• Energy Research
• 2021-2025close
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Abstract Efficient electric heat pumps have the potential to significantly reduce greenhouse gas emissions from heating and cooling buildings. However, heat pumps’ initial costs can be prohibitively high and their lifetime costs are only situationally competitive with incumbent technologies. Here we show that a business model based on heat purchase agreements could lower these barriers to heat pump adoption. In this business model, a user hosts a heat pump owned by an aggregator. The aggregator installs the heat pump at low or no initial cost to the user. The user buys the heat pump’s heat or cooling output from the aggregator. The aggregator buys the heat pump’s input electricity in the wholesale energy market and sells the flexibility of their aggregate electrical load in ancillary service markets. This paper presents the first economic analysis of heat purchase agreements as a third-party ownership model for electric heat pumps. We derive conditions under which a heat purchase agreement is mutually beneficial to the user and the aggregator. We also provide a method to fairly price heat and cooling. A case study of a typical United States home shows that a heat purchase agreement could more than double the value of a heat pump investment relative to the incumbent business model. The potential impact of this work is to reduce emissions both directly, by accelerating replacement of fossil-fueled or inefficient heating or cooling equipment, and indirectly, by helping power system operators reliably integrate wind and solar generation.

Abstract Efficient electric heat pumps have the potential to significantly reduce greenhouse gas emissions from heating and cooling buildings. However, heat pumps’ initial costs can be prohibitively high and their lifetime costs are only situationally competitive with incumbent technologies. Here we show that a business model based on heat purchase agreements could lower these barriers to heat pump adoption. In this business model, a user hosts a heat pump owned by an aggregator. The aggregator installs the heat pump at low or no initial cost to the user. The user buys the heat pump’s heat or cooling output from the aggregator. The aggregator buys the heat pump’s input electricity in the wholesale energy market and sells the flexibility of their aggregate electrical load in ancillary service markets. This paper presents the first economic analysis of heat purchase agreements as a third-party ownership model for electric heat pumps. We derive conditions under which a heat purchase agreement is mutually beneficial to the user and the aggregator. We also provide a method to fairly price heat and cooling. A case study of a typical United States home shows that a heat purchase agreement could more than double the value of a heat pump investment relative to the incumbent business model. The potential impact of this work is to reduce emissions both directly, by accelerating replacement of fossil-fueled or inefficient heating or cooling equipment, and indirectly, by helping power system operators reliably integrate wind and solar generation.

To promote the sustainable development of supply chains, numerous manufacturers are embracing corporate environmental responsibility to mitigate the ecological consequences of production activities. The environmental benefit concern (EBC) of enterprises not only affects their operations strategies but also impacts other enterprises within the supply chains. Therefore, it is essential to study the influences of EBC behaviors on supply chain performances under various competitive scenarios. This paper examines a supply chain comprising two manufacturers and one retailer under two distinct competitive settings: Competition between non-green and green products (OE), and competition between green products from small and big brands (SB). The study analyzes the effects of unilateral, bilateral or multilateral EBC behaviors on both the economic and environmental benefits of the supply chain. Key findings emerge from this study. Firstly, prioritizing environmental benefits throughout the supply chain has the potential to enhance environmental performance. Secondly, unilateral EBC behavior can lead to a vertical altruistic effect, where the focus on environmental benefit by a manufacturer (retailer) increases the retailer's (manufacturer) profit but reduces its own profit. Additionally, unilateral EBC behavior among manufacturers creates a competitive squeezing effect on each other, potentially diminishing competitor profits. Notably, the retailer's focus on environmental benefit can also reduce the profit of the non-green manufacturer. Thirdly, when the levels of EBC are relatively low, bilateral or multilateral through EBC leads to a positive effect on economic performance, resulting in increased profits for both the green manufacturers and retailer. In conclusion, bilateral EBC has the potential to enhance both economic and environmental benefits in the OE scenario.