Space Heating and Cooling

Overview

Historically, most buildings in Colorado have been heated by natural gas due to the cold winters, available technology, and relatively low cost of natural gas. Any cooling needs have been met by separate equipment—predominantly refrigerant-based or evaporative cooling. In the last two decades, efficient electric heating and cooling technology has improved significantly. Today, there are heat pump products that can reliably provide electric heating and cooling in all Colorado climate zones.

Heat pump technology is fundamentally different from traditional natural gas-fired heating systems. Terminology, design strategies, and installation methods are different from traditional gas-fired systems, and sometimes more complex. At the same time, projects that succeed in executing an efficient, all-electric design can reap substantial benefits, including:

Financial incentives
Tax credits
Utility rebates
Municipal funding (location dependent)
Low-carbon-emission buildings
Health benefits to residents
Competitive Housing Tax Credit applications
Compliance with building performance standards

Technology and Design

Conventional heating equipment converts fuel directly to heat by burning natural gas or powering electric resistance coils. A heat pump acts more like a typical air conditioner, using electricity to move heat from one place to another. Conventional cooling uses the refrigerant cycle to remove energy from indoor air and transfer it outside via an air conditioning condensing unit. A heat pump operates in the same way, but also has the capability to take energy from the outside air (or some other source) and move that heat into the building.

This Old House has a great video breaking down how a heat pump works.

Because heat pumps transfer heat instead of generating it, this technology is highly efficient. While gas-fired or electric resistance heating is 80 to 100% efficient, heat pumps can operate at 300 to 500% percent efficiency. Operating at 300% percent efficiency means that for every one kilowatt-hour (kWh) of energy consumed, the system moves three kWh of heat from the source into the building.

Types of Heat Pumps

Individual In-unit Systems

Heat pumps seen in affordable housing rental units are commonly either individually packaged equipment or split systems. Packaged systems, such as packaged terminal heat pumps and vertical terminal heat pumps, have the benefit of lower first costs and easy installation. Split systems, while more costly upfront, generally offer improved energy performance, air quality, and occupant comfort.

Comparison of Typical Heat Pump Terminal Equipment: Packaged vs. Split

Packaged Systems [i.e., Packaged Terminal Heat Pumps (PTHPs), Vertical Terminal Heat Pumps (VTHPs)]

Pros

Cons

Low first costs for labor and equipment
Wide range of options to meet project-specific efficiency requirements
Easily maintained
Familiarity with system amongst contractors and maintenance

Shorter lifespan and limited opportunities for repairs
Increased air leakage through exterior wall penetrations
Comfort limitations without additional ducting
Poor outside air filtration system [minimum efficiency reporting value of two (MERV 2) or below] for PTHPs, which may be detrimental to resident health during poor air quality or wildfire days
Higher electrical demand charges are associated with packaged systems, especially if paired with outside air for ventilation through the packaged unit.

Packaged terminal heat pump

Design Considerations

Many standard packaged system options do not meet the energy performance requirements of advanced energy standards.
May need to be paired with an energy recovery ventilator (ERV) or solar to meet 2021 International Energy Conservation Code (IECC) performance code requirements

Best practice tip:

For ENERGY STAR, Zero Energy Ready Home (ZERH), or 2021 IECC compliance, consider systems that offer switchover temperatures at 25 degrees Fahrenheit or below. Heat pump operation down to zero degrees Fahrenheit is ideal.

Split Systems (i.e., fan coils or mini-splits with outdoor heat pump unit)

Recommended HVAC system for achieving higher performance energy targets such as those set by ENERGY STAR, ZERH, or 2021 IECC.

Pros

Cons

Higher efficiency and durability compared to packaged systems
Generally has lower changeover temperatures than packaged systems, leading to better energy performance and lower operational costs
Wide range of cold climate heat pump options available amongst various manufacturers
Enhanced air filtration for indoor air quality (up to MERV 8)
Familiarity with system amongst contractors and maintenance
Ducted or ductless options provides flexibility for new construction and retrofits

Higher initial cost than packaged systems due to equipment cost, refrigerant piping installation, and ducting when applicable
Heat pumps may take up significant roof area, limiting available space for solar or making solar installation more difficult.
Ductless split systems can require a secondary heating source such as baseboard heating to warm the building when the heat pump cannot cover the load. Additionally, ductless systems require an alternate form of ventilation air, whether that be exhaust ventilation or ERV systems.

Design Considerations

For ENERGY STAR, ZERH, or 2021 Residential IECC compliance, ducted systems will require duct leakage testing.
Fan coil units are typically located in the bathroom, which may require additional space above the ceiling.
Refrigerant line set lengths for heat pumps are less than standard direct expansion DX cooling line sets.
For retrofit applications, the height of the building and distance to exterior units needs to be considered.

Best practice tip:

Many split heat pump models offer lower switchover temperatures than packaged systems. Look for models with switchover temperatures at 15 degrees Fahrenheit or below. Heat pump operation down to zero degrees Fahrenheit is ideal.


Ductless mini split heat pump and head	Outdoor split system heat pump unit


Ductless mini split heat pump head	Outdoor split system heat pump unit	Outdoor split system heat pump unit

Centralized Systems

Variable refrigerant (VRV/VRF) systems and ground-source heat pumps (GSHPs) are less commonly installed HVAC options in the Colorado affordable housing market. Both offer lower operating costs at a higher upfront cost.

GSHPs are best suited for projects that have a large site area with sufficient space to install ground loop piping. While more difficult to design correctly, GSHPs have the benefit of better cold weather performance and domestic hot water system integration opportunities.
VRV/VRF systems are best suited for larger projects with diverse loads, as these systems are better able to handle concurrent heating and cooling.

In addition to higher upfront cost, another all-electric centralized system challenge is a limited pool of knowledgeable design engineers, HVAC contractors, and maintenance personnel. Without relevant professional expertise, systems are more likely to be improperly designed, installed, or operated. This can lead to higher operating costs, early failure of equipment, or resident discomfort. For property management staff who are less familiar with central system operations and maintenance, there may also be a need for third-party service contracts.


Centralized system	Centralized system

Heat Pump Efficiency and Terminology

Heating and cooling source
This describes the source from which the heat pump moves energy when heating and cooling the building. Most commonly this is “air-source,” which means energy is taken from the outside air and transferred to the building. There are also water-source heat pumps which transfer energy from water flowing through the heat pump to the air in the space. Ground-source heat pumps are a specific type of water-source heat pump that use long stretches of piping buried in the ground to heat and cool the water going to the heat pumps.
Changeover temperature
Heat pump efficiency declines as the temperature of the source gets further from the temperature of the building. Eventually, a heat pump will stop operating when the temperature is so low that it can no longer remove energy without freezing the equipment. For this reason, heat pumps frequently have a backup heating source in very cold conditions—typically electric resistance heat, which is substantially less efficient. The changeover temperature is where a heat pump switches from “heat pump mode” to the less efficient “electric resistance mode.” In Colorado’s heating-dominated climate, the changeover temperature can have a significant impact on operational costs. A higher changeover temperature will lead to higher operating costs.
Efficiency ratings
Heat pumps are typically rated by their Coefficient of Performance (COP) or the Heating Seasonal Performance Factor (HSPF). These are similar to the Energy Efficiency Ratio (EER) or Seasonal Energy Efficiency Ratio (SEER) ratings for cooling performance.
Cold-climate heat pumps
Cold-climate, or low-ambient, heat pumps are designed to operate in heat pump mode at low temperatures (below freezing). This equipment can achieve the same transfer of heat from the outside to indoors, sometimes even when temperatures are as low as 20-below-zero degrees Fahrenheit. Less (or in some cases zero) electric resistance heating reduces operating cost compared to standard heat pump systems.

Retrofits

Summary

In Colorado’s cold and mixed-dry climate, space heating represents the dominant energy load in multifamily affordable housing. Much of the existing building stock relies on aging central gas systems or electric resistance heat, and many properties lack mechanical cooling. As buildings approach recapitalization, HVAC upgrades present a critical opportunity to address energy performance, resident comfort, and long-term asset resilience.

High-efficiency heat pump systems offer a pathway to reduce operational carbon emissions and improve comfort, particularly in properties without existing cooling. However, existing HVAC configurations vary widely across affordable housing portfolios, and the condition and capacity of the existing mechanical and electrical infrastructure typically determine the most viable retrofit pathway.

Retrofit Options

Similar to domestic hot water systems, space heating and cooling systems have two high-level configuration typologies:

Central Systems: A central plant generates heating and/or cooling in a mechanical room or rooftop and distributes it building-wide. Common examples include steam systems or gas-fired boilers serving hydronic baseboard, fan coil units, or water-source heat pumps, and central chillers paired with cooling towers. Heat is delivered to dwelling units through vertical risers and branch distribution piping or ductwork. Energy costs are often borne by the building owner via a master or house meter.
Distributed Systems: Heating and cooling equipment is located within individual dwelling units, with each unit operating independently. Common examples include in-unit gas furnaces, electric resistance baseboards, PTAC/VTAC units, ducted split systems, and ductless mini-split heat pumps. Distributed systems eliminate the need for central hydronic or air distribution networks but increase the number of independently operating systems that must be maintained.

For each retrofit strategy, the sections below summarize Key Considerations and Benefits. “Key Considerations” include constructability constraints, infrastructure limitations, operational complexity, and potential cost drivers or implementation challenges that may affect project feasibility.

Central Systems

High-Efficiency Gas Boiler Replacement
- Description: Replace existing atmospheric gas equipment (<80%) with high-efficiency condensing gas boiler (>95% efficiency)
- Key Considerations:
  - Optimal condensing operation requires lower return water temperatures (existing systems designed for high supply temperatures may limit efficiency gains)
  - Existing hydronic piping must be evaluated for condition, leakage, and pressure tolerance prior to reuse
- Benefits:
  - Minimal modification to hydronic distribution
  - Does not increase electrical service requirements
  - Familiar maintenance requirements
  - Lower first cost than electrification
This approach preserves the existing hydronic distribution system and typically avoids significant electrical upgrades. It is often the most practical near-term upgrade for buildings seeking performance gains without major electrical or system reconfiguration. However, in older properties, deteriorated or leaking piping and distribution inefficiencies may limit long-term viability and reduce the cost-effectiveness of reinvesting in a centralized system.
Central Air-to-Water Heat Pump Plant
- Description: Replace gas boilers with air-source heat pumps serving hydronic distribution
- Key Considerations:
  - Increased peak electrical demand (thermal storage may be leveraged through additional storage tanks to reduce peak loads, but requires additional space)
  - Electrical service upgrades likely required
  - Supplemental heat likely required (electric resistance or gas)
  - Distribution operates at low supply temperatures (pairs well with water-source heat pumps or fan coils as terminal equipment)
- Benefits:
  - May quality for electrification or heat pump incentives to help offset capital cost
  - Significantly reduces carbon emissions
  - Can frequently be used to heat DHW as well with minimal added infrastructure costs
Where unitized systems such as ductless mini-splits are not feasible, full electrification of central heating systems typically involves replacing gas boilers with air-to-water heat pump plants. These systems produce low to moderate temperature hot water for existing hydronic distribution and can significantly reduce site energy use. When paired with additional thermal storage, system operation can be optimized to reduce peak electrical demand and enable load shifting.

Because heat pump capacity declines at low outdoor temperatures, supplemental heat is often required to meet peak winter demand. Backup may be provided through electric resistance or by retaining gas boilers in a hybrid configuration, each with different implications for electrical capacity, utility costs, and capital investment. Evaluating supply water temperature requirements, building heating load, and peak demand is critical to determining whether full electrification or a hybrid approach is the most practical and financially sustainable solution.
Hybrid Approach
- Description: Central heat pumps serve base load with gas boilers to provide backup heating
- Key Considerations:
  - Controls integration for efficient staging and sequencing between heat pump and boiler
  - Space allocation for both heat pump equipment and retained boiler capacity
- Benefits:
  - Reduces peak electrical demand by limiting full electric operation
  - Minimizes costly electrical service or transformer upgrades in many retrofit scenarios
  - Enables phased decarbonization by reducing annual gas consumption without requiring full electrification
  - Can frequently be used to heat DHW as well with minimal added infrastructure costs
In many affordable housing properties, electrical infrastructure represents the primary constraint to full electrification. Converting entirely to electric heat pumps can substantially increase peak demand, potentially triggering costly service, feeder, or transformer upgrades.

Hybrid central systems, where heat pumps serve base heating loads and gas boilers provide supplemental or peak heating, often represent a more feasible pathway. By limiting electric heating to moderate outdoor conditions and relying on gas during extreme cold, hybrid systems reduce peak electrical demand and costs while still achieving meaningful reductions in annual gas consumption. This strategy frequently provides the most constructible and financially balanced approach to decarbonization.
Reversing Chiller
- Description: A reversing chiller (also referred to as a heat recovery chiller or heat pump chiller) replaces a conventional cooling-only chiller with a unit capable of operating in both cooling and heating modes. The system can provide chilled water during summer operation and reverse its refrigeration cycle to produce hot water for space heating during shoulder seasons or moderate winter conditions.
- Key Considerations:
  - Supplemental heat likely required (cost increases significantly with higher performing chillers that maintain heat capacity at lower temperatures)
  - Compatible with water-source heat pumps as terminal equipment
  - Not well suited for terminal units requiring high supply water temperatures (i.e. baseboard radiators)
  - Control sequencing must manage seasonal changeover and simultaneous heating/cooling requirements
- Benefits:
  - Uses existing chilled water and hydronic infrastructure
  - Does not increase electrical service requirements
  - May qualify for electrification or heat pump incentives
  - Can frequently be used to heat DHW as well with minimal added infrastructure costs
A reversing chiller represents a relatively newer but increasingly viable technology in retrofit applications. It offers a pathway to partial electrification of space heating without significantly increasing electrical service requirements, particularly when replacing an existing chiller nearing end of life. Although first costs exceed those of standard cooling-only chillers, the ability to use existing infrastructure and access incentives can improve overall economics.

This strategy is generally most appropriate in buildings that already have a central chilled water system and low- or medium-temperature hydronic distribution, allowing heating electrification to be integrated into the existing plant with minimal infrastructure changes.

Common In-Unit Terminal Equipment

Supply water temperature requirements of in-unit terminal equipment are a primary constraint when evaluating central heat pump integration. The required supply temperature directly affects heat pump efficiency, capacity, and reliance on supplemental heat. Key examples include:
- Water Source Heat Pumps (60°F – 90°F): WSHP systems operate at relatively low loop temperatures and are highly compatible with central heat pump plants. This configuration supports high system efficiency and minimizes reliance on supplemental heating during winter conditions.
- Hydronic Fan Coils (120°F – 140°F): Fan coil units require moderate supply water temperatures. While compatible with central heat pumps, maintaining these temperatures can reduce heat pump efficiency and increase reliance on backup heat during colder periods.
- Baseboard Radiators (160°F – 180°F): Hydronic baseboard systems are designed for high supply water temperatures that exceed the optimal operating range of standard air-to-water heat pumps. In these cases, heat pumps may provide limited heating contribution during cold weather, resulting in significant reliance on supplemental heat. Retaining an existing gas boiler in a hybrid configuration is often the most practical and cost-effective strategy to maintain performance without substantially increasing operating costs.

In-Unit Systems

For distributed HVAC systems, retrofit strategies are typically more straightforward than central systems. Common retrofit solutions include:

Cold-climate ductless mini-split heat pumps (ductless)
Fully electric or dual-fuel air-source heat pumps (ducted)
Conversion of packaged AC to packaged heat pumps systems

Cold-Climate Ductless Mini-Split Heat Pumps
- Description: Cold-climate ductless mini-split heat pumps consist of one or more interior wall-mounted indoor units connected to an exterior air-source heat pump. These systems provide high-efficiency electric space heating and cooling in buildings without existing ductwork.
- Key Considerations:
  - Additional indoor heads or a multi-zone system may be required for larger apartments, adding cost and complexity
  - Electrical panel capacity and potential service upgrades may be required
  - Space availability for outdoor units, indoor units, and line set routing (well-suited for properties with balconies)
- Benefits:
  - Supports full electrification
  - Provides cooling
  - Reduced operational costs compared to baseboard heaters
  - Qualifies for electrification or heat pump incentives
  Ductless mini-split heat pumps are an optimal retrofit strategy for existing properties that lack ductwork and are currently heated with electric resistance baseboard or aging distributed systems. They can also be effective solutions where existing central plant system replacement would be cost-prohibitive. Properties with individual balconies are often particularly well suited for ductless retrofits, as balconies provide convenient locations for outdoor condenser placement while minimizing façade disruption and complex structural coordination.
  
  Successful implementation depends on proper design and sizing, thoughtful indoor unit distribution in multi-bedroom layouts, and early electrical capacity analysis. When paired with envelope improvements and ventilation upgrades, mini-splits provide one of the most practical and cost-effective electrification pathways for affordable housing in Colorado.
Cold-Climate Ducted Split System Heat Pumps (Fully Electric, Dual-Fuel, and Aquatherm Applications)
- Description: Existing gas furnaces and air conditioners are replaced with a cold-climate air-source heat pump connected to the unit’s existing ductwork. These systems provide whole-unit heating and cooling through a single air handler and are capable of maintaining strong heating performance at low outdoor temperatures. They may be configured as all-electric systems with electric resistance backup or as dual-fuel systems retaining a gas furnace for extreme cold conditions. Cold-climate heat pumps serving well insulated apartments may not require back up heat. Projects that already have central air conditioning are often simpler to convert than furnace-only systems, as portions of the electrical and refrigerant infrastructure may already be in place.
- Key Considerations:
  - Electric strip backup heat increases demand charges and peak load; dual-fuel configurations reduce electric demand but retain gas infrastructure
  - For fully electric systems, panel upgrades may be required
  - Existing duct systems must be evaluated for proper sizing, static pressure, and air leakage - existing duct issues can significantly reduce performance
  - Where no prior air conditioning exists, additional considerations may include locating outdoor equipment, verifying electrical capacity, and evaluating exterior noise impacts from new condensers
- Benefits:
  - May qualify for electrification or heat pump incentives
  - Leverages existing duct distribution system
  - Reduced or eliminated gas consumption
  - Familiar system type for residents and maintenance staff
Ducted cold-climate split system heat pumps are typically the most straightforward electrification pathway for properties with existing forced-air distribution. Because they utilize existing infrastructure, they often result in less disruption than alternative retrofit strategies. Feasibility is typically driven by available electrical capacity and the selected backup heating strategy.

A hybrid dual-fuel configuration can be an effective strategy for avoiding costly electrical infrastructure upgrades while managing operating expenses. By allowing the heat pump to serve heating loads during moderate outdoor temperatures and retaining gas heat for backup, the system balances efficiency with infrastructure limitations and high electricity rates. Although it does not achieve full electrification, a dual-fuel approach can function as a practical transitional step within a long-term decarbonization plan and, when paired with envelope and other efficiency improvements, can reduce operating costs compared to gas-only systems.

While heat pump water heaters are highly efficient for standalone DHW applications, they are not well suited for Aquatherm systems. HPWHs typically lack the heating capacity needed to meet combined space heating and DHW loads.

For properties served by combination space heating and domestic hot water systems (“Aquatherms”), common retrofit solutions include replacing the condensing units with a heat pump. In these cases, domestic hot water can be decoupled into a dedicated system or the existing gas water heater may be retained for supplemental heating. This approach leverages existing distribution while reducing fossil fuel use and increasing overall efficiency. When retaining DHW for backup heat, controls should be configured to prioritize the heat pump and limit DHW operation to supplemental use.
Packaged Systems (PTAC-to-PTHP / VTAC-to-VTHP)
- Description: Standard PTAC (Packaged Terminal Air Conditioner) or VTAC (Vertical Terminal Air Conditioner) systems can be replaced with heat pump models (PTHPs or VTHPs) using the existing wall sleeve or vertical chase. This strategy electrifies space heating with minimal design changes.
- Key Considerations:
  - Typical PTHPs revert to electric resistance heat below ~25-45°F, increasing operating costs and peak demand
  - High-performance models have higher first cost but reduce long-term operating expense
  - Providing ventilation through a packaged system will increase operating costs and reduce system performance
  - Unit layout should be evaluated. Buildings with studio units or PTACs located in each room are generally better suited for this retrofit approach. In larger units, a single PTAC typically serves only the living area while bedrooms rely on central heating, limiting electrification potential and complicating controls.
- Benefits:
  - Low first cost relative to other electrification strategies
  - Familiar system type for residents and maintenance staff and easily replaced
  - May qualify for electrification or heat pump incentives
Conversion of packaged AC systems to heat pump systems represents a low-cost, minimally invasive electrification pathway. High-efficiency equipment selection (heat pump operation to 25F or below) and a thoughtful ventilation strategy are essential to optimize performance and avoid excessive resistance heat operation.

Where central systems are being decommissioned and ductless mini-splits are not feasible, PTHPs can provide a compact, distributed solution for efficient space heating and cooling. However, the addition of through-wall units increases envelope penetrations, which may affect building aesthetics and contribute to higher infiltration.

Design Considerations and Constructability

Rather than pursuing a one-size-fits-all approach, building owners considering retrofits should adopt a building-specific strategy grounded in technical feasibility, financial constraints, and long-term asset planning. Full electrification is often limited by first costs associated with installation complexity and infrastructure upgrades, including electrical service enhancements, distribution modifications, hazardous materials abatement, and tenant disruption. As a result, retrofit strategies are most successful when aligned with planned capital improvements, such as end-of-life equipment replacement, cooling additions, or building performance standard compliance.

Technical and climate-specific considerations further shape viable pathways. In cold climates, heat pump efficiency and capacity decline at low outdoor temperatures, increasing peak heating demand and, in fully electric systems, often requiring electric resistance backup. This can substantially increase peak electrical load and trigger costly upgrades to service, feeders, or panels. Where infrastructure constraints or cost thresholds limit full electrification, hybrid strategies that use heat pumps for base loads with gas systems retained as backup may offer a more constructible approach. In this context, electrification becomes a phased transition rather than an all-or-nothing conversion.

Operations and Maintenance

Operating cost impacts vary by existing fuel source and local utility rates. Where natural gas has historically been inexpensive, electrification may not yield cost savings unless replacing electric resistance heating. In many cases, maintaining existing operating costs while improving comfort and reducing energy use should be considered a successful outcome.

Maintenance complexity depends on the system type installed. Central heat pump plants and hybrid systems require more advanced controls integration and may benefit from Building Automation Systems (BAS). While this may introduce training and oversight requirements, actual maintenance can be comparable or less intensive than central gas-fired systems. Distributed ducted systems generally maintain similar service routines to furnace-based systems. Ductless and packaged terminal systems shift maintenance toward decentralized filter cleaning, coil inspection, and condensate management across many individual units. In general, heat pumps don’t increase maintenance needs compared to gas-fired systems, but lack of staff familiarity with the equipment or increased system complexity may result in the need for more third-party maintenance support.

For distributed systems with more complex in-unit controls, resident education becomes increasingly important to prevent improper system operation and excessive use of supplemental heat. Across both central and distributed strategies, long-term performance depends on staff training, preventative maintenance planning, and maintaining institutional knowledge through staff turnover.