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How heat pumps can maintain their momentum in 2025 and beyond

By Jeff St. John --

A host of local, state, and federal policies have been enacted to spur heat pump adoption. Now, advocates are assessing how to keep things going under Trump 2.0.

Heat pumps are the single biggest tool for U.S. households to cut carbon emissions and curb unhealthy air pollution. They’re also far more efficient than the fossil-fueled or electric resistance heating appliances found in most homes, meaning most households can save on utility bills by purchasing one.

But making it as cheap and simple as possible for households to replace their fossil-fueled boilers, furnaces, and water heaters with electric heat pumps involves a lot of hard work — and not a little bit of extra money. Heat pumps, which are reversible air conditioners, can come with significant up-front costs.

Over the past four years, numerous local, state, and federal policies have been signed into law to lower heat pump costs and spur adoption of the appliances. Now, advocates are assessing how to keep that momentum going under an incoming Trump administration and a Republican-controlled Congress likely to reverse or at least water down federal support.

That’s not an ideal political turn for a technology that faces an uphill climb, even with its many benefits and the recent policy support.

Fewer than one in five U.S. households have heat pumps today. Far more must install them to eliminate the roughly 10 percent of U.S. carbon emissions that come from burning fossil fuels in homes. To also replace the inefficient electric resistance heaters that tax the power grid and cost consumers, every U.S. household with heating would need to get a heat pump.

Heat pumps have outsold fossil-gas furnaces for the past two years, but adoption is still not growing anywhere near fast enough. Heat pump sales need to triple over the next three years to hit the Biden administration’s goal of halving U.S. carbon emissions by 2030, according to advocacy group Rewiring America.

So, where does the U.S. stand now? In a December report, the Building Decarbonization Coalition, a nonprofit that promotes heat pumps and is part of public-private partnerships in nine states, laid out how far the country has come, how much more must be done, and what the change in federal government will mean.

“We’re talking about what we’ve learned, what we’re hopeful for, and yes, what’s making us perhaps bite our nails a bit as we’re looking ahead to the post-2024 election landscape,” said Rose Stephens-Booker, BDC’s managing director of programs and partnerships.

 

The good news — growing markets, supportive incentives, aggressive goals


The first positive news comes from the marketplace, where heat pumps continue to outsell fossil gas furnaces. That trend began in 2022 and accelerated in 2023.

And as per data from the Air-Conditioning, Heating, and Refrigeration Institute through September of this year, ​“once again, we’ve seen heat pumps outpace their fossil-fuel counterparts,” said Kristin George Bagdanov, BDC senior policy research manager.

In fact, heat pump sales widened their lead over the past 12 months, exceeding furnace sales by 27 percent, up 2.4 percent compared with the previous 12 months.

BDC tracked similarly favorable market data for water heating, which makes up about 18 percent of residential energy use. Electric water heaters expanded their lead over fossil-gas water heaters in 2024, surpassing sales of their gas counterparts by 23 percent, according to BDC.

Most of the electric water heaters in homes today are electric resistance models, which are far less efficient than heat pump water heaters. But data from the Environmental Protection Agency shows that in 2023, heat pump water heaters outsold gas-fueled water-tank-storage water heaters for the first time. Still, the technology was installed in only about 4 percent of U.S. homes as of late last year.

The primary barriers to expanding these markets remain up-front cost and complexity.

Most households replace heating systems when existing equipment breaks down. It’s harder to cheaply and quickly replace fossil-fuel units with heat pumps, which can require extra work like electrical upgrades or installing new pipes. And many contractors are leery of heat pumps, since longer and more complicated jobs mean less money, along with concerns that a novel system won’t be as reliable as fossil gas.

Technology advances like 120-volt heat pump water heaters and window-mounted heat pumps are starting to ease some of these constraints, particularly for renters and households that lack central air systems. But to make pumps the preferred option for households and contractors alike will take a concerted effort, said Matt Casale, BDC’s director of state mobilization — particularly to ensure that lower-income households aren’t left behind.

“Cost of living is and will continue to be a major issue in the years to come,” he said. ​“States that are leading on building decarbonization are going to be digging into this issue to ensure that the transition is affordable, accessible, and equitable.”

Getting costs down


Heat pumps are more expensive up front than fossil-gas heating equipment, although just how much more expensive depends on a wide and sometimes unpredictable set of variables. Regional climate conditions make a big difference in installation prices, as do the vagaries of individual home construction, insulation, and preexisting heating systems. The availability of equipment and skilled labor to install it also influences up-front costs, as does contractor education and willingness to take on the extra work that’s likely to be involved.

As for long-term costs, the price of electricity versus fossil gas plays a major factor on whether swapping your furnace for a heat pump will save you money over its lifetime. So does the appliance you’re switching from. If you’re ditching an old, inefficient gas or oil heating system, chances are the heat pump financials work out for you. If you have a newer, more efficient gas furnace, they might not.

Overcoming these obstacles will require more policy support, Casale said.

To be fair, state incentives and policy goals aren’t the only factors speeding up heat pump deployment. In fact, the highest proportion of homes with heat pumps are in Southern states, where a relative dearth of fossil-gas heating, low electricity rates, and milder climates have driven adoption despite relatively weak efficiency and electrification incentives.

Still, some states will require more aggressive support to boost adoption — and some are already seeing success with such an approach.

In Maine, generous incentives and households looking for alternatives to costly fuel-oil heating systems have led the state to already exceed its goal of 100,000 installations by 2025 and re-up its target to 175,000 by 2027. In California, joint public- and private-sector efforts have streamlined the process for households and contractors to secure state, utility, and federal incentives and rebates in a bid to quadruple the 1.5 million heat pumps now installed to 6 million by 2030.

Multistate partnerships are also pushing the envelope. Last year the U.S. Climate Alliance, a bipartisan group of 25 states, agreed to install 20 million heat pumps by 2030. And earlier this year, nine Northeastern and Western states and Washington, D.C., set a shared goal for heat pumps to meet at least 65 percent of residential-scale heating, air-conditioning, and water-heating shipments by 2030 and 90 percent by 2040.

States are also taking action on the legislative and regulatory fronts. In 2024, 15 states and Washington, D.C., passed a combined 35 laws taking on building decarbonization in one form or another, according to BDC’s year-end tally.

 

Beyond increasing incentives, many states are taking action to reform underlying regulatory structures that privilege fossil gas for building heating, Bagdanov said. Examples include limiting the practice of utilities charging their customers at large for the cost of extending new gas pipelines to newly built homes, and ​“reforming a utility’s obligation to serve gas, and allowing them to substitute it with clean electricity or thermal energy,” as is being done in Massachusetts, New York, and California.

Other states are taking on the bigger question of how gas utilities must transform to fit into a low-carbon future, she said. As of this fall, 12 states with a third of the U.S. population were examining so-called future of gas regulatory proceedings such as a groundbreaking effort approved by Massachusetts regulators last year. The aim is to restructure how gas utilities operate to reduce the long-term cost of building and maintaining pipeline networks that will be used far less in the coming decades due to decarbonization targets.

Others are imposing ​“clean heat standards,” such as those launched in Colorado and Vermont, that reward gas utilities for reducing their emissions via alternative investments, including helping customers switch to heat pumps.

Where the federal government may fall short


In the past four years, ​“private, public, state, and federal commitments and partnerships have layered on top of one another,” Bagdanov said. But in the next four years, heat pump advocates must find ways to move ahead without a friendly federal government.

That’s not to say that the primary Inflation Reduction Act programs boosting heat pump adoption are certain to be undone. But they do face a murky future under the Republican-controlled government, according to Skip Wiltshire-Gordon, senior manager of government affairs for policy strategy firm AnnDyl Policy Group.

Most at risk are the Energy Efficient Home Improvement tax credits, known as 25C credits. Those offer a tax credit of 30 percent of the cost of a range of upgrades to heat pumps, capped at $2,000 for an air conditioner/​heater or a water heater and $1,200 for other qualifying improvements such as insulation and home weatherization.

The IRS reported in August that U.S. households claimed $2.1 billion in 25C tax credits, including credits for 267,780 heat pumps and 104,180 heat pump water heaters.

But Republicans in Congress want to extend the 2017 Trump tax cuts next year and ​“are going to be looking to find funding offsets pretty much anywhere they can,” Wiltshire-Gordon said during last week’s webinar. ​“The inflation Reduction Act is one place they’ll look.”

It’s not clear if that hunt for offsets will affect the Inflation Reduction Act’s $8.8 billion in home energy rebates, which can provide qualifying households with as much as $14,000 for electrification upgrades. The Department of Energy started approving state applications for accessing and disbursing those funds earlier this year, and was processing about $6.6 billion in applications as of December.

While it’s more complicated to claw back funding that’s been promised to states than it is to eliminate tax credits, ​“the executive branch has a wide latitude on a whole host of programs and setting requirements,” Wiltshire-Gordon said. It’s possible that the DOE under the Trump administration could set ​“more onerous requirements to potentially limit uptake.”

It’s also likely that other federal grant programs that have helped support heat pump adoption, such as the U.S. Environmental Protection Agency’s $4.3 billion Climate Pollution Reduction Grant program, would be targeted by Republicans as part of a broader rollback of the Biden administration’s environmental justice agenda.

Donald Trump has also pledged to increase U.S. oil drilling and fossil-gas exports as part of an ​“energy dominance” program and plans to appoint oil-friendly politicians and businessmen to a newly formed National Energy Council. It’s not clear whether this program will benefit ongoing fossil-fuel industry efforts to fight building electrification policies at the state and local levels.

But additional federal support for heat pumps — and reducing fossil-fuel use in buildings — is highly unlikely to emerge from the Trump administration or a Republican-controlled Congress.

Instead, ​“the next big wave of progress really does need to happen in the states,” Casale said.

“States will have to protect progress that has already been made, and work within a challenging political atmosphere where affordability and keeping down consumer costs is key,” he said. That won’t be easy, ​“but as a movement, I think we’re up for these challenges.”

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This article first appeared at Canary Media.


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