 Hi, I'm Nate Adams, CEO of HVAC 2.0, often known as Nate the House Whisperer. And today I want to talk about what's probably going to become a new name for Curve. So we have the Duck Curve. I think we should have something called the Bell Cliff or how to kill decarbonization. And in fact, it's basically how to kill any new technology adoption. So I want to think about an efficiency program or rebate program or anything that is aimed at decarbonization. So I've been in the efficiency world now for just shy of 20 years. And I've watched a lot of ugly stuff happen. But at the beginning of coming out with most programs, most people tend to be excited. You know, there's a little bit of talk about it. Contractors are getting geared up. And you see a demand bump come up. So things start to grow pretty quick. That's a fairly typical program start. The issue is after a little while, growth begins to slow. And it hasn't necessarily gotten that, you know, it's not that popular in the grand scheme of things. I don't know of any state programs that have broken 10,000 projects per year for building performance. And that's not that great, because the two biggest states for that are New York and California, which are two of the most populous states in the country, California is the most populous. So a lot of money has been thrown at this to not have it continue to increase. And then at some point, the program always ends. The bar closes. You don't have to go home, but you can't stay here. And what happens is numbers crash. And more often than not, it takes contractors out too, because this can create a don't feed the bears problem where you start feeding the bears, and you basically put them into a cage and you're feeding them. And then one day the program ends, and you leave them in the cages to start death, seeing it again and again and again. So this is what happens, the numbers crash. But right here, things look good. So let's take a look at a market-based program, which if you aren't familiar with my thinking and how I like market-based stuff, where have you been? So welcome. I'm glad that you somehow ended up with this video, but it's kind of surprising that you wouldn't know that. So the issue with market-based programs is getting things rolling is a lot harder because you have to do the actual work. You can't just throw money at it and expect something to happen. You have to develop the contractor network. You have to develop the business model. You have to develop the sales process. All of these things have to get done, and then things start to move very slowly. So early on, see, look, the program looks kick butt. This is amazing, but then it dies. But what you want to have happen is the green curve where it continues to go up and up and up and up. That's what we want to see. And I'll show in a minute it doesn't keep going vertical like this because it can't. You want it to accelerate very quickly. If we want market adoption, we need this slope to go as vertical as humanly possible. And I'll come back to that in a minute. But in the meantime, on the bell cliff, whatever program that you want to do, ask yourself, can you 1,000 exit? Can you scale it infinitely? And if not, that's a problem it's going to end. And so you end up with an unsustainable program and you create a bell cliff. We don't want a bell cliff. We want to avoid at all costs. I was born in 1978. That was Jimmy Carter era. That's when a whole lot of efficiency things started happening. None of them have ever scaled and kept going. And it's not all of it, but a big piece of it is creating programs, getting excitements, using a business model and then taking the money away and the business model crashes. So can you 1,000 X whatever program design you have? And if no, don't do it. So this usually means two things. You can go federal. So I suggested the 3-H program, the hybrid heat homes program with clasp, which is to pay the OEMs to stop making air conditioners and only make heat pumps moving forward. Huge decarbonization move for not a whole lot of money. And it modeled out a 10x payback. The feds can afford 10 billion and it's 10 billion over like 7 years or 12 billion over 7 years. It's not that much money in the grand scheme of things. But most states and most utilities don't have that kind of cash to do. So the only other things you could do, one thing that I suggest is publish energy use at resales so that you can create resale value from the cash flow differences. If a house costs $50 a month less to operate than a similar house or a comparable house, that house should be worth the net present value of what that $50 box is. So even if it's a couple grand, it's a start. But it's not hard to see 10, 30, even $40,000 net present value differences that way. That is something that you can 1,000 X. It's just another field in the MLS. So that is a possibility. When you 1,000 to 1,000 X something, it's really hard. There's not a lot of things that work. So important thing to note, though, and I mentioned this, but I need to repeat it. A efficiency program looks way better right here. I mean, look, this is just barely getting off the ground. It's not really moving. It's tempting to look at this and judge, but then that happens. A long-term figuring out something that can scale infinitely that is entirely market-based is the way that things, they grow and they keep growing. Because if we want to decarb, we can't stop. We can't have a solar coaster doing this. We can't do that. We need to continuously go up for as long as we can until we really get into the mass market. So and here's what this is related to. This is from Jeffrey Moore's Crossing the Chasm. I can't recommend this book enough. It's one of my favorite books. And he studied technology adoption. And what happens is you get the early market. These are the Ooshiny crowd. These ones are the seriously Ooshiny crowd, and then the next ones are the ones that like to have things before their friends. The issue is these people put up with crappy things, with incomplete products. Over here, they don't. So if you want to get to the mainstream market, which is, oh, ballpark 84%, you have to create something that's genuinely good. So when you look at these two curves, this is what they look like. So there's this curve, look, it's the bell cliff. There you go. So it doesn't cross the chasm and it dies. If you want to continue to go up, you have to get to the mainstream market. So you can't give something a push and assume that it will get going because they don't. All right? They just don't. I've been watching this for a long time. It doesn't work. And what this means is this is failure and this is success. Now I had a comment because I just put a slide like this, excuse me, up on Twitter and it's like, well, this isn't possible. It can't continue going up. Yes, you're right. What you're actually going to see is this S-curve, the sigmoid. The sigmoid, this curve here, is the bell curve plotted as far as how many people are adopting. So right in the middle of the bell curve, so 50-50 on either side of it, you were at 50% market share. So see how quickly this is going up. So you're really screaming as you go through here and then you hit an inflection point at the laggards, the people that don't really want to buy stuff. This applies everywhere. I'm working on HVAC 2.0 onboarding and I have, I think, four videos on the S-curve. S-curve is just such a critical thing to be aware of. And we need to create this. We don't want to have this come up, crash. We want to have the whole market be gone through. And here's what that looks like if you look at all sorts of different technology. So I mean like a flush toilet, like it didn't really take off until 1920. This was actually the last pandemic, more than likely is what it was. Bathroom design changed after the Spanish flu pandemic. But see how these kind of are a little bit slow and how they go? They take several decades. Look at like the tablet here. That just went screaming upwards. This is what we want to see happen. We want to see it be darn near vertical for residential decarbonization and decarbonization in general. But Rezzy is where my heart is and our work is. And what that ends up doing is I call this the two clocks. So this is from my presentation about how to sell heat pumps to consumers and contractors. The first clock is we need to get to where every single piece of HVAC that is replaced has a heat pump in it or anything that has a compressor. I've come to be kind of sort of OK with having furnaces. I mean that's what the 3-H program is. It's meant to create hybrids where you put a heat pump on top of a furnace. But we want to get to where every single piece of equipment that goes in has a heat pump in it. And we want to do that as soon as humanly possible. So the 3-H program gets us to 100% by January 2023. Like this is something the supply chain can deal with in 12 months or so because all the parts are there. We just need to ramp what some of them are. So if we have a solid year to begin ramping, should be doable. But realistically, getting to 100% penetration by 2030 or to where everything is a heat pump by 2030 is freaking heroic because there are so many bits of inertia that are in the way of doing that. So my personal goal in HVAC 2.0's goal is to make this happen. The sooner we can get to the top of this bell curve, the better. So once we get to where 100% of replacements involve a heat pump, then we start about the 20-year replacement clock. So cars last 15 or 20 years, HVAC systems last 15 or 20 years. So once we are replacing every single one that's failing with something that's electric, we still have a 20-year time frame until we run through stock. And it's going to be extremely expensive to speed that up. Not saying you can't do it, but it's really expensive. So realistically, we're looking at 15 or 20 years to get there. Now the good news is 40 million U.S. homes are already electric because the southeast and the northwest are both predominantly heat pumps. They have mild climates and they have reasonable electricity prices. So that's that. So if we want electrification to be fast, we want to avoid that bell cliff. We do not want to do this red curve. We want to do the green one. We want the adoption of residential electrification to be as vertical as possible. Now it can't be this vertical, it's going to take 20 years. So if we had started in 2000, we're not going to finish until 2020. In this case, if we start in 2030, we're not going to finish until 2050. So the sooner we can get started on that 100% replacement, the better. And so if we aren't really careful in program design, we're going to do this. We're going to get stuck in that early market and then shut the program down and kill the growth, kill the companies, kill the business model. Can we please not do that? If you've been watching me, you know this is something I care about. I probably should care less because it doesn't pay for squat, at least not yet. This is a really hairy thing to undo. Residential decarbonization may be, I don't know if it's the toughest sector, but it's going to be one of the toughest sectors because we have 100,000 contractors to get on board and then we have 100 million homeowners to get on board. That's going to be a challenge. So think on this. Can we please avoid bell cliff and hashtag bell cliff wherever you see something like this happening? So I made Adams, have a good day, and if you haven't made a plan for your own life, please go make a plan. How are you going to decarbonize your own life within the next five years or thereabouts? Because if you don't have a plan, we really should be quiet about climate because it shows that we don't care. So go make a plan. Basic steps are really simple. I mean, make sure you're buying clean electricity, get an induction hop late, 50 or 100 bucks hours time. Then figure out how are you going to replace anything that burns gas in your house? And then what electric car actually suits your needs and hopefully budget. And then the last one, the hardest one is HVAC. So hopefully we'll have a good network soon of HVAC 2.0 contractors so that this process won't be too onerous because right now it is to be frank. So anyway, bell cliff. Avoid it. Talk to you next time. I'm Nate. Bye bye.