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Three freshly funded startups bringing heat pumps to the North, the nation, & eventually the world

Heat Pump. Image Credit: Max Payload // Unsplash

Fun fact: having a planet-friendly home is the norm in southern red states, whereas bluer northern and midwestern homes are the most likely to be reliant on planet-warming fossil fuels.

In fact, Florida, which is one of just a dozen states without any portfolio standards (laws that require electric utilities to deliver a certain amount of electricity from renewable or clean energy sources) has the most all-electric homes in the energy country, despite the fact that Governor DeSantis, in 2021, signed a bill preventing cities from making 100% renewable energy goals.

As of 2020, 77% of Florida’s housing units were all-electric, followed closely by Hawaii, South Carolina, Tennessee, North Carolina, and Louisiana, with the rest of the South not far behind.

California, however, which has the most all-electric ordinances of any state with 50 local bans on gas hookups, and New York, which just passed the first statewide ban on gas in new buildings, both fall in the bottom five when it comes to electrified housing.

Traditional radiator. Image Credit: Julian Hochgesang // Unsplash

That means that in addition to more gas stoves and traditional heating, ventilation, and air conditioning (HVAC systems) like furnaces and radiators, non-southern states have the least amount of heat pump installations, a device that traditionally uses electricity to transfer heat from a cool space to a warm space.

Thanks to modern innovation heat pumps are now not only suitable for both heat and AC in warmer climates, but perfect for colder states too. Unlike oil and gas AC units and furnaces, heat pumps enable zero-emission heating and cooling.

This is essential because, in our warmer world, ten air conditioners are sold every second. Already an insane number to fathom, that figure will only increase, as more than 2 billion people globally are expected to buy cooling appliances in the coming years.

ACs, as well as heating devices, save lives but because they rely on gas, they also contribute to scorching the planet. A heat pump can help save both.

That’s why three east coast- and west coast-born startups are bringing heat pumps and other decarbonization and efficiency solutions to their home states and beyond. These startups are Quilt, Gradient, and Radiator Labs, which today rebranded as Kelvin.

With millions of dollars in recent funding, these companies are scaling their modern takes on the conventional heat pump and each could play central roles in helping northern buildings comply with growing gas bans and closing the country’s North/South electrification gap.

Now, why is the South so heat-pump crazy?

Out of the top 15 states with heat pump installations, two-thirds are below the Mason-Dixie with the Sunshine and Lone Star States leading. The reason is not a political phenomenon or a sign that Florida and Texas legislature have gone woke.

Instead, as Bloomberg columnist Justin Fox explains, it’s a surprising case of climate, geology, and history all wrapped into one. The fact of the matter is, most homes in the South are simply newer, built after World War II when gas distribution networks had yet to be established in the regions.

So, without gas networks, they used alternative methods.

Now, due to the demands of the climate crisis, alternative methods are again vitally needed to ween the North off of the fossil fuels that are the foundation of its neighborhoods.

With $30 million in fresh funding, New York-based Radiator Labs, now Kelvin, targets older buildings with the goal of bringing clean cooling and heating solutions to these buildings globally.

The round was led by climate-focused venture capital firm 2150, with participation from the Schmidt Family Foundation, the Partnership Fund for NYC, and several previous investors.

Radiator Labs was born in a New York winter, and like many buildings across the North, 75% of buildings in NYC are heated with steam radiators that have been operational for 100 years. Now, as Kelvin, they're accelerating their sustainable HVAC systems, hiring more talent, and making old buildings just as sustainable as their new, electric counterparts.

“Our mission is to decarbonize the world’s legacy buildings,” Kelvin founder and CEO Marshall Cox, said in a video made prior to the rebrand.

“In a lot of the bigger, older cities that we have, steam heating is prevalent, but it’s inefficient,” he said in the video. “Radiator Labs directly addresses that inefficiency,” he said.

On top of that inefficiency, space, and water heating systems are responsible for over half of the energy demand and CO2 emissions from buildings.

That’s why the company’s flagship product, The Cozy, is already installed in more than 4,000 apartments across the Northeast.

The Cozy // Image Credit: Kelvin

Essentially, the Cozy is an insulated radiator cover that the company enhances to prevent overheating and fuel wastage by allowing it to push heat from overheated rooms to cooler rooms by virtue of thermodynamics, the process that enables heat pumps.

This process also lowers the energy used in the building and can be dropped right on an existing radiator. By pairing a low-cost commodity heat pump with the Cozy efficiency products, Kelvin provides a “hybrid electrification solution.”

The company offers a no-money-down subscription, removing capital barriers to decarbonization for all communities and promoting a financially-driven transition, especially benefiting lower-income communities.

While New York’s recent statewide law, the All-Electric Building Act, only targets new construction, there is still stamina behind the NY HEAT (Home Energy Affordability Transition) Act which could catalyze a broader transition. Plus, as NYC’s local law — passed last year — also requires the electrification of buildings undergoing big renovations starting in 2024, Kelvin could help many make the transition.

“Our new identity as Kelvin symbolizes the next phase of our broader mission: to provide energy-efficient temperature control that benefits building owners, tenants, and the larger communities they serve,” Cox said in a statement.

“With this new capital, we're excited to expand our team and platform, helping more buildings in more cities meet electrification goals while reducing operating costs.”

Over the last decade, Kelvin has sold over 15,000 of its intelligent HVAC solutions, serving primarily New York sites including schools, apartment buildings, and public housing. Now, with a round led by a Europe-based climate tech VC, the team is also turning its attention toward international expansion.

On the other coast is Quilt, a new Redwood City, California-based startup that just raised $9 million in seed money to become “the Nest of heat pumps.”

Quilt developed a highly efficient electric heat pump system that the company says is controlled through “a first-of-its-kind” integrated software platform with built-in artificial intelligence. The AI-guided system, which will be available next year, enables room-by-room control, and like Kelvin’s Cozy, aims to create climate zones throughout the house.

Image Credit: Quilt

Quilt’s tech eliminates the need for traditional furnaces and ductwork, thus eliminating CO2 emissions from these systems.

According to the company, the AI system automatically maximizes efficiency, increasing cost-savings over time, thus “further incentivizing homeowners to switch to heat pumps and join the fight against climate change.”

While homeowners and building owners in the North and Midwest are warming to the concept of using one device for both heating and cooling, and incentives for the switch in the Inflation Reduction Act have made many curious, not everyone is completely sold on the idea.

Plus, in addition to being unfamiliar with the tech, many find it… kind of ugly.

Kelvin avoids this fate with a modern design. Similarly Quilt, in addition to efficiency, also focused on a sleek form designed by Mike&Maaike, the award-winning industrial design studio behind Google products.

“Heat pumps are now widely recognized as a key solution to decarbonizing home heating,” said Quilt co-founder and CEO Paul Lambert in a statement. “However, most heat pump systems today are more difficult to use than their more mature fossil incumbents. We’re developing heat pumps that are better than any HVAC system of any kind. Quilt will be the smartest way to add heating or cooling to your home, full stop.”

Quilt’s founders — Lambert, CTO Matthew Knoll, and COO Bill Kee — are all Google veterans. Google Nest cofounder Matt Rogers also participated in the seed round through his venture firm Incite Ventures.

“At Nest, we reimagined the lowly thermostat to make homes smarter, more comfortable, and more efficient—Quilt brings that same innovative vision to heat pumps,” Rogers said.

The funding round was led by Lowercarbon Capital and Gradient Ventures with participation from Incite, MCJ Collective, Garage Capital, Climate Capital, and Spacecadet.

According to the company, in addition to becoming “the Nest” of heat pumps, they also want to become “the Tesla” of heating and cooling. “Much as Tesla is credited with creating a national network of charging stations to accelerate electric vehicle adoption, Quilt is taking a similar tack with HVAC services,” the startup wrote in its press release.

Where Quilt is on the west coast and Kelvin on the east coast, San Francisco-based Gradient is targeting both.

Back in February, Gradient closed an $18 million Series A funding round co-led by Sustainable Future Ventures and Ajax Strategies with participation by Safar Partners, Climate Tech Circle, Shared Future Fund, At One, Impact Science, and others.

Last spring Gradient launched its product, a heat pump AC window unit, and is delivering them this year focusing on multi-family homes, which the company says is central to its mission.

Image Credit: Gradient

The startup was founded in 2017 and since, has raised millions in funding including grants from the U.S. Department of Energy, California Energy Commission, and California Strategic Growth Council. Gradient is also working to support New York’s state and local government efforts.

Their initial sleek, white heat pump AC system is intended for Cali’s warm climate, so they made a cold-climate version to tackle fossil fuels across cooler states.

In August, the startup won a $24 million contract to bring accessible carbon-friendly heating and cooling to low-income housing as a winner of the New York Clean Heat for All Challenge (NYCHA).

Under the award, Gradient will provide 10,000 cold-climate units to the New York City Housing Authority. While the initial investment includes 10,000 units, NYCHA’s 300+ buildings comprise 177,000 apartments. Plus, the agency has also gathered interest for bulk orders from agencies in several other cold cities like Boston, Seattle, and Jersey City, ​together representing 24,000 apartments.

“This historic effort is just the beginning. A bright future for electrified heating and cooling – and a cooler world – await,” the company wrote in its press release.

This year, the company is also scheduled to begin testing and demonstrating its cold-climate heat pump prototype in NYCHA housing.

Plus, as nominated for Prince William’s Earthshot Prize 2023, Gradient, like Kelvin, has eyes for Europe and plans to expand across the pond.

Whether it be Gradient’s over-window system, Kelvin’s radiator cover, or Quilt’s AI-enabled machine, products like these will be essential as the country inches away from fossil fuels and into a renewable power grid.

By 2035, the Biden administration plans to eliminate fossil fuels as a form of energy generation in the U.S. and the White House set out a target of 80% renewable energy generation by 2030 and 100% carbon-free electricity five years later.

That means that many of the fossil fuel-reliant systems across the country, especially where buildings are older, will need to be transitioned in order to meet those goals. Despite progressive policies, cold, northern states with generally, the oldest buildings are still behind, making systems essential for both new construction and existing homes.

The good news is that innovation and investment are both there.

“For the past million years, combustion has been the engine of human progress,” Quilt’s founder Lambert wrote in a letter detailing the startup’s mission.

“The core technology has matured to the point where it is possible to create a great consumer product out of heat pumps, but no one has done it yet,” Lambert wrote, noting that electric vehicles were at this point in the 2000s.

“When evaluated as a technology, heat pumps are incredible. But when evaluated as a consumer product the options are…lacking.”

However, while the options for EVs were once lacking, Tesla is now only one of almost 40 sizable car companies tackling electrification. Will heat pumps be next?

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