More Americans are purchasing heat pumps, an eco-friendly alternative to furnaces and air conditioners that can significantly reduce monthly energy bills. But the pace of installations has slowed in the past year, posing a hurdle for the Biden administration’s climate plans.
Rising interest rates and inflation, combined with a slow and confusing rollout of federal government incentives for heat pump purchases, are largely responsible for the recent sales decline, energy analysts said. These headwinds, if they persist, could jeopardize President Biden’s goals of effectively eliminating American greenhouse gas emissions by 2050.
Biden’s signature climate law, the Inflation Reduction Act, offers tax credits of up to $2,000 a year for the purchase of heat pumps, devices that can heat and cool homes and are significantly more efficient than oil heaters. and gas. Those incentives cover only a small portion of the $16,000 it costs for an average heat pump installation, according to Rewiring Americaa nonprofit group that works to increase the use of cleaner forms of energy.
A much more generous program that would provide refunds of up to $8,000 for heat pump purchases, which also authorized Biden’s climate law, is not expected to be operational until next year; The timing will vary by state. That program is taking longer to implement because it will be administered by state governments, which have to come up with a system to distribute the money and then submit those plans for approval by federal officials.
“We’re not on the right track,” said Alexander Gard-Murray, a political economist at Brown University’s Climate Solutions Lab. “We need to dramatically accelerate adoption.”
The facilities have slowed down recently because the cost of installing a new heat pump is significant enough that many homeowners will need to borrow money to purchase one. This is not something many people are eager to do, given that mortgage and other lending rates are at or near their highest levels in decades.
“The incentive level for heat pumps in the Inflation Reduction Act is not large enough to overcome the effect of higher interest rates on HVAC installations,” said Trevor Houser, partner at Rhodium Group, an independent research firm, referring to heating. Ventilation and air conditioning systems.
Other people, including most low-income Americans, can’t take advantage of the credits because they don’t owe enough taxes.
Unlike air conditioners or boilers that cool or heat the air inside homes, electric heat pumps transfer heat and move it into or out of buildings. As a result of their operation, heat pumps can operate at greater than 100 percent efficiency, which is much higher than that of a typical air conditioner or boiler.
The typical homeowner can save more than $500 a year on energy and heating bills by replacing an aging heating and cooling unit with a heat pump, according to Carbon Switch, a clean and renewable energy company.
The IRA limits the use of the heat pump tax credit to devices that meet or exceed high efficiency standards. Higher efficiency heat pumps generally cost more than lower efficiency ones and are harder to find.
More expensive heat pumps are a necessity in states that have harsher winters. Nick Bender, a contractor in the Minneapolis area who has been installing heat pumps for more than 15 years, said he preferred inverter heat pumps, which are more efficient, quieter and run at lower temperatures than older models. .
“If you’re really trying to install a heat pump that’s going to heat well in Minnesota, you need an inverter heat pump,” Bender said.
Some homeowners who recently purchased heat pumps said the federal IRA incentives were difficult to use.
Becca Zerkin, an engineer from Chapel Hill, North Carolina, said she and her installer had spent hours styling through a federal database to determine which model would qualify for the $2,000 federal tax credit. Even after all that work, Zerkin said, she still isn’t sure if the system she purchased, which cost her $11,000, will qualify for the tax exemption when she files her taxes next year.
“The installer and I were doing a ton of research, following every link, and it kept ending up in the same cycle of ‘Okay, I still don’t know the answer,’” Zerkin, 52, said.
Houser said investments in electric vehicles and solar panels were accelerating faster than heat pumps, but the market was growing relative to competing fossil fuel-burning devices.
Total shipments of heat pumps this year have been higher than orders for gas- or oil-fired hot air boilers, according to the Institute of Air Conditioning, Heating and Refrigeration, an industry group. Biden administration officials also noted that the recent drop in installations came after a surge in the pandemic when many Americans were renovating their homes. Heat pump sales this year are still expected to be higher than in 2019 before the pandemic.
“President Biden’s historic investments in clean energy are leading consumers to choose more clean energy appliances and reduce their costs,” Treasury Department spokesperson Ashley Schapitl said in a statement.
Energy experts said interest in heat pumps should increase as states begin implementing rebates, which will immediately reduce costs and not require people to wait until tax filing season to claim a credit.
The rebate programs provide a total of $8.8 billion for various home energy efficiency and electrification projects. States have until the end of January 2025 to apply for the money. The Energy Department expects rebates to be available “in much of the country” next year.
Some states offered incentives for heat pumps long before Congress passed the IRA. Maine began its rebate program in 2012. So far this year, more than 32,000 heat pumps installed in the state have received rebates, up from more than 28,000 in 2022 and more than 8,000 in 2018, according to Efficiency Maine, which administers state energy programs.
Montana, which has one of the lowest rates of heat pump sales in the country, has seen an increase in interest in the installations, said Ben Brouwer, energy department chief for the Montana Department of Environmental Quality.
The state has requested $1.8 million in administrative funding from the federal government, which it will then use to request $71 million to dole out as reimbursements. But even once the state’s rebate program is up and running, which Brouwer said would be in early 2024, expect a variety of challenges.
Montana will have to train more contractors to install heat pumps, especially in more rural areas. “There is a limited pool of contractors available to implement the incentivized measures in these programs, whether they are energy contractors or auditors, plumbers or electricians,” Brouwer said.
Another major problem is that many Americans are not aware that they could save thousands of dollars through Inflation Reduction Act programs. Only 22 percent of Americans had heard “a lot” or “a lot” about heat pump tax credits, while 77 percent had heard “a little” or “not at all,” according to one study. July survey by The Washington Post and the University of Maryland. About 32 percent had heard “a lot” or “a lot” about EV tax credits.
Ari Matusiak, CEO of Rewiring America, said officials still had a lot of work to do to raise awareness about the incentives included in the IRA.
“Right now, it’s fair to say people don’t know much about what’s available,” Matusiak said. “On the other hand, what we’ve seen is that there is a lot of interest once people find out that these incentives exist.”
