Budderfly, under the leadership of founder and CEO Al Subbloie, aims to help accelerate sustainability efforts across the built environment. The company is a commercial heat pump end user and a manufacturing partner in the U.S. Department of Energy’s Commercial Building Heat Pump Accelerator program, which aims to make higher-efficiency rooftop heat pump technology available as soon as 2027.
In January, Budderfly secured $400 million in financing from Nuveen and Vantage Infrastructure to expedite clean energy technology adoption across small- and mid-sized commercial and nonindustrial facilities. About a month later, it announced a 12-month pilot at UConn Health to install and deploy its proprietary HVAC equipment with the goals of helping the healthcare system cut energy costs and expanding its own services to the government sector. More recently, Budderfly announced in April that it is deploying its model at Craveworthy Brands’ restaurants to help the business cut energy consumption by an estimated 30% at each site.
In a conversation with Facilities Dive, Subbloie discussed the uptake and potential benefits of heat pumps in U.S. commercial buildings, Budderfly’s business model and strategies for sustainability in energy management.
Editor’s note: This story has been edited for length and clarity.
FACILITIES DIVE: Despite advances in heat pump technologies, deployment remains low, with fewer than 15% of commercial buildings using heat pumps, according to the DOE. Why is this the case?
AL SUBBLOIE: I actually think [U.S. commercial building heat pump use is] a lot lower than that. It's primarily a rooftop unit market, [which] has primarily and historically adopted gas-fired and electric cooling [systems]. And most of the buildings were designed to support the package unit model. So, you have a hole in the roof that you plop it on, you put a new one in and it's easy. To put a heat pump in, you’ve got to drive refrigeration lines through walls and roofs, [and it’s] a little harder.
Also, most of the [heat pump manufacturers] come from Japan and Korea. They'll tell you that the majority of their sales are coming out of the residential market, not the commercial market. If no one is buying something, companies typically won't spend a lot of money to make something. You need to have different players enter the market.
What trends are you seeing in terms of incorporating heat pump technologies that boost energy efficiency?
Even when people are using an existing rooftop model, the manufacturers mostly make mid-level efficiency equipment. And most people are … not even buying the high-efficiency models in the market. You can see that in the manufacturers’ volumes. [For example], Carrier may make 100,000 mid-efficiency units [and] only 20 high-efficiency units. If you ask them, they'll say that’s because nobody's buying. Personally, I, as the leader of Butterfly — across our company — want to push almost a 90% adoption of heat pumps in the commercial space. We've been testing the strategies of existing buildings [and] what you need to do to make it efficient. We're testing them in really cool environments. We really want to … make it a 100% adoption across the board. But it takes effort.
How can commercial building operators navigate the cost barrier of retrofitting ground-source heat pumps, which many believe are more efficient but also more expensive than air source heat pumps?
We are literally flipping the switch on 60 tons of ground source heat pumps in our warehouse that we just installed. We have 26 500-foot holes in the back of the warehouse, feeding 13 Bosch heat pumps made in the United States. So, I've been through it all individually, but also for our customers.
Most people are just doing like-for-like [replacements]. As long as it worked, [previously, customers] didn't care. Now, all of a sudden, we care about efficiency. In a gas-for-gas replacement, you get about 30% off of your HVAC spending for heating and cooling. That’s not good. If you use a high-efficiency RTU gas-for-gas, you get about 50%.
Now there's two ways to do an air source heat pump. [If] you just do heat pump only, you'd probably be [looking at a] 55% to 60% reduction. If you go with an … energy recovery ventilator, what you're doing now is you're separating the band instrument in the air. And [with] a low-cost fan unit that actually recycles the temperature, you can cut your [energy? Load?] tonnage in half. And you'd be looking at about a 70% reduction in energy use in that environment. If you go with a ground-source heat pump model, you're starting to [look at] a 75% to 80% energy reduction.
What makes ground-source heat pumps a more viable option for long-term energy savings despite the initial installation challenges?
In our model, we focus on amortizing the expense individually. Once you drill the holes, you don't have to deal with it for 40 or 50 years. You'd probably go through three cycles of equipment with the same set of holes. [Customers in] rural areas often balk at paying $200,000 for a bunch of holes, but you need a long-term view. You get 30% back on the whole project, not just the holes. You get it on the equipment, [and] it pays for 80% of the holes, [which] last a really long time. With a 70% to 80% reduction in energy use, you could see a breakeven in three, four or five years.
I'm a big believer in ground-source heat pumps, but it's hard to get people in the commercial space to adopt them. They pose challenges like where to put the holes, where the truck goes, and how long it's there. I'm a big believer in air-source heat pumps as well. They make a lot of sense, and we want to electrify everything if we can. The business case for it makes all the sense in the world, even if it requires re-architecting what you're used to with an RTU model. At UConn, I told them, "Listen, we're not replacing all that equipment with gas-fired heat. We're installing a brand new heat pump architecture and aiming for net-zero."
How does your approach simplify the decision-making process for companies considering energy-efficient upgrades?
The hurdle to get over is people's lack of desire to spend money and lack of know-how. That's why we created an outsourced model where [we] walk in and say, "Listen, we're not doing this unless we do what's right. And what's right is, we need to move to a heat pump architecture.” Then I look at them and say, "We're going to do it, we're going to pay for it. And oh, by the way, I'm going to give you some of those savings right from day one." Of course, they're excited.
It makes it an easier conversation when you outsource it like that, as opposed to a heat pump [manufacturer] coming in and saying, "I want you to switch to heat pumps. It's going to cost you $1.2 million." The CFO of the company doing the upgrade is going to sit there and ask, "What's my payback?" They have to go to the board for approval. Two and a half to three years later, they start the first project. Meanwhile, we get going in three months because we just write the checks. We know what the outcome will be.
How does Budderfly’s revenue model streamline the process of adopting energy-efficient technologies for customers?
In [our] model, the way [we] do it is by taking over the spend on the electrical side. So, the customer starts to write checks to me, not the utility.
We then write software that's essentially like a utility billing system, but it uses all the data from the utility, [and] we have integrations to them. That gives us the control to manage the economics with the customer. We do this typically on a 10-year basis. So, if I buy a new heat pump, I'm amortizing that cost over that period of time. And we've raised enough money. We don't mind writing those checks because there's a breakeven that we would get. So, when the customer pays us for the utility every month, that becomes our revenue, like a utility. We're almost like a virtual utility.
