Commercial Heat Pump HVAC Program

The City’s Commercial Heat Pump HVAC Program builds on a successful pilot to support the transition from natural gas to efficient, all-electric heating, ventilation, and cooling (HVAC) systems in commercial buildings. As a key component of the City’s climate action goals, commercial electrification plays an essential role in reducing greenhouse gas emissions.

Eligible customers can upgrade to energy-efficient heat pump HVAC systems with incentives of up to $100,000. In addition to lowering emissions, these upgrades can help reduce operating costs, improve indoor comfort, and support a healthier environment for the community.

Insights from the pilot helped shape this program to better address project needs, making it easier for businesses to participate and electrify their facility.

Incentives Available

Commercial Heat Pump HVAC Incentive

$2,000/ton* for material and labor costs

$100,000 rebate cap per customer, or 50% of the project cost, whichever is less
Up to $50,000 per project for permitting fees (City permitting fees), permitting compliance costs (sound analysis, sound barriers, screening, etc.), and infrastructure upgrades (panel or transformer). This add-on rebate will also be capped at 50% of the total costs of permit fees, permit compliance costs, and infrastructure upgrades.

*A ton, as used in the HVAC field, refers to the cooling capacity. A one-ton heat pump is equivalent to 12,000 BTUs per hour, approximately heating or cooling 500 square feet, although actual coverage can vary depending on factors such as insulation, ceiling height, and climate conditions. Consult with an HVAC professional to correctly size your heat pump HVAC system.

Free Consultation With Electrification Expert

The City offers consultation with an electrification expert to customers participating in the Commercial Heat Pump HVAC Program. This service is available upon request for complex rooftop unit (RTU) projects or unique RTU replacement challenges. Provided by Prospect Silicon Valley, technical assistance will include system sizing, energy modeling, electric capacity analysis, building electrification guidance, finance and incentive opportunities, and general project feedback.

If you are interested in receiving this consultation, please contact utilityprograms@paloalto.gov.

Steps to Apply

Step 1.Prepare your Application

Make sure your project complies with the Program Eligibility Requirements and Terms and Conditions listed on the webpage, as well as under measure BE01 in the Business Customer Rebates Catalog. Prepare your pre-installation supporting documentation.

  • Estimates from contractor(s) for installing a gas like-for-like system versus heat pump HVAC equipment (drawings and estimates by a certified engineer are also accepted)
  • Photos of existing equipment
  • New proposed equipment specification sheets

Step 2.Submit your Application

You will submit your application through the City’s Business Customer Rebate portal using your utility account number and address.

Submit your Application

Step 3.Get Pre-Approved for the Rebates

Program staff will schedule a pre-installation inspection, if needed. Participants in the Business Energy Advisor program who have completed site assessments may forgo an additional pre-inspection. After a pre-inspection, you will be preapproved to proceed via email.

Do not purchase equipment until you receive this notice.

Step 4.Apply for a Building Permit

Before installing your equipment, get an issued permit with Planning and Development Services. You will have 180 days to complete the installation from the permit issued date. Extensions may be granted on a case-by-case basis by written request.

Apply for a Building Permit Now

Step 5.Install Equipment and Upload Supporting Documentation

  • Final paid invoice from installer and professionals
  • Post-installation photos
  • City permits with final signature
  • CPAU may schedule a post-installation inspection, if necessary.

Step 6.Receive Money Back

We will verify your documents and send your incentive check within 2 – 4 weeks.

Eligibility & Terms and Conditions

  1. Applicant must be on a commercial rate schedule for electric and gas utility services from City of Palo Alto Utilities (CPAU) at the time of application.
  2. Applicant must have an existing space heating system that runs on natural gas.
  3. New construction projects are not eligible.
  4. Applications will be accepted on a first-come, first-served basis until allocated funds for the Program are spent. Rebate funding is subject to availability and may change without prior notice.
  5. Applications must be approved before purchasing the equipment in order to receive rebates.
  6. Projects shall not commence until CPAU issues a notice of approval. CPAU reserves the right to reject any application that is incomplete or does not meet the program criteria.
  7. Heat pump HVAC equipment must meet all Eligibility Requirements and specifications listed in the Business Customer Rebate Catalog to receive rebates.
  8. All equipment must be purchased and installed within 180 days of the permit issued date from the City’s Building Department. Extensions may be granted on a case-by-case basis.
  9. All equipment must be installed in accordance with all applicable federal, state, and local laws, building codes, manufacturer’s specifications, and permitting requirements. Contractors must hold the appropriate license for the work performed.
  10. Applicant certifies that it meets the Program Eligibility Requirements, and that the information is true and correct to the best of its knowledge.
  11. Applicant certifies that they have read and understood the Eligibility Requirements listed in the Catalog and the Terms and Conditions.
  12. If Applicant is a tenant, Applicant certifies that it has obtained the property owner's permission to install equipment.
  13. Applicant and its agents shall indemnify and hold the City of Palo Alto harmless from any damage, loss or liability that may arise from the undertaking of this project and participation in the Program.
  14. Applicant understands CPAU is not responsible for taxes that may be imposed on Applicant and/or its agents as a result of receipt of any financial incentives from CPAU. Applicant is urged to consult a tax advisor concerning program rebates and incentives.
  15. Applicant understands that participation in the Program is subject to acceptance of the rebate application by CPAU.
  16. Applicant understands that if CPAU agrees to rebate application, a notice of approval will be issued specifying the potential reimbursement amount, project deadline, and other terms.
  17. Applicant understands that any changes to the notice of approval must be in writing and approved by CPAU.
  18. Applicant understands CPAU reserves the right to cap the rebate amount at $100,000 or 50% of the total project cost, whichever is less.
  19. Applicant understands that it must complete project(s) in the City of Palo Alto service territory and must provide copies of invoices and any supporting documentation as requested by CPAU as a prerequisite to receiving any rebates.
  20. Applicant understands that rebates may require pre- and post-inspections and/or measurements of product performance, and that rebate amounts can be adjusted based on results of the inspections or measurements. Therefore, Applicant agrees to provide access to the project site for these purposes to CPAU and/or its agents.

Contact Us

Utility Program Services

 

Incentive Availability

Incentives are available on a first come, first-served basis, subject to funding.

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