What you need to know about heat pumps: Cost, rebates, energy efficiency and more

Alongside rooftop solar panels and electric vehicles, heat pumps have emerged as a key climate solution and staple of the residential electrification movement.

From securing rebates to finding the right contractor, here's what you need to know about the heating and cooling appliance.

What are they?

Heat pumps are an electric alternative to furnaces and traditional air conditioning units.

While there are various types of heat pumps, such as geothermal, absorption and water source, the most common is the air-source heat pump, which transfers heat between your house and the outside air.

Much like your refrigerator, the appliance uses electricity to transfer heat from a cool space to a warm space. In the summer, heat pumps move heat from your house to the outdoors, and in the winter, they move heat from the outdoors into your house.

Because the heat is transferred instead of generated, heat pumps are more efficient than conventional heating technologies such as gas furnaces, which burn fossil fuels for energy. For instance, an air-source heat pump can produce up to three times more heat than the electrical energy it consumes, according to the U.S. Department of Energy.

Do heat pumps work in colder climates?

While earlier generations of the appliance didn't work as efficiently in freezing temperatures, heat pumps are used today in some of the coldest regions of the globe thanks to advances in the technology.

In Norway, where the average winter temperature sits at -6.8 degrees Celsius, 60% of buildings are equipped with a heat pump, according to the International Energy Association.

Meanwhile, here in America, the appliance is installed in 13% of all homes as of 2020. That's equal to 16.31 million heat pumps nationwide, the U.S. Energy Information Administration reported in its 2020 Residential Energy Consumption Survey.

In Illinois, there were 110,000 heat pumps in 2020, representing 2% of all homes.

To drive up those numbers and cut down on home heating emissions, a coalition of 25 governors including Gov. J.B. Pritzker recently announced an ambitious push to reach 20 million heat pumps by 2030. That would mean nearly quadrupling the 4.8 million heat pumps the coalition's states and territories had deployed as of 2020.

How much do they cost?

Homeowners can expect heat pumps to cost on average $14,000, after rebates, according to tech analysis website Carbon Switch.

However, a number of caveats exist: How big is your home? How much energy do you use? Do you need a ducted or ductless system?

Taking these into consideration, Carbon Switch reports costs can range between $3,500 and $20,000, with home size being the most influential factor.

For homes without ducts, air-source heat pumps also are available in a ductless version called a mini-split heat pump, which allows temperature control in individual rooms or spaces. Those installations cost between $7,000 and $25,000, depending on the number of zones, with the cost just over $12,000 on average after rebates.

Because heat pumps are more efficient than traditional heaters, the appliance can be expected to save homeowners money in the long run on their utility bills.

According to a 2021 study by Illinois consumer advocacy group Citizens Utility Board, Chicago households that switch from natural gas to a heat pump could see lifetime savings ranging from $24,716 to $47,104.

Savings vary based on replacement scenarios. In cases where both the furnace and central air conditioning are at the end of their service life, monthly cost savings begin accruing immediately.

"If only the furnace is at the end of its life, payback ranges from three to six years for both multi- and single-family homes. Switching to electric heat pumps early, while the furnace still has life, has a longer payback period of course," according to the study. "However, even in this 'retrofit' scenario, payback at 10 to 11 years is similar to other energy investments, such as installing solar panels, and not unreasonable given the substantial public health and environmental benefits of transitioning away from fossil fuels."

What discounts, rebates or incentives are available?

The biggest heat pump savings available right now come in the form of a 30% federal tax credit on the cost, translating up to $2,000 for heat pumps bought after Jan. 1, 2023. These Clean Energy Tax Credits are available through the 2032 tax year.

Savings also are available through ComEd. The utility offers discounts of up to $1,400 for air-source heat pumps and up to $1,000 for mini-split heat pumps. These credits should be provided at the point of sale by an eligible distributor.

While the state does not currently offer any heat pump-specific savings, it is expected to start rolling out home energy rebates next year through the Inflation Reduction Act, which included $8.8 billion in rebates for home energy efficiency and electrification projects.

The funding will include upfront electrification rebates, covering 100% of heat pump costs up to $8,000 for low-income households and 50% of costs up to $8,000 for moderate-income households.

"Funding for the program has not yet been processed by or provided to Illinois EPA," state Environmental Protection Agency spokesperson Kim Biggs said. "The Illinois EPA will update our webpage when significant activities occur."

How to find the right contractor

Oak Park resident Derek Eder recently documented his family's journey to completely electrify their home with solar panels, electric vehicles and heat pumps.

Eder said the biggest hurdle to overcome in the heat pump installation process was a wide range of conflicting opinions he received from HVAC installers.

"Over the course of 6 months, we reached out to and got quotes from many HVAC installers," Eder wrote in his blog. "Most said they just don't install heat pumps. Some said they do, but can't recommend going 100% electric. One even proposed we install 5 mini-splits for $70k, one for each floor and bedroom, and completely ignore our existing ducts - a ridiculously wasteful and expensive proposal."

While the family eventually got promising quotes from Energy Matters and On the Mark HVAC, Eder said he had been discouraged by what he was being told from industry professionals.

His advice? Stay persistent.

"The market for heat pumps is growing, and therefore, the need for contractors to be able to use them and know when and how to install them is growing, but it still feels like there's a pretty big gap there," he said.

Andy Frank, a Glen Ellyn native who founded climate technology company Sealed, said a lack of experienced heat pump installers is "absolutely one of the challenges in the industry."

Sealed helps homeowners figure out where they should make long-term energy investments - such as air sealing the attic or switching to heat pumps - and then connects customers with local installers.

"It's like any technology transition, right? There's a transition for people in the industry to understand and adopt, and then start to evangelize new technology," Frank said. "Homeowners are getting educated, and the contractors are getting educated, too."

How else can I cut down on cost?

Eder said another lesson learned during his home's electrification process was that insulation and energy efficiency are key.

Before going ahead with their heat pump installation, the family spent $2,300 on insulation, ultimately reducing their home energy needs by 20% - from 100,000 to 80,000 BTUs.

"It's not fun or exciting like buying something shiny, but in our house, it made a huge difference," he said.

For Frank, who founded Sealed because he wanted to help homeowners tackle barriers to lowering their energy costs, "energy efficiency is really the biggest energy and carbon saving resource that we have," he said.

"I really wanted to focus on how we can scale this resource, because it's something that on paper is good for everyone," Frank said. "The cleanest energy is the energy that you don't use, right? It's the key to fighting climate change."

Sealed, which covers the upfront cost of improvements and gets paid back with energy reductions over time, expanded its service area to the Chicago metro region last year.

• Jenny Whidden is a climate change and environment writer working with the Daily Herald through a partnership with Report For America supported by The Nature Conservancy. To help support her work with a tax-deductible donation, see dailyherald.com/rfa.