- States are expected to dole out billions of dollars in rebates later this year for heat pumps.
- There's already a 30% tax credit for homeowners who make energy-efficiency upgrades.
This may be the year to install an electric heat pump at home.
States are expected to start doling out funding under a nearly $9 billion rebate program later this year to make energy-efficient appliances and other home upgrades more affordable. Nine states on Wednesday also pledged to aggressively promote heat pumps so that by 2030 they would account for a large majority of the market for heating, air conditioning, and water-heating systems.
The efforts are aimed at replacing oil and gas in residential buildings, a major contributor to the climate crisis. The energy Americans use at home accounts for about 19% of greenhouse-gas emissions, according to the Energy Information Administration.
Electric heat pumps are also more efficient at heating and cooling homes than systems powered by oil and propane. Heat pumps move hot and cold air from indoors to outdoors, rather than burn fuel, and can save the average US homeowner an estimated $500 a year. In Maine — a leader in heat-pump adoption thanks to state incentives — annual savings range between $900 and more than $2,000.
"We're thinking about ways to provide more incentives so that we can make the decision easier for consumers because heat pumps are not cheap," Serena McIlwain, the secretary of the Maryland Department of the Environment, told Business Insider. "They're going to need some support from states and the federal government."
Maryland is among nine states — along with California, Colorado, Maine, Massachusetts, New Jersey, New York, Oregon, and Rhode Island — that aim to boost heat-pump sales to 65% of new heating, air conditioning, and water-heating systems by 2030 and 90% by 2040.
Heat pumps currently make up about one-quarter of the HVAC market in those states, according to the Northeast States for Coordinated Air Use Management, a coalition of environmental agencies leading the multistate push to boost sales.
Cutting the up-front costs of buying and installing heat pumps is a key way to increase sales. Prices vary widely depending on the project, including where someone lives, the size of their home, the type of heat pump they buy, and the labor. A report by Rewiring America, a nonprofit that advocates for electrifying buildings, found that median costs ranged from $5,200 in Maine to more than $18,000 in Massachusetts before applying state incentives.
Federal tax breaks, state rebates
The Inflation Reduction Act signed into law by President Joe Biden in August 2022 authorized numerous programs to help homeowners go electric and invest in energy-efficient retrofits.
A tax credit of up to $3,200 became available last year for people making changes to their primary residence. However, the reach is limited because the credit can't be claimed by landlords or Americans who don't have much taxable income.
This year, states are expected to set up rebate programs funded by the act. But first, the programs need approval from the Energy Department, and so far only California, New York, Hawaii, and New Mexico have submitted their applications. Maryland hopes to offer rebates by summer or fall, Jay Apperson, a spokesperson at the state's Department of the Environment, said in an email.
One rebate program is designed to offer point-of-sale discounts on heat pumps, electric stoves, insulation, and new breaker boxes and wiring — capped at $14,000 per household. The program is targeted to low- and moderate-income homeowners, or those earning between 80% and 150% of the median income in their area. Landlords who rent to people in those income brackets are also eligible.
The other program is designed to cover half the cost of energy-efficiency projects that can show a home's energy use will drop by at least 20%, with larger rebates for low-income households.
"The rebate programs are a vehicle for equity in the IRA," Sage Briscoe, the director of federal policy at Rewiring America, told Business Insider. "They are the tool to reach families most in need of help to make changes in their homes."
Beyond the up-front costs, a barrier to increasing heat-pump adoption is education. Homeowners typically don't think about their heating and cooling system until it breaks. That leads to a mad dash to replace it, and many contractors still aren't familiar with heat-pump systems.
"We have to take advantage of that end-of-life opportunity," Emily Levin, a senior policy advisor of building electrification at NESCAUM, said. "There's a lot of outdated information about heat pumps out there."
McIlwain said Maryland was working to put more information online, including a database of contractors, electricians, and manufacturers trained on heat pumps. The website will also have information about incentives for homeowners.
States including Maine, New York, and California have already set up similar sites.