One Home Builder Grows the Entire Heat Pump Water Heater Market by 30%

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Clayton, a leading single-family home builder, recently made big environmental news by deciding to convert nearly all of the 42,000 modern manufactured homes it builds annually to be certified ENERGY STAR and Zero Energy Ready Homes (ZEHR). These certifications mean that its manufactured homes will be much more efficient, save homeowners money on their utility bills (up to 50%) and provide premium energy-efficient appliances that are often considered unaffordable to the average family.

Clayton’s switch to ZERH also means nearly all of its homes now come with a heat pump water heater (HPWH), which likely represents the single largest procurement of HPWHs in the history of the technology. To put it in context, the entire HPWH market in 2022 shipped 141,000 units, and Clayton alone will increase this total by 30%!

Sales of heat pump water heaters have grown steadily since becoming certified by ENERGY STAR in 2009. Clayton’s decision to install them in approximately 42,000 manufactured homes a year will be a huge boost. Image courtesy of New Buildings Institute.

The Reasons Clayton Made This Move

Clayton’s decision to switch to heat pump water heaters is a success story for the Inflation Reduction Act (IRA). The IRA increased the tax credit home builders receive for both ENERGY STAR-rated homes (from $1,000 to $2,500) and Zero Energy Ready Homes (from $2,000 to $5,000). Heat pump water heaters proved to be one of the key technologies that helped Clayton qualify for the full ZEHR tax credit. Ron Powell, president of manufacturing for Clayton Home Building Group, said, “Based on how we built ENERGY STAR 2.0 homes, one of the easiest ways to meet 3.0 standards was to swap the traditional dual element water heater for a heat pump water heater and add a heat pump for electric homes. But once we committed to the heat pumps, the conversation then turned to, ‘Why don’t we go all the way by building DOE Zero Energy Ready Homes?’”

Clayton is calling its new Zero Energy Ready home eBuilt®. The company had 39 of its 40 home building facilities certified to produce to this standard by May 2023, and today 96% of all new Clayton home orders are eBuilt®. The homes feature LED lighting, smart thermostats, low-e windows with argon gas, insulated doors and thermal envelope, additional insulation, a heat pump water heater, and many of the homes have a heat pump for space conditioning as well. Thanks to the IRA tax credits, Clayton was able to offer a total of 25 efficiency features without raising its prices to the end consumer.

Clayton’s eBuilt home. Heat pump water heater to the far right. Image courtesy of Clayton

36,000 eBuilt homes have already been manufactured, and in the first 6 months of production, Clayton built more ZEHR certified homes than all the other ZEHR certified homes built by other home builders since 2013.

A Heat Pump Water Heater Success Story

Clayton made a couple changes when adding HPWHs to all their homes. First, they redesigned their home floor plans for the heat pump water heater, creating a utility closet that contains the heat pump air handler. This helps keep the noise produced by the water heater fans (usually around 45 dB like a quiet dishwasher) from bothering anyone. Clayton also ships the water heater with nylon straps instead of metal, which reduces vibration if the straps aren’t removed once the water heater is installed.

The switch to HPWHs hasn’t been entirely without challenges. Clayton has gone to significant lengths to protect the HPWH while the home is being built (see images below), but some installers I’ve talked to are finding problems with the HPWH ducting after the home has been commissioned and are having to provide repairs. Other industry insiders are questioning Clayton’s decision to duct just the HPWH exhaust, as it may create negative pressure within the home. Clayton reports that it has since changed the way heat pump water heaters are vented to eliminate the negative pressure risk.

Clayton is going to great lengths to protect its HPWHs during home construction. Image courtesy of Clayton

But overall, Clayton is receiving very positive feedback from the tens of thousands of new eBuilt homeowners. They heard from one longtime Clayton homeowner who switched to a new eBuilt home and said that their energy bill had gone from $250 a month in the winter to $75. The lower energy  bills that come with these Zero Energy Ready certified homes tackle the issue of the “hidden mortgage,” where monthly ownership costs, like energy bills, can be almost as much as the mortgage itself. “Energy costs rose 14% in 2022 – double the cost of inflation – and 20 million families currently struggle to pay their power bill,” said William Jenkins, Clayton Home Building Group’s senior director of environment and sustainability.

Clayton’s historic move to heat pump water heaters and other energy-efficient features in its eBuilt home is a win-win-win. Homeowners benefit from lower utility bills, the environment benefits from drastically lowered emissions, and the company benefits from good press and smart tax credits. It shows how even one company can significantly accelerate market transformation. Kudos to Clayton for making this big move towards an energy-efficient, low-cost future.

Watch a video of Clayton Homes presenting on its move to HPWHs to the Advanced Water Heating Initiative here.


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Joe Wachunas

Joe lives in Portland, Oregon, and works to promote electric and decarbonized buildings. He believes that electrifying everything, from transportation to homes, is the quickest path to an equitable, clean energy future. Joe and his family live in an all-electric home and drive an EV.

Joe Wachunas has 68 posts and counting. See all posts by Joe Wachunas