 Welcome to The Boundary Spanners, a podcast on residential decarbonization with me, Nate, the blue-collar CEO of Atrack 2.0. And I'm Abhi, a white-collar policy researcher based in Canada. In this podcast, we're taking tacit unspoken and hands-on knowledge from the white and blue-collar worlds and turning it into explicit and actionable out loud insights for residential decarbonization. The views expressed in this show are entirely personal. You can follow The Boundary Spanners podcast on YouTube or wherever you get your favorite podcast from. Thank you for listening. This episode is called The Church of the Kitchen Table. What does that mean, Nate? So when it comes to decarbonization, what are the two parties that actually matter? The Democrats and the Republicans, no. Exactly. That's close enough. The homeowner or the contractor, right? Exactly. I mean, it's who is selling and doing the work on one hand, that's the contractors. And it is who is buying and paying for the work, which is the homeowners. Nothing else matters. So I feel like we should hit that little riff of, and nothing else matters, right? Oh, yeah. We don't have the budget for... Next time, next time, maybe. All right. Somebody's sponsored the show, okay? But yeah, those are the only two that matter. So one utility program is like, I have my goals, screw you, I don't care about your goals. And the curses, the incentives of contractors and homeowners, well, those are different to begin with. But when you throw in the incentives of utilities, utility programs, governments, decarbonization goals, all those things end up muddying the waters and creating friction in that really, really fragile transaction. Selling a heat pump, well, getting contractors comfortable, particularly in cold climates with selling heat pumps is A, extremely difficult. How do we know this? Because we've gotten them there, the HVAC 2.0 program, so they get there. But it's the same thing as me. The first heat pump I put in, do you think I was confident that was going to work? Hell no, I was terrified. I'm like, geez, I hope this thing works. Because I mean, I nearly got into a fist fight over that contractor showing up with the wrong unit at the house. And I mean, so to be clear, this is the energy smart home performance practice or Cleveland practice, which is now, it's pretty much wound down at this point. But we learned how to do these electrifications that way. And so it was hard to find a contractor that was willing to do it. And then when I did, I specified a three ton and they quoted a three ton. And I go to the day of install, look on the back of the thing, and it's a four ton. And I'm like, we'll get into this, this is a whole other thing, but static pressure, the pressure inside the duct. So the duct pressure is super, super important. If it's too high, you will kill the equipment really early. And so I'm like, no, we can't do a four. And it was a three hour fight that ended with my partner, Ted, calling the contractor's mother some rather rude things before he finally moved because we tried all the nice stuff and kept turning up the volume, but they were terrified. And so was I. And so the first time out when we're doing this, the getting cold climate HVAC contractors comfortable with the idea of full decarbonization is really hard. And then you have to get the homeowners there, which is a lot of education and back up in your, your, your calling fears left and right. So as soon as you try to mess with that already extremely fragile transaction, which by the way costs a lot more than doing it the other way, a crappy furnace and a crappy air conditioner are a lot cheaper than a good heat pump or a good furnace and heat pump. So it's thousands of dollars difference between the two. And so as soon as you're like, well, it needs to be the seer or you have to use this method or it needs to be on this list. And then you change the rules and change the list. If you think of the the transaction being like an engine or a motor, well, we'll call it an electric motor. But imagine pouring a bucket of sand into a running electric motor. It gets in the bearings, it tears it up. It stops everything from contacting the way it should. It's it's really, really bad. And the curse is anyone who is involved at the kitchen table that is other than the homeowner and the contractor is getting in the way and adding sand, adding friction to that transaction. So stay the hell away with whatever program design you're doing, because you're you're going to end up screwing stuff up and not realizing why it's it can be really light pressures that end up it messes with things. So another way to look at it, the program that I used to work with. So when I won the Century Club award with the Department of Energy's whole performance and energy program. So I won that in 2012 with my insulation company and they would pay, I forget what it was, 10 cents a square foot. Let's call it 10 cents a square foot. I think it was more than that. I think it was 40 cents or 50 cents per square foot for insulation. And then they would pay $40 per hour for air ceiling work. So what that ended up doing was shaping what the project looked like. So you wanted to purposely use labor heavy methods and maximize the number of hours. So I mean, what I wanted to do was it was up to a $1,200 cap. So if I could show enough hours of work to burn the whole 1200, I was happy. And so was the client. So you would end up using methods that were more labor heavy. That doesn't necessarily mean it's the best way to do it. So now that I am freed from those constraints, now on our projects, we use close cell spray foam almost exclusively. And that bothers some people a lot. If you don't watch what kind you get, the global warming potential, I love it's pretty serious, but the new blowing agents are quite good. And that gives you insulation, air sealing and moisture control all in one product. But with that program, you would get either or and it's much more expensive to do. So it would be two, three, four times the cost to spray foam, something versus doing basic air sealing and then blowing the attic. So by having it structured that way, I mean, it was well-meaning. It's not like there's any evil intentions here. It's like, well, we had to make a rule, so that's the rule. And so, but it ended up changing how the project happened and what the results were. And fairly often it wasn't fixing things and we weren't moving blow doors as much as I would like that at the early kitchen on the house. So that was shifting how the project worked just by how the program was designed. And there's lots and lots of examples of that. So let me pause you there. So let me see if I'm understanding this right. So you had an installation business and you won an award from the OE and the so you as a contractor, you have certain goals from your business, right? So the goals involved having a sustainable, long-term business, making, doing good projects and doing them profitably. That's presumably your goal. Now the homeowner, what are their goals when it comes to doing installation? I often didn't know. Fascinating. Can you expand on that? So sometimes you know that they want to deal with icicles or something like that. But I would be usually full of hubris and say, oh, we can do this. But thankfully, I wasn't usually full of too much hubris. But there were a couple of times I was like, yep, this will solve the problem. And I learned quickly, you can't do that. Because in the case of icicles, you can't stop the sun. And so the the peak of the roof, the heat from that's in the attic will get there, melt the peak of the roof, the black roof shows and then the ice melts down. So I can't control that nearly so. Because I live in Cleveland. But so so you had a program which would pay you $40 an hour, but 10 cents a square foot. And as a consequence of which your business relied significantly on the program enough to a point where at that time, we were talking like a decade ago, you didn't. It wasn't even important for you to know what the goals of the homeowner was. You showed up showed up. You oriented your business practices in the way that maximized the the maximize the incentive that you would get. And that's natural, right? The incentives matter. Yeah, yeah. And the contractor. So I'm interested to know. And when you talked about the fragile relationship between the homeowner and the contractor, what are ways in which this program contributed to, you know, interacted with that fragile relationship between the homeowner contractor, like, did you, for example, have to go back and fix some of the stuff? How was it fragile and how did that friction? Well, in the case of those smaller projects, it probably wasn't adding a great deal of friction, but what it was doing on the business side was it was holding job size down. And that could be really problematic. And that was ultimately what killed me. I had to work so hard to get jobs that averaged about $2,500 a piece. I was working 80 to 100 hours a week to keep my crew working 30 or 35. And that's super common in contracting. So you just you have all these balls in the air that you're trying to do. So ideally, what you want to do is bump your job size and bump your closing ratio. So you're doing less bids and you don't have to work as hard to keep your crew busy. And so part of this was in my own head because I was like, oh, you know, I'll be happy with most consumers. So this is just insulation. So we're not talking HVAC here. Most consumers for insulation are expecting to spend somewhere between one and three thousand dollars. So if I could show them a $1,250 rebate on a $3,000 job, now it costs them $1,750, they're happy. I thought I was happy, but I wasn't realizing that I was actually killing myself to where my margins weren't high enough for me to not work so darn hard. And the the day that I decided to kill the business, while it was probably the day after my wife looked at me and said, Nate, can I spend one evening a week alone with you? Have your full attention. And I told her, no, I was that stress out that busy. Is that a healthy way to live? And at that point, she was pregnant. And I'm like, my dad worked so much when I was a kid that I didn't see him. Now, thankfully, he worked right behind her house, so I got to see him some, but I didn't interact with him much until my teen years. And I didn't want to do that. So that was a bad setup. So that is an unsustainable model to do. So I mean, ideally what we want to do is increase job sizes, increase closing ratios so that the owners have to work less hard to sell. And hopefully they have a margin to hire a salesperson to help because I didn't have the margin. I tried to squeeze that in. And I'm like, you know, so the ironic thing is I made almost $100,000 with that company the first two years, so I was doing quite well. But then I learned how to do building science and do my job well. And the last year, I made 25 grand, 10 of it was on one job early in the year. And I got to work upwards of 80 hours a week for my trouble. That's stupid. And a lot of that was it's a free money versus a gold thing. So if you're like, oh, over here on the right, this is what we want to fix over here on the left is free money. The free money is shiny and we all head over that direction and we ignore what the original goals were and good stuff doesn't end up happening nearly as often as it would if we just stayed focused on the goals. And so I was so focused on getting clients money and helping make my jobs bigger that I was often ignoring delivering good results. So it didn't happen all the time, but it definitely happened some where people would come back and be like, it didn't fix it or it made it worse. I mean, in the case of one and oddly enough, he's he's in the commercial HVAC business. I bumped into him a little while ago. He's got a podcast. I helped him out with his house and we insulated a crawl space underneath an addition that stuck out behind his house. We lowered the load of the house, so it didn't take as much heat anymore. And as far as was already oversized, the the addition got colder after insulating. So we did a good job, which actually screwed up comfort. But you got the rebate and so that's better ways to look at. So the first two years when you were making 100 grand a year, was that still with the program? Trying to think, was it? It was in part, I mean, part of what was going on there was I was also doing some of the work myself, so I didn't yet have a full crew. But also, like when I was asking the guys to air seal, what one of my guys, like he kept burning through an entire case of foam on every job, and I'm like, Scott, you got to ease up, buddy. You use it 150 bucks a material. I've only charged him 400 and it's taking you longer than that too. So like, I'm losing money on this. You got to be gentle. And so doing it was doing the better work, but not yet knowing how to charge enough for it was a lot of what it was. And you have to be able to show value to people. I mean, now routinely a shell job for work that I do is between 10 and $25,000. That is very different than a $2,500 average. But realistically, if we're going to decarbonize cold climate homes, we have got to do between 10 and $30,000 worth of shell work to them to get them to where three ton heat pump will carry them. So that's a problem because now we're going to sell jobs that are four to 12 times larger than what most people want to pay. You got to show us the value. So just trying to make sure I understand this right. So one of the consequences of having these incentive programs is you're saying that it perverts or bastardizes your conception of your business model. So it's like, I mean, I'm not a contractor. So I'm trying to put it in my terms. Like if I went to a grocery store with the goal of getting something healthy to eat, and I go there and they've got like a sale on Nutella, you buy one, get one free. Then I know, right? And so then it's easy for me to lose sight of what my original goals were for being there. And then go down this path. And then before you realize your whole business structure is centered around the way these incentives are structured. So you're not learning on the job. And you're not thinking too much about these margins and stuff like that. And you will find yourself on the right. Is that how you're describing your situation? 100%. Yeah, you also tend to not grow. Because if you have this really wide range of possibilities, program design can very easily narrow them. And the problem is where it narrows them could be the wrong direction. And so therein lies the rub. So don't screw with the kitchen table. That's called downstream incentives. Avoid downstream at all costs. Because you're going to have unintended consequences of your program design choices that you don't realize. And so for policymakers who are, let's say, designing a program like this, they might end up recruiting. I mean, you are describing an installation business, but we can imagine similarly they're trying to recruit HVAC. And chances are that because it narrows the solution space, constraints on solution space, they might end up recruiting contractors that are only working within the narrow bandwidth or end up pivoting their business work in the narrow bandwidth. So either way, you're taking a segment of the population and then you're not letting them grow, right? Yes. Because they are just like narrowly focused in that one range. Yeah, and it can be tricky for programs too. So in my case, when I decided to shut down, I was by far the largest installation contractor in the program. And my competitors were only mentioning it because I was. So they said that the number of projects that went through using installation rebates afterwards fell off to darn near zero after I was gone. So I thought I was promoting energy efficiency. We were saving energy. It was great. But I was killing myself. And most contractors are killing themselves. So they oftentimes have bad reps because they're like, oh, well, he started the job and they didn't come back. It's like, yeah, because 20 different people called him. And he was like, oh, OK, I'll just appease this. I'll go start this one. And now he's got six projects half completed all over town. And that's because there aren't enough contractors to go around. And we're going to be stuck in that for probably 20 years until we get better at sending kids to trade schools and teaching them mechanical things again. We're going to be struggling with that. But that's another story. So let's talk about learning. Because when you talked about how programs end up constraining the solution space so that you're not learning new things, you're just learning how to deliver that one little program and you don't get experience in doing jobs around it. It ties in with what we were talking about in an earlier episode where we were saying how H&M contractors are asked to do so much. So is the solution then that they need more training? How do contractors learn to expand the scope of their business? Because it doesn't come. They don't teach you that at college, do they? No. I mean, there's programs for HAC, but there's two sides of this. There's the technical training and there's the sales or I would argue mindset training. So the technical training, an air conditioner is not that different from a heat pump. Yes, there's a learning curve, but once you learn and understand refrigeration, it's not that different. I mean, it's like a car that has a reverse versus a car that doesn't. It's still a car. One of them you just have to push out of the parking lot before you go again. So think of air conditioners like that. It's a car that you have to push out of the parking space. You got gypped. You want a two-way air conditioner or a heat pump, not one way. But the technical problem here is really not the main one. The main one is, well, for starters, being comfortable with the technology doing its job. So just like that first job that I was talking about, where we put the three-time heat pump in and then I sweated bullets to see if it was going to work. But that was really scary. All of these guys are going to need to go through that, but the more people that they know of in their field of influence that are saying, oh, yeah, we're running heat pumps and it runs fine. You know, the more experience there is out there, the more bright spots there are out there, the less pushback we're going to get from this. But right now, when it comes to heat pumps, everyone's thinking about old-school single-stage heat pumps. And they sucked. It was like early 80s diesels. The problem is most HVAC contractors have had a bad experience with a heat pump because single-stage old-school heat pumps are not that great. Right. And if they aren't used well, they're bad. I mean, I've heard plenty of stories of cylinders being like, oh, yeah, I had a heat pump once. That thing, man, the house is so cold. I got a furnace. I've never bought one of those things again. But in the last five or 10 years, as I've argued all over the place, all electric technologies have gotten to where they are superior than their gas counterparts. Induction is better than gas cooking. It's more controllable. It comes down to lower levels. It's easier to clean. You know, there's all these things. The fastest electric car right now is in crazy dragster territory. Like in internal combustion engine cars will never, ever, ever, ever compete again at the drag strip with production cars. It's done. It's over. That car has almost 2,000 horsepower. You can't put that much and then put it down in a gasoline car. They're too picky. It's just too hard to deal with. You can really finally do that. So, I mean, the car thing is basically over and I'm a car guy. Heat pumps, now that we have the inverter and fully variable speed stuff, they act much more like a furnace and their variable speed. There's all kinds of beautiful things that come out of it. The heat pump water heaters now, although the last generation unfortunately are kind of noisy. So, Rain, get on that please. That's really annoying because I bought one. And the last generation was darn near silent and this one was whining and I'm like, you got to be kidding me. But it now costs less to operate that one than it does a gas tank in almost all markets. That's remarkable. Like it's, we're getting to this point where these things are all better than their fossil fuel counterparts. So, we have that, but now people need to get comfortable with it. So, when you say people need to get comfortable with it, you mean contractors need to get comfortable with building a business around heat pumps. Yeah. Well, for starters, they need to get comfortable with the heat pumps. Technically. Technology wise, yeah. And put a couple in, I mean, run them as hybrids. The hybrids are a wonderful belt and suspenders thing. And from our experience, you can drop the gas usage of a house between 50 and 90% with a hybrid. So, it depends on the load of the house, the size of the heat pump, the performance of the heat pump, you know, a bunch of different things, but it's not hard to have the gas usage. And so, if you can just sell a few heat pumps with a communicating modulating heat pump on top of the line and you're paying some attention to the install quality, your clients are going to be like, holy crap, this house feels totally different. I can't believe it's the same place. You can do that with HVAC alone. Not every house, but probably a third. You can, well, in all of them, you can at least take some rough edges of the comfort out of houses. But the technical training, it's only a piece, because then you have to teach them how to talk to homeowners about this. Okay. And so, that's the fragile part of the church at the kitchen table. Yes. And so, the way I understand this is that oftentimes homeowners and contractors get into a begin almost in an adversarial relationship. Homeowners don't often, they're suspicious. Like I don't want to tell this guy or girl too much, because then they'll try to, I don't know. So, can you expand? So, why would you go to a doctor and not tell them your entire symptoms, right? If you're looking to get a diagnosis, why would you go to a lawyer and not tell them in the entire details of your situation so that they can give you your best advice? People wouldn't think of doing that. And yet, somehow, when it comes to contracting in general, not just HVAC, but like plumbing and foam contracting, homeowners will call a contractor and they will withhold information. So, can you expand on that a little bit, that the fragility of that relationship and like how you start up on that kind of like, opposite ends? That's a tough thing. So, let's look at the doctor relationship. But A, you're probably not paying for it, or if you are, it's a set price, regardless of what he tells you. So, there isn't an economic incentive here. We have an economic incentive problem that you want to hold back. I mean, so typical buyer behavior is extract as much information for free and leave the salesperson in the lurch. That is default behavior working with somebody who's selling you something. So, people will pick up the phone, they'll call the contractor, try to get free consulting out of them, free quotes out of them, give them as little information as possible because they're worried that if you give them too much information, then you're going to get upsold. Is that right? Exactly. I mean, you've probably felt this, you're just trying to sell me something. I mean, we've all felt that pushback and that's when the relationship is out of balance. It's not equal or equal. And it's not a consultative relationship. It is a sales-oriented relationship, which is, it's just unpleasant. It's like, oh. It's very transactional, right? It's not built on trust. It's not built on any kind of, relationship like that. It's a transactional thing. So, at the church of this kitchen table, you've got the contract and the homeowner. I'm picturing this kitchen table, right? They're sitting on opposite ends and they're almost like this tension in the air between them. The homeowner is like, I don't want to give this person too much information because they'll try to upsell me. What's the contractor thinking? This cheap punk isn't actually going to buy anything that's any good. What can I, what's the most I think I can sell this person? That's really what's going through their mind. And that doesn't match what is actually best for that person or even what that person wants. It's what they think they can do. So it's, I mean, that's mutual mystification. Neither side knows what the hell's going on. And so the homeowner is not articulating their goals. And the contractor is sitting there thinking, how much time have I already spent here? You know, what's my margin? What products do I need to sell? What incentive program can I sell to this homeowner so I can go get the next job? Yep, exactly. And also what do I have in the warehouse that I'm trying to get rid of? But what did my supplier tell me they can't get their hands on right now? So I don't even want to talk about that piece of equipment. Yeah, it's complicated. But what you want instead is to have a consultative way of looking at it. So I mean, a doctor is a consultant. The lawyer done right anyway is a consultant. So it's like, all right, doc, this and this are happening. I've done this and this. I've considered trying this. My dad had this. What else do you need to know? And they're trying to pull together the information so that they can create a treatment plan for you. That's a consultative path where, like you said, it's transactional with contracting. It just is. And that's how things are set up. So what we suggest doing, and I think I mentioned HVAC 101 the last time, comparing the HVAC in a car to the HVAC in a house, I mean, it's a commodity problem. The example I always use is I remember buying a $10 can of ceiling paint for our second house of five as we keep burning through houses. And I was trying to take a shiny ceiling and make it flat. Two and a half coats later, I was out of paint and there were still shiny parts coming through. I had to go buy another can of paint after putting two freaking coats on that ceiling. I was so annoyed. And so we learned then we always buy the expensive paint. It was we were so stuck on it that recently they were out of the high end paint. And we're like, all right, how far are we gonna have to drive to do this? And then we realized, so they have seven gallons of the step down. So we bought one step down, but we always buy good paint because we understand that it's not actually commodity. There are quality differences. And so when you look at what a car can do with this HVAC, so you have variable speed fan, you have variable output, heating and cooling, they do dehumidification, they do filtration, they'll put the air where you want it. If there's all these things that the systems can do that most houses can't. And so once people have some education on that, instead of you're just trying to sell me something, they're like, so I really want this. I mean, was it last night on our bi-weekly call in each HVAC 2.0, one client once a one of the guys and said, don't you dare try to sell me anything other than that 19 seer piece of awesomeness right there. How many clients are demanding? Demanding a high floor, right, rather than high. People will give you a ceiling say, don't sell me anything more than X thousand dollars. But this person was like, I want the best quality stuff. This is interesting. So to summarize, just to make sure I'm understanding this right, the current paradigm of a relationship between a homeowner and a contractor is adversarial and transactional. It's not built on a foundation of trust. And the sale happens as a commodity. And so the contractor is looking to make the quick sell shortest amount of time possible. The homeowner doesn't want to articulate too many goals because they're afraid of being upsold. And so, and this is the kitchen table. The church, the church, all is not well at the church of the kitchen table. There's a lot of friction because they're adversarial. It's very fragile because they don't have trust. And so what you're suggesting is downstream incentives end up just adding another element of transaction to it rather than smooth out, rather than create a consultative process rather than free up the tension in the room rather than build that element of trust. What it does, it just becomes yet another thing that the contractor has to juggle the math in their head about, oh, should I sell the homeowner this or should I not sell the homeowner on this particular incentive program? Just like they're thinking, what equipment do I have in the shed? What are my guys capable of installing? What are my margins on this project? So they've got to think of all these things. It becomes yet another element of the transaction. But there's nothing that's smooth. It adds more friction. So I'll put it to you then. What kind of policy proposals have you seen or have you been a part of that would go a long way towards adding some grease or reducing the friction or making this less fragile? This is the kitchen table. So the kitchen table is downstream. That's happening at the point of transaction at the sale to the person who is actually going to install it. So it's the installer and the installee or whatever you want to call it. That's downstream. Midstream is at the supply house level or whatever the distribution, whatever you're going to call it for whatever industry it is, but supply houses for HVAC upstream is at the manufacturers. So upstream really can only happen at the federal level. That's just kind of how it is. Because the state's probably not going to go to a manufacturer and say we're only going to do this or if they do, it's not going to stop all of the production. They're still going to keep making air conditioners and not heat pumps. So the proposal that we're discussing to a degree is what we propose was Clasp and Alexander Bergmere and myself put together a proposal to basically say, why don't we pay the manufacturers, the HVAC manufacturers, to stop making air conditioners and cover the cost difference between an air conditioner and a heat pump because every air conditioner has a heat pump version with a few exceptions, like the 13-serial or the 14-serial or not. There are heat pump versions of everything. So what if we just write a check for that? And at that point, the supply house is only going to stop heat pumps. So in those 85% of emergency replacements, if they're getting an air conditioner, they're getting a heat pump. It just is. It's default. That's what's on the shelf and that's really important to do. Now, provincially, your states or cities or whatever you want to look at, you could do that supply house by supply house and say, all right, we're going to give you a flat $500 a unit to not stop air conditioners anymore. And then at least heat pumps are going in. And a fair amount of the time, some people are going to be in pain and they're not going to run a new thermostat wire because you need two more wires to run a heat pump versus an air conditioner in general, not all the time, but in general. So you might not run a new thermostat wire. It may get wired up as an air conditioner only. But the capabilities there, it's a wire away where if you have an air conditioner, you really can't retrofit an air conditioner into a heat pump. There's enough changes there that the odds of failure and trying to do that and the cost of it, for what it's worth, you should just take that outdoor unit off, put a new one on. But that might also require changing some indoor stuff too. So in any case, midstream is supply house upstream is OEM. And the best thing when it comes to decarbonization is probably to make sure that you can't buy an air conditioner anymore. But it can't be a ban based thing. Well, it shouldn't be because as soon as you ban air conditioners, they're trying to take our air conditioners away. I mean, there's just an article that came out this week in ACHR news that was basically where they're trying to take our furnaces away. We need a fight to keep our furnaces. This is what ban does to people. You evoke the screw you, I won't do what you tell me, human nature feedback loop, which we want to avoid evoking that as much as humanly possible. And that means there should be a law of thinking, should have a law against it itself. So you don't want HVAC to be a new front on the cultural one, right? Yes. Is you never know which thing is going to next show up on the front of this broader cultural war that our society seems to be in. And you don't want to attract that attention. And you don't want it to be politicized anymore than it perhaps already is. Yeah, I think that. And so I'm already seeing some of the culture war and when it comes to the culture war, another really key thing to understand, I don't know the stats in Canada, but in the US, 80% of contractors are politically conservative. So if you give them any form of a dog whistle that sets off conservative people, you just lost the war. And they are literally 80% of the people that are going to be putting this stuff in. Can we achieve decarbonization with 20% of the workforce? I mean, we were just talking in the previous episode that even with 100% of the workforce, there are significant challenges for decarbonization, right? And why would we artificially constrain our solution space to just 20%? And when you were talking about like people, so in effect to take this back to where we started the conversation, climate change works like climate change to add more friction to that dialogue and the relationship between the homeowner and the contractor. So maybe there are some outliers out there, likely, where contractors care about, I mean, like you said, 20% of contractors, for them maybe climate change is a priority, but the chances of them matching up with the homeowner for whom climate change is a priority. And then, and this is significant, and the homeowner actually puts money right at their mouth is, because I am willing to bet my experience has been that every contractor in America and Canada has a story to tell about the kitchen table, that they've sat down with someone who has talked a big talk about being climate aware and climate sensitive. They run the numbers and they're not willing to. I'm sorry, we just can't afford that right now. Congratulations, you just locked in your personal carbon emissions for as long as you own this house and for the next 15 or 20 years for this house in general. Good job. And that's, I mean, that's the end of the day, right? It's the iron law of climate science. There's researchers that talk about this. Anytime environmental concerns intersect or come in dialogue with economic concerns, often chances are economic concerns win out of environmental concerns. Of course, there's, that's not to say that both are orthogonal, right? So you can have both. You know, there's decoupling between environmental progress and economic progress, environmental effects, blah, blah, blah and all of that. But end of the day, at the kitchen table, even people who talk the big talk, don't end up walking the walk. So the words like climate change, reducing emissions, reducing impacts on the environment, they're not actually further. Am I right? This is actually a subject that just pisses me the hell off. Because I've had it happen to be enough where like, oh, we're going to do this, but we want to do this. It's how much? It doesn't matter how much it is. And these are high profile, these are high profile people who are, you know, who have street cred in the environmental community. That I know personally, that my contractor buddies know personally who end of the day when it comes to putting their own money on the line, environmental concerns, don't seem to motivate them. And that's, I mean, it is what it is. We just have to acknowledge that as a problem and not pretend that it's not. Yeah, so, I mean, at the end of the day, all the problems that we are trying to solve in residential decarbonization go back to value. And like, for a long time, I've always hated that. Like, oh, there's that damn marketing work again. But it's a real thing. I mean, transactions happen when the price is less than the value perceived, period. That's how it works. Do you, like if I'm selling my car to you, the transaction only happens when you give me enough money that I'm willing to let the car go. And so that you feel like it's a fair price for the car. So the value you're receiving is more than what you're paying. That's how capitalism works. And it is funny. I triggered somebody last week on Twitter using the word capitalism. I don't view it as a negative. I view it as a tool. Capitalism to me is the same as a hammer. I can kill you with a hammer or I can build you a house. Same tool as the tool is not good or evil. It's just a tool. So we have to wield it well. But value is critical and there's multiple points of value that we need to do here. So for contractors to actually want to decarbonize, they need to make more money. It needs to be better than current business as usual. It just has to be. Because if you have to make a change that is relatively difficult to make the same amount of money and you don't really value what the change gives you, you're not going to do it. I mean, it's a struggle. I'm fat. I don't value the change enough to stop eating. It's I need to go exercise more and I'm just not pushing myself enough to do that. So contractors are not going to change your business model if they don't see the value of doing so. So the way that I've come to look at it is the only way that we are going to move to decarbonization with the kitchen table is to create a business model that is so much better than business as usual. It takes over like an invasive species. So now that we've moved to West Virginia here, Kudzu is a thing here. So everywhere where it's sunny mountain sides, just they take over the trees, they take over the fields, gone. And I guess they call it a foot of night vine. It'll grow a foot a day. I know that's probably a exaggeration, but I mean, it moves fast. And so if we don't solve that value problem, that's a problem. And then for consumers, there's two value problems. So the first one is, is it worth the first cost? Are they willing to write the check for the system or whatever the upgrades are? The second one is, when they sell the house, will they get any of it back? And in our experience, watching a few of our clients sell their houses, the answer is, hell no, zero. They're going to get nothing. So economically, I mean, cars do this all the time, but we see value, like the cars depreciate like crazy. But could you imagine buying a car for $30,000 and the next day it's worth zero? That's not a good thing. We would sell a lot fewer cars. We need to have residual value of some sort. So particularly in cold climates where shell upgrades are needed in probably about half of homes to be able to decarbonize them. If it requires $40,000 or $50,000, because some of these houses are older and bigger and more complicated and more expensive to do, if you need $40,000 or $50,000 to upgrade that house to where you can put heat pump in so that it's decarbonized, but at resale you get Zippo. That's, you're going to find a few people that'll do it, but in our experience, the people that do the projects that we do, there's a few things that they have in mind because we're talking about the exact kind of projects that we developed a process to do. So the advanced piece of HVAC 2.0 sells these projects. They're really hard ones. So there are people that are going to live in their house for a long time. Typically they love where the house is, but they don't like the house. So the house is uncomfortable. They have problems that are large enough to solve that they're willing to pay tens of thousands of dollars to do it, and they have the money. So having those three things together, the money to do it, the problem to do it, and planning to live in a house for a long time, that's only a couple percent of the market. So realistically, as the market stands, I cannot see any way past about 3% of deep energy upgrades or comprehensive energy upgrades on houses in the US or Canada. I cannot see a path beyond that. Right. So the policy that you talked about, the proposal that you co-wrote, where the upstream incentive, you're giving manufacturers some incentives so that every air conditioner installed by default is a heap of install. And so when you come downstream to the kitchen table, then it's not friction because it's not a decision point. It is what it is. I want a stick shift minivan. Well, that's nice. They don't make one. Would you like the automatic one I have or the automatic one that I have? I'll let you model. But yeah, it's just no longer even on the table as part of the solution set. So there are minor technical learnings that come from having to learn how to do heat pump with relation to air conditioning, but those technical issues will be solved once contractors can develop a successful business model out of installing heat pumps. Well, they don't even need a successful business model to just make hybrids. And if they're doing a 13-sear air conditioner, they're making a 14-sear heat pump, they're just going to do it. Okay. So with this proposal at this point, we're still working under the fragile and friction-filled church of the kitchen table stuff, but at least it does no harm. Correct. Yeah, it doesn't add friction to the kitchen table. So if there's something you can do, if you can't add grease, if you can't improve trust, at the very least try to do no harm. A policy goal can be that what we can take away from this is a policy goal is to turn the church of the kitchen table away from a transactional relationship into a consultative collaborator relationship. And equal, equal, a fund relationship, really, at the end of the day. I mean, in any relationship, do you like feeling like a child? Not particularly now. Me neither. I mean, sometimes it's fun to be the parent, talk down to someone, but then the other person doesn't like it because they're the child. So talking to people as adults, equal, equal is really important, but setting up that relationship takes some work or we jokingly call it creating your own matrix. So you have to set the rules up front and you can create that. But I mean, back to your point about training, this is very little of the training needed as technical, not to say that none is, but if you as a policy person are like, oh, we just need technical training, this will work. No, it won't. It will not under any circumstances work because this is a sales and marketing problem. We need the contractors to be comfortable with the heat pumps and just kind of they need some experience actually using them, but they need to be able to talk to their homeowners in an intelligent way about them, not scare them off because right now, if you go to 90% of HVAC contractors, particularly in cold climates, and you say, I want a heat pump and no furnace, they will tell you, you are nuts. And they're frankly right because if you don't do the math on this, you could have a really bad experience. And who's going to get the blame for that bad experience? The homeowners going to be all there like, you went that way. And they're going to point that finger at anybody aside from themselves. And the contractors like, I want nothing to do, I'm out. Yeah, homeowners like, you're the last person that touched the box and I trusted you, brought you into my house and the contractors. What a shame, I'm going to leave you a horrible review. And so the contractors can see this trade right coming. So if we don't give contractors a way to reduce the risk and then increase the odds of success with the homeowners, we're going to fail. And that is much more of a sales trading thing than it is a technical training. Thank you for listening to the Boundary Spanners podcast. In this episode, we learned about how the most important element and the locus of decarbonizing homes is really the relationship between an HVAC contractor and the homeowner. Nate calls this the church at the kitchen table. Now all is not well at this church at the kitchen table. For instance, the relationship has a lot of friction because homeowners usually want the cheapest piece of equipment installed as fast as possible. And contractors knowing this have built a business model around turning a quick sale using equipment that they're already familiar with. Typically, when utility or government incentive programs layer on top of this process, they end up simply adding more friction by narrowing the solution space and giving homeowners and contractors yet another element that they have to grapple with at the kitchen table. The church of the kitchen table is also very fragile because of a deficit of trust. Homeowners worried about being upsold through aggressive sales tactics respond poorly when contractors recommend heat pumps, especially when there's a difference in price between heat pumps and air conditioners or a standard gas furnace. Meanwhile, contractors are reluctant to recommend heat pumps because they do not want to be held liable for failure of equipment that they might not be as familiar with. Therefore, taking together a shared goal between policymakers and HVAC contractors can be reducing the friction and fragility at the church of the kitchen table. One way of achieving this goal is for HVAC industry to pivot away from the volumetric sales and duress process to a more diagnostic or consultative business models much like a lawyer or a doctor, for example. So as a policymaker, you might want to ask yourself, what do policy interventions that improve the trust between parties at the kitchen table look like? What upstream incentives can make heat pumps the status quo installation? What downstream incentives can improve, or I mean at the very least, not add to the friction and fragility at the church of the kitchen table? What is the role of policy in supporting HVAC professionals that are seeking to pivot to a consultative business model? Who are the early adopters that are already building successful business models around electrifying and decarbonizing homes in US and Canada? How can policy support their work? And how can their success be learned, replicated, and perhaps scaled? What lessons can we learn from their experience and how can such learning be mobilized to help transform the entire HVAC industry and also to inform and educate consumers? What are the most appropriate forms through which this kind of learning can be shared? Because we all know you cannot teach a kid how to ride a bike at a seminar. And so we'll be asking and perhaps answering questions like these in the next and subsequent episodes of Boundary Spanner's The Podcast. Thanks for listening.