slice-of-Day framework is CAISO’s
updated equivalent, which assigns obligations across all hours.
Solutions in the technology category include:
• Gas Turbines can achieve competitive LCOC numbers with high ELCC measures and high
revenues, despite high capital and operating costs.
• 4-hr Batteries can also achieve competitive LCOC numbers with high ELCC measures, high
revenues, and low operating costs, despite high capital costs.
CATEGORY II: MARKET
3.2 Market
Market solutions use economic signals as the firming mechanism rather than building physical assets.
The most relevant examples are: demand response (DR) programs where loads commit to curtail in
exchange for payments; rate structures that set predefined terms that a customer can operate around;
and simply direct wholesale energy market exposure where a load accepts real-time price risk with no
firming infrastructure. Capacity from market signals can take many different forms depending on the
market in which it’s located.
The Market LCOC entails a different cost structure with no physical assets to build and no construction
risk. The LCOC for market options is the cost of the program divided by the number of MW of capacity
gained.
Shutoff Cost [Cost to run program or Value of Lost Load ($/MWh)] × Curtailment hours × MW curtailed
Capacity Avoided (MW) – Reduction in needed capacity from load turning off at key times
Shutoff cost is either the cost to run a program or the value of the load that is foregone during
curtailment events. The Value of Lost Load is the pivotal variable describing how much it would take for
that load to turn off.
Solution sets in the market LCOC category include:
• DR Programs – Demand Response programs aggregate resources that can turn off when needed.
They serve as a potential external resource to a project.
• Rate Structures – Rate structures that include a demand charge provide a predetermined incentive
for customers to reduce load at peak times.
Shutoff Cost
Capacity Avoided (MW)
LCOC Market =
Energy Intel 2nd Quarter 2026 | 19
• Wholesale Energy Exposure - Real-time energy prices signal the need for load reduction that the
user ultimately responds to and pays for. For example, ERCOT’s high scarcity price spikes send a
strong message to turn off large load centers.
CATEGORY III: POLICY/REGULATORY
3.3 Policy/Regulatory
Policy solutions achieve capacity firming through regulatory and tariff changes rather than new assets.
This category is underappreciated because it lacks a standard methodology and the outcome can be
so uncertain. These endeavors can be seen as larger policy intervention campaigns that might be more
uncertain yet affect many projects. For example, groups lobbied for VA legislation to use grid utilization
metrics as part of the utility commission’s oversight, a change that has the potential to reduce required
capacity reserves but by an uncertain amount.4
Campaign Cost Legal fees + regulatory filings + advocacy, annualized over the benefit period
MW Unlocked Reduction in capacity obligation if the regulatory outcome is achievedP(success)
P(success) Probability of achieving the outcome (0–1)
The probability adjustment is what distinguishes Policy LCOC from the other categories. Policy
campaigns might be carried out at the national, state, RTO/ISO, or utility level. Often the costs and
benefits are borne and received by many parties, which also distributes the risk for what is otherwise a
high-risk endeavor.
CATEGORY IV: TRANSMISSION
3.4 Transmission
Transmission solutions firm capacity by removing the delivery constraint that prevents existing supply
from being counted as firm. The solution increases import capability rather than adding
new generation.
Customer Share Fraction of total project cost allocated to the load (0–100%)
The decision of who pays for transmission projects depends on who benefits. Major transmission
projects take five to fifteen years to permit and build. Transmission offers long-term value with broad
regional benefit.
Project Cost × Customer Share
Capacity Enabled (MW)
LCOC Transmission =
Campaign Cost
MW Unlocked × P(success)
LCOC Policy =
20 | Energy Intel 2nd Quarter 2026
4 The Urgency for Expanded LCOC Measures
In summary, LCOC provides a single comparable unit ($/MW-yr) for the full range of capacity firming
solutions. Describing different formula methodologies for different capacity solutions can help take
into account the differences in the solutions while creating a standardized comparison.
When using, the uncertainty in any of these calculations can be portrayed with value ranges. LCOC
values are also market-specific: a gas plant in PJM offers a different value than in CAISO, so the analysis
needs to be market-specific.
As zero-marginal-cost resources become more prevalent, energy cost measures will fail to measure
and compare the true costs of the energy system, and capacity cost metrics will become more vital for
investment and reliability decisions. Interconnection queues holding hundreds of gigawatts of projects,
load growth driven by data centers, and rising electricity costs would all benefit from a more robust
and standardized measure of the cost of capacity. A standardized LCOC framework equips developers,
grid operators, and policymakers to make decisions with standardized comparisons across broad
solution sets.
4. Ben Zieentara. (2026). Virginia House unanimously passes legislation to require utility measurement of grid utilization. https://pv-magazine-usa.
com/2026/02/04/virginia-house-unanimously-passes-legislation-to-require-utility-measurement-of-grid-utilization/
Andrew Bray is an energy strategy leader with over 10 years of experience
working across diverse, multi-stakeholder teams. He offers a distinct
perspective from all sides of the energy technology scaling ecosystem:
developing and managing innovation programs at DOE’s Office of Clean
Energy Demonstrations, VC investing at Powerhouse Ventures, startup
growth consulting at MXV Ventures, and advising on energy markets for grid-
scale projects at Aurora Energy Research.
Andrew has coalesced support and garnered approvals for the creation
of millions of dollars in adoption-readiness programs for next-generation
energy technologies, delivered energy market analysis informing gigawatts
in grid-scale battery and solar projects, and performed investment analysis
of seed-stage clean energy startups.
Andrew has an M.S. in Energy Policy from the University of Chicago, and B.S.
in Industrial Engineering from the University of Wisconsin - Madison.