Blog: Market transformation in California is taking shape

California’s efforts toward market transformation reached a major milestone in late December with CalMTA filing an application to the California Public Utilities Commission (CPUC) requesting approval of new initiatives for implementation. The application includes two recommended Market Transformation Initiative (MTI) Plans that aim to deliver energy efficiency and decarbonization outcomes to the State. Pacific Gas and Electric filed the application on CalMTA’s behalf (search for Statewide Energy Efficiency Market Transformation Initiatives at the link to access the application).  

These MTIs represent the culmination of 18 months of development, research, outreach, and analysis, beginning with CalMTA’s first Request for Ideas (RFI) in June 2023. Approval of them will bring substantial cost-effective benefits to California’s ratepayers and support a number of important State policies and goals. As illustrated in the tables below, the Room Heat Pumps and Induction Cooking MTIs are estimated to deliver a combined $1 billion in Total System Benefit (TSB) to California over their 20-year lifetime (costs also include development expenses from 2024-2025). 

Induction Cooking MTI: TSB and cost-effectiveness 2024-2045

Test	TSB – Energy	TSB – Grid	TSB – GHG	TSB – Total
TRC	$ 36M	($ 125M)	$ 626M	$ 537M
SCT	$ 90M	($ 295M)	$ 2,533M	$ 2,328M
Estimated MTI Cost				$37.5M

TRC Ratio	PAC Ratio	SCT Ratio
1.12	14.36	3.04

Room Heat Pump MTI: TSB and cost-effectiveness 2024-2045

Test	TSB – Energy	TSB – Grid	TSB – GHG	TSB – Total
TRC	$ 160M	$ 30M	$ 331M	$ 521M
SCT	$ 344M	$ 68M	$ 1,005M	$ 1,417M
Estimated MTI Cost				$62.8M

TRC Ratio	PAC Ratio	SCT Ratio
5.46	8.29	11.2

High-value decarbonization technologies

Both MTIs offer increased efficiency and decarbonization solutions for existing homes, including households that might otherwise not be able to access electrification, and seek to remove barriers to large-scale residential decarbonization that are not as easily addressed through traditional energy efficiency programs.   

The Room Heat Pumps MTI will influence market adoption of this newer technology, a self-contained heat pump solution for small single-family and multifamily households, and is particularly relevant for apartment tenants. Room heat pumps provide efficient heating and cooling, performing the same functions as room heaters or window/room air conditioners, and can be self-installed in standard outlets without a panel or service upgrade.   

In supporting the needs of ESJ communities, room heat pumps also fill a critical technology gap: making heat pumps more accessible to low-income households unable to afford the expensive, skilled labor required for installation of conventional heat-pump systems (i.e., mini-splits and central).  Approval of this application will help California reach its goal to install 6 million heat pumps by 2030. Over time, this initiative will also promote the use of air filtration to improve indoor air quality and lower global warming potential (GWP) refrigerants to further reduce greenhouse gas (GHG) emissions.  

As its primary objective, the Induction Cooking MTI will accelerate market adoption of induction cooktops and ranges to provide a high-quality cooking experience and a more-efficient technology than traditional electric resistance and gas stoves. The initiative also seeks to reduce GHG emissions and provide enhanced health, safety, and other non-energy benefits afforded by induction technology.  

CalMTA will work with the induction market to make new, affordable products more available to all communities by reducing the cost of the product and encouraging the market to introduce battery-equipped 120V products.  These battery-equipped units do not require panel upgrades, and the batteries can charge when rates are low to reduce household bills and help reduce peak demand. 

From an idea to an initiative

CalMTA’s development process includes three phases, with potential initiatives identified in Phase I: Concept Development and research and analysis conducted in Phase II: Program Development to confirm market barriers and ensure the potential MTI has viable market leverage points and sound program logic. In Phase II, the CalMTA team also analyzes market conditions to create intervention strategies, market forecasts, and cost-effectiveness models to inform the creation of a full MTI Plan.  

In the case of the Room Heat Pumps and Induction Cooking MTIs, the CalMTA team spent 2024 completing the many activities needed to finalize comprehensive, accurate, and strategic MTI Plans, including:  

• Completing market characterization studies for each MTI to better understand key barriers and opportunities. This research also informs development of baseline market forecasts, using secondary research and literature review, in-depth interviews with subject matter experts and market actors, focus groups and quantitative surveys, “secret shopping” in retail locations, and a Delphi panel. 

• Developing a product assessment for each MTI that studies the availability of appropriate products for California markets, potential bill impacts, and technical barriers to accelerating market adoption of the targeted products.  

• Developing a Strategy Pilot in partnership with three organizations across California to better understand the market response to the purported “self-installation” potential and relative portability of room heat pump products. Each partner recruited 50 households to receive and install a room heat pump unit and share feedback on their experience. 

• Partnering with the Building Decarbonization Coalition (BDC) on a series of “Chefluencer” events, in which experienced chefs led multilingual, culturally relevant cooking demonstrations that allow community members to gain firsthand experience with induction cooking. CalMTA built on the existing event format at 12 events across the State to better understand opinions on induction cooking and inform intervention strategies.  

• Launching an additional Strategy Pilot designed to help determine whether the ENERGY STAR® Retail Products Platform (ESRPP) could serve as a viable intervention strategy for targeting ESJ communities once the MTIs move into market deployment. 

• Engaging entities across California and beyond whose work aligns with the focus market or MTI goals, including regular meetings with investor-owned utility (IOU) representatives, other efficiency portfolio leads and implementers, as well as direct outreach to organizations representing ESJ communities in support of CalMTA’s equity lens. 

• Regularly sharing information with and soliciting feedback on the evolving MTIs at eight Market Transformation Advisory Board (MTAB) meetings throughout the year, all of which were open to the public and allowed participants to ask questions and make comments. Feedback from MTAB members is documented and responded to in Appendix I of each plan. 

Presentations and supplemental materials explaining elements of the MTI Plans can be found on CalMTA’s Idea to Initiative webpage.

Milestones ahead in 2025

The new year will see additional steps toward transforming markets in California. We have proposed a schedule that estimates a final decision from the CPUC by August 2025. Assuming approval, CalMTA will immediately seek implementers for the two initiatives through a Request for Proposals (RFP) process and anticipates having an implementer in place in early 2026.  

In addition, we expect another MTI Plan will be finalized in 2025 for CPUC approval with at least two nearly completed and ready in early 2026. CalMTA currently has four additional ideas under development including Commercial Rooftop Units, Commercial Replacement & Attachment Window Solutions, Residential Heat Pump Water Heating, and Foodservice Water Heating Systems and expect to advance one or two additional ideas submitted through our summer 2024 RFI. 

California’s bold commitment to a clean energy future has resulted in some of the most ambitious climate goals in the nation. Achieving these goals requires breaking down long-standing barriers that limit adoption of energy-efficient, climate-friendly technologies such as the two targeted by CalMTA’s first MTI Plans. Market transformation’s proven ability to deliver high-value, long-term benefits makes it a necessary approach to driving the lasting change the state needs.