For Most Americans, A Heat Pump Can Lower Bills Right Now
February 14, 2024
As colder temperatures hit much of the country, families usually expect a bump in their energy costs. But what if you and your family could save hundreds or even thousands of dollars by switching to a more efficient energy source?
Fortunately, heat pump technology is able to make energy efficiency affordable for a growing number of American homes, for both heating and cooling. New peer-reviewed research from two national laboratories shows that for over 90% of American households assessed,[1] replacing worn-out heating equipment with the right heat pump[2]—one that matches the home's needs—will save on energy bills. Saving money with a heat pump is an opportunity for Americans in every state.
The right heat pump can save households hundreds of dollars – or more
Across the country, heat pumps are saving families hundreds of dollars on energy costs. For example, in Arizona, the new analysis shows that the best heat pump option for most homes is an ENERGY STAR, variable-speed air-source heat pump that will save on both heating and cooling energy bills. For homes where this is the best choice, average annual savings are around $300. In Michigan, for homes that are currently heating with propane or electricity the best heat pump option is a different model type designed for cold climates and could save households $1,500 annually on average.
While savings are generally highest for homes that are currently using heating oil, propane, or older electric equipment, there are also 13 million homes that currently heat with natural gas that would save by switching to a heat pump.
As shown in the figure below, homes heating with electricity already have (on average) the lowest annual energy bills. EIA's Home Heating Report estimated that homes heating with electric will spend an average of $1,063 on energy costs this winter, significantly less than homes heating with propane or heating oil. Electric rates vary widely across the country, but because heat pumps are so much more efficient than other equipment, they can help save even when rates are high.
How do heating costs contribute to annual household utility bills? [3]
Insulating first can set households up for even more savings
When heating equipment breaks down, it can mean a significant unexpected cost to a household. But that cost depends on how big your heating equipment needs to be, and larger equipment is needed in poorly insulated homes. This new analysis demonstrates that investing in envelope upgrades like insulation and air sealing can mean that the cost of purchasing and installing a heat pump can be up to $3,700 lower,[4]compared to making no insulation improvements. This is because a well-insulated home needs a smaller heat pump to stay comfortable in both cold and hot weather. These savings can be crucial for a household needing to make an emergency replacement of their heating or cooling equipment.
Specific efficiency upgrades, such as prioritizing insulation and air sealing as well as ultra-efficient cold climate heat pumps, can ensure greater savings from electrification, and savings for an even greater share of American households.
How much can different kinds of homes save with the right heat pump and envelope upgrade?
How much can different kinds of homes save with the right heat pump and envelope upgrade?
Efficiency and electrification can deliver benefits for the majority of Americans today, including reductions in household energy burdens, improved health, and comfort and safety. Additionally, access to things like air conditioning and reliable heating can be a game-changer for households that are getting them for the first time.
The Biden Administration is Working to Make Heat Pump Benefits an Option for Every Household
The Energy Department, alongside our partners across agencies and in the Administration, is working to improve options for families to improve their household efficiency and save money. That's why there is more funding coming out of DOE than ever before for research, development, demonstration and deployment activities that will aid our energy transition.
The DOE and others are working to make heat pumps and other technologies more affordable and accessible to both renters and homeowners. The Inflation Reduction Act of 2022 allocated $8.8 billion for state rebate programs to provide homeowners and rental property owners with upfront financial incentives for home decarbonization solutions, with a strong priority for households with low-to-moderate incomes. It also created the Energy Efficiency Home Improvement tax credit — up to $2,000 per household per year for 10 years — for heat pumps, heat pump water heaters, wiring upgrades, insulation, and home energy assessments. According to the new study, these incentives can make heat pumps a cost-saving option for an additional 2.5 million households. Upgrading the building envelope through improvements in insulation, windows, and doors makes heat pumps cost effective for another 4 million homes. Visit the DOE Savings Hub for more information on financial incentives for homeowners and renters.
DOE and the national laboratory system are also working to make heat pumps and other key electrification technologies more affordable and easier to install, while also supporting the growth of high-quality jobs in our nation's communities. This includes reducing the cost of energy efficiency in affordable homes, accelerating the deployment of high-performance cold climate heat pumps, increasing domestic manufacturing of heat pumps, and supporting contractors with tools that make their jobs easier and more profitable. Through its "Energy Skilled" program, DOE provides recognition for professionals who can help consumers choose the right heat pump for them – and ensure it's properly installed.
DOE is implementing additional programs and actions to further reduce household energy costs for Americans — no matter the kind of energy they use to heat their homes. The DOE Weatherization Assistance Program (WAP) reduces energy costs for low-income households by increasing the energy efficiency of their homes, providing weatherization services to approximately 35,000 households every year. The Bipartisan Infrastructure Law provided a historic infusion of funding to this program, with $3.5 billion to be expended over ten years. DOE also supports the development and implementation of building energy codes by engaging with government and industry stakeholders and providing technical assistance for code development, adoption, and compliance. And the actions on appliance and equipment standards, taken by the Biden Administration in 2022, will contribute to final standards that will save the average household at least $100 annually. Finally, while the study described in this article is focused on air-source heat pumps, DOE is also investing in ground-source heat pump technology, which takes advantage of ground temperatures to provide even more efficient heating and cooling.
As heat pumps improve in performance and become more well-known, more households across the U.S. will be able to reap the benefits of this exciting technology. Colder temperatures do not have to mean breaking the bank over surging heating costs. Heat pumps, along with home insulation techniques, allow households to save money, experience lower energy bills, and enjoy a draft-free home all winter long.