Heat pumps are becoming more popular for residential homes with rising energy prices and the need to reduce the use of fossil fuel heating systems.
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Thinking about a home heat pump? New and expanded government incentives and sharply rising utility costs make it even more attractive.
Especially when used in conjunction with clean electricity sources like rooftop or community solar, a heat pump—a single electric appliance that can replace a homeowner’s traditional air conditioner and furnace system—can heat and cool a home with less planetary damage.
These investments also become more attractive to consumers given the heavy hand of inflation. According to SaveOnEnergy.com, 87% of US homeowners surveyed reported experiencing higher prices in at least one utility or utility category during the summer. There’s another possible bonus: incentives are being offered through the 2022 Inflation Reduction Act.
“These incentives not only save you money on your utility bills now and in the long term, they also put our economy on track to reduce fossil fuel consumption that contributes to climate change,” said Environmental Law Director Miranda Leppla. clinic at Case Western Reserve University School of Law. “It’s a win-win.”
The use of heat pumps will become more widespread as governments legislate their adoption. Washington State recently mandated that new homes and apartments be built with heat pumps. In July, California Governor Gavin Newsom announced a goal of 3 million climate-ready and climate-friendly heat pumps by 2030, 7 million by 2035, and 6 million by 2030.
Here are four important things to know about upgrading your home to a heat pump system.
Heat pump cost, savings and efficiency considerations
According to Rewiring America, a nonprofit focused on electrifying homes, businesses and communities, heat pumps are suitable for all climates and save three to five times more energy than traditional heating systems.
Instead of generating heat, these devices transfer heat from the cool outdoors to the warm indoors, and vice versa in hot weather. Heat pumps rely on electricity instead of natural gas or propane, both of which have higher carbon emissions than renewable electricity like wind or solar, said Jay S. Golden, director of Syracuse University’s Dynamic Sustainability Lab.
According to Rewiring America, heat pumps can cost anywhere from about $8,000 to $35,000 to install, depending on factors such as the size of the home and the type of heat pump, but these savings can add up to hundreds of dollars a year for the average household. . Plus, it’s a long-term game, because according to Rewiring America, the average lifespan of the heat pumps most people consider installing is 10 to 15 years.
Electricity costs also become more stable by insulating consumers against fluctuating gas prices, said Joshua Skov, a business and government consultant on sustainability strategy who serves as an industry mentor and instructor at the University of Oregon.
“Although there is an initial cost, millions of homeowners will save money with a heat pump over the life of the unit,” he said. “You’ll save more by paying a fraction of the federal government’s upfront costs.”
Inflation Reduction Act incentives
The Inflation Reduction Act—a broad climate protection effort by the federal government—includes numerous incentives to reduce the cost of energy-efficient property improvements. Jono Anzalone, a professor at the University of Southern Maine and executive director of the Climate Initiative, which empowers students to fight climate change, says those incentives go far beyond what’s available to homeowners today.
For low-income households, the Inflation Relief Act covers 100% of the cost of a heat pump, up to $8,000. For middle-income households, it covers 50% of your heat pump costs, up to the same dollar limit. Homeowners can use a calculator available from Rewiring America to determine their eligibility.
If you’re considering multiple green home improvements, keep in mind that the law’s total cap for “qualified electrification projects” is up to $14,000 per home.
Federal tax credits for homeowners
Peter Downing, director of accountancy firm Marcum LLP, said those over the income threshold for relief could benefit from the non-business energy carrier credit, commonly known as 25C, from January 1. tax credits and rebates group.
Homeowners can receive a 30% tax credit for home energy efficiency projects such as heat pumps. In a given year, they can get a credit of up to $2,000 for installing certain equipment, such as a heat pump. According to the Congressional Research Service, this loan will expire after 2032.
Another tax credit is available for homeowners who purchase a geothermal heat pump, which is a more expensive but longer-term option on average. According to Rewiring America, which estimates that the average geothermal installation costs about $24,000 and lasts twenty to fifty years, homeowners can receive a 30% tax credit for a geothermal heating installation. That means the average tax credit for this type of pump would be about $7,200, Rewiring America said.
The ventilation system of the geothermal heat pump located in front of the residential building.
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The Inflation Reduction Act regulations are still in place. But eligible consumers may be allowed to receive both a discount and a credit, Downing said. But based on previous IRS guidance on federal government-sponsored energy rebates, the math won’t be so simple. Let’s say a consumer is entitled to a 50% discount on a heat pump that costs $6,000. For tax credit purposes, the remaining $3,000 may qualify for a 30% tax credit, resulting in a $900 credit.
State and local financial support
States, municipalities and local utility companies may offer rebates for certain efficient appliances, including heat pumps. “Check them all out because there are so many different levels of programs, you really have to hunt around,” said Jon Huntley, senior economist at the Penn Wharton Budget Model, who co-authored an analysis of the potential impact of the Anti-Inflation Act. in economics.
Since the programs are updated frequently, check back often to see what new state, local and municipal-based incentives may be available, Gold said. Reputable local contractors should also know about local incentives, he said.
Anzalone says many installers have aggressive financing packages to make heat pump installation more affordable.