Heat pumps pull hot air into homes in the winter, and push out hot air in the summer.
This article appears in the February 2023 issue of The American Prospect magazine. Subscribe here.
Many cities and states are banning or restricting fossil fuel hookups in new buildings as part of a broader strategy to reduce carbon emissions from buildings. Electrification of buildings is a key climate strategy because space heating, cooling, and water heating comprise 46 percent of residential and commercial building emissions and more than 40 percent of the primary energy used. In addition, getting fossil fuels out of buildings has health and equity benefits.
Heat pumps could accelerate electrification. The story of why heat pump adoption is going so slowly reveals what a complex policy environment surrounds a simple technology.
Heat pumps take heat from outside and move it into your home in the winter and take heat from inside in hot weather and move it outside. Some systems use ducts like hot-air furnaces and some are ductless—you’ve probably seen these on a restaurant wall. Heat pumps offer considerable energy savings because the quantity of heat and cooling brought into your home is considerably greater than the quantity of electricity used to power the system. Households that go all-electric by installing heat pumps for space and water heating, adding rooftop solar, and using an electric car will save an average of $1,800 annually.
A recent study by University of Texas at Austin professor Thomas A. Deetjen estimated that 32 percent of U.S. houses would benefit economically from installing a heat pump, and 70 percent of U.S. houses could reduce greenhouse gas emissions. Added to the 8.7 million homes that have heat pumps already, these new installations would create an economic benefit of about $7.1 billion annually and an 8.3 percent drop in carbon emissions annually, which would avoid $1.7 billion in climate damages annually.
Some 15 states and almost 100 cities and counties have policies to promote heat pump adoption. Only four of them—California, Massachusetts, Maine, and New York—have set targets for the number of heat pumps to be installed, and meeting the targets will be difficult.
Regulatory and Permitting Obstacles. Local regulations and the permitting process are often confusing and difficult to navigate for both installers and customers. Heat pumps can violate local noise ordinances, particularly in cities with small lots. If the heat pump makes noise beyond the legal level, the contractor usually is responsible for rectifying it.
In most states, each city and town has specific regulations that contractors have to take the time to master before starting a job. One contractor told me of a recent job he completed that required multiple permits. After the assessment of the home’s heating and cooling needs (referred to as a Manual J) specific to town inspector’s requirements, the permitting required sign-off from the home insurance company and a certified plot plan (cost of $2,000) for placement of the condensing units. If the requirements are not adhered to, there are fines and costs to reconfiguring and changing equipment. He decided not to work in that town again.
In many states, there are not enough contractors with the skills to install heat pumps.
Confusing Rebate Programs. In addition to local regulations, the requirements of rebate and subsidy programs are often confusing and contradictory to state climate goals. Some rebates require that homes be weatherized first—an expensive undertaking even with rebates.
Most states offer rebates that require the customer to pay for the system up front. A lot of people can’t afford the up-front payment and for many the rebate isn’t enough incentive. The Inflation Reduction Act’s heat pump incentive program will help by offering point-of-sale rebates of up to $8,000 for purchasing a heat pump. The amount of subsidy depends on household income.
Supply Chain Delays. It is not uncommon for the ideal unit for a particular home to be unavailable. The chip shortage is partly responsible for limiting production, but there is almost no manufacturing of heat pumps in the U.S. Most heat pumps are made by Japanese or German producers. The Department of Energy investment of $250 million to promote domestic heat pump manufacturing is much needed.
Inadequate Workforce. In many states, there are not enough contractors with the skills to install heat pumps. We need to build more green-technology career ladder programs in our high schools, community colleges, and universities. At the federal level, the DOE is exploring additional investment in workforce development for heat pump manufacturing and installation. The Massachusetts Clean Energy Center is investing in training programs to bring underrepresented populations into the clean-energy trades, including heat pump installation. New York City’s Precision Employment Initiative seeks racial and climate justice through job training in the green economy for youth in areas of poverty and high levels of gun violence.
As Goes Maine. The national leader in promoting wide installation of heat pumps is Maine. With 62 percent of its households heated by highly polluting fuel oil in 2019, Maine officials knew that heat pumps would have to be a big part of reaching the state’s goal of cutting greenhouse gas emissions 45 percent by 2030.
And they’re not a hard sell—every heat pump installed saves consumers $300 to $600 in heating costs annually. The Efficiency Maine Trust, the administrative unit charged with overseeing funds for energy efficiency improvement and greenhouse gas reduction, coordinates all the policy supports needed to ensure widespread heat pump adoption: offering information, advice, and rebate and loan programs. Most importantly, the Maine legislature has taken action to require utilities to do the grid improvement planning needed for a more electrified future.
Efficiency Maine started offering rebates for air-source heat pumps in 2013 and accelerated the program in 2019 when Gov. Janet Mills set a goal, and the legislature then passed a bill to install 100,000 heat pumps in residences and commercial buildings by 2025. An online dashboard shows that 82,326 heat pumps have been installed since 2019, with roughly 7 percent of these in low-income homes.
Easy Rebates. Several factors drive this success. Easy-to-apply-for rebates are part of the story. The first hurdle to be overcome was creating consumer confidence in the product. Maine has long, cold winters that first-generation heat pumps couldn’t handle. Efficiency Maine examined the capabilities of heat pumps on the market and chose to offer higher rebates for those with a minimum Heating System Performance Factor (HSPF) of 12.0, which is greater than the standard needed for achieving the federal government’s Energy Star certification. Units at this level can provide heat at temperatures as low as negative 15 degrees Fahrenheit.
It costs between $3,500 and $5,000 to install a single “mini split” heat pump in Maine. Rebates are between $400 and $800 for the first heat pump installed and $200 and $400 for the second, depending on the efficiency level installed. Staff at Efficiency Maine are considering different tiers of rebates to accelerate adoption even more. As Michael Stoddard, executive director of Efficiency Maine, told me, “When we started, our goal was to give as many residents as possible a taste of what it is like to heat with at least one heat pump. Now we want everyone to heat completely with heat pumps.”
Maine has been a national leader in promoting wide installation of heat pumps.
Two programs help low- and moderate-income residents secure heat pumps. For residents who document their eligibility through the federal Low-Income Home Energy Assistance Program, or several income-dependent state programs, to receive rebates, the Maine State Housing Authority has dedicated some of its funds to pay for 100 percent of heat pump installation costs for the neediest households. Those customers, as well as anyone owning a home where the town’s tax-assessed property value for the home is in the bottom quartile in the county, can receive a $2,000 rebate from Efficiency Maine for the first heat pump and another $400 for a second.
About 40,000 eligible households in Maine have installed at least one heat pump. In April 2022, the Maine legislature passed a bill mandating that new affordable-housing projects funded by the Maine State Housing Authority use all-electric heating and cooling systems and must meet a recognized standard of high energy efficiency, such as Passive House.
The bulk of the funding for the rebates comes from Efficiency Maine’s participation in the ISO New England (the regional grid operator) Forward Capacity Market. Efficiency Maine receives between $5 million and $10 million annually for the reduced usage it can deliver, all of which is dedicated to heat pump rebates.
Getting Rates Right. Maine has taken action to ensure that the Maine Public Utilities Commission (PUC) is aligning its pricing and planning for grid upgrades that support state policy. The Governor’s Energy Office, Efficiency Maine, the Maine Office of the Public Advocate, and several industry and environmental groups negotiated with the utilities to establish rate discounts to encourage residents to electrify and adopt renewable energy. As a result, in December 2022, the Maine PUC ordered the state’s two largest utilities (Versant and Central Maine Power) to pilot reduced electric rates for customers adding solar panels with energy storage, switching to heat pumps, or purchasing electric-vehicle chargers.
Another rate strategy seeks to reduce peak demand. The Seasonal Heat Pump rate has lower rates in cold-weather months and higher rates in summer. For households that have electric usage, the Electric Technology rate offers a higher fixed charge year-round, but a lower charge per kilowatt to encourage adoption of electric appliances. The time-of-use rate is being adapted to promote off-peak electric use (e.g., for charging cars, running dishwashers, etc.).
Stoddard comments that by switching to the new Electric Technology rate, consumers who are using more than 1,000 kWh per month should see savings of between $100 and $200 a year in electricity costs. These voluntary rates are being piloted for two years to assess how they influence demand. While critics point out that the rates should be lower and go into effect sooner, there is widespread agreement that these rates will motivate more electrification while spreading demand to help defer and reduce the need for expensive new grid additions.
Growing a Green Grid. In April 2022, the legislature passed a new law that requires the state’s utilities to engage in a transparent and integrated process to ensure the future readiness of the grid to support the increased electrification and renewable-energy adoption called for in the state’s climate plan. Dan Burgess, director of the Maine Governor’s Energy Office, explains that the Maine Climate Council estimated that the grid will need to at least double its current capacity by 2050 to meet this growth.
Further, the shape of the distribution peak will change over the course of the day and time of year. For example, the current summer peak will change to winter as more buildings are heated with electric systems. Managing and planning for changes such as these, as well as the integration of other distributed energy resources and loads like home battery storage, EV charging, and rooftop solar, is central to the legislation’s requirements. Thus, the key factors to be considered are the upgrades that need to happen in the distribution grid and how much of that can be avoided through rate design, and by leveraging other clean-energy technologies.
The for-profit utility model is to make capital expenditures on grid capacity and infrastructure and pass those costs along to ratepayers. An integrated planning process forces those investment decisions in the open, with improved transparency and public input. Jack Shapiro, the clean-energy director at the Natural Resources Council of Maine, presents the example of a neighborhood served by a substation with a few thousand homes. The utility will present a scenario that every system is running at the same time and assume solar capacity is offline. Such a scenario would suggest a need to, say, triple the capacity of substation transformers to serve the neighborhood. Integrated grid planning challenges those assumptions.
If the sun is shining and there is rooftop or distributed solar in that area, it lowers demand from the broader grid. Smart devices can be programmed to respond to grid needs and avoid the highest annual or daily peaks. Contracts with battery operators can incentivize off-peak charging. All of these interventions can reduce the need for expanded grid capacity and could significantly lower the costs of the overall energy transition.
Creating a New Skilled Trade. Efficiency Maine has also acted to increase the supply of qualified installers. The number of companies has doubled since 2015, with more than 700 qualified installers listed on the website—more per capita than any other state, according to Burgess. This growth can be attributed to the Maine Clean Energy Partnership, which has released two reports that target the clean-energy industry, which includes energy efficiency contractors.
Kennebec Valley Community College opened a new heat pump training lab to support degree and certificate programs in plumbing; heating, ventilation, and air conditioning (HVAC); and sustainable-energy systems. Students can also take shorter-term heat pump installation and maintenance training courses. Efficiency Maine worked with the college in developing the programs. In December 2022, Gov. Mills announced $2.5 million in new workforce grants to be awarded to nine organizations for training residents in weatherization, electric-vehicle repair, solar installation, and related careers.
Ideally, there will be a rendezvous between the new federal subsidies for clean energy and state-level policies to make maximum use of them. Maine’s success shows both the complexity and the possibility.
