- Originally published in The New York Times, Nov. 9, 2023
More Americans are buying heat pumps, an environmentally friendly alternative to furnaces and air-conditioners that can significantly lower monthly energy bills. But the pace of installations has slowed in the past year, posing an obstacle to the Biden administration’s climate plans.
Rising interest rates and inflation combined with a slow and confusing rollout of federal government incentives for the purchase of heat pumps are largely responsible for the recent drop in sales, energy analysts said. These headwinds, if they persist, could jeopardize President Biden’s goals of effectively eliminating U.S. emissions of greenhouse gases by 2050.
Mr. 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 and gas heaters. Those incentives defray only a small portion of the $16,000 an average heat pump installation costs, according to Rewiring America, a nonprofit group that is working to increase the use of cleaner forms of energy.
A much more generous program that would provide rebates of up to $8,000 for heat pump purchases, which Mr. Biden’s climate law also authorized, is not expected to be up and running until sometime next year; the timing will vary by state. That program is taking longer to set up because it will be run by state governments, which have to devise a system for dispensing the money and then submit those plans for approval by federal officials.
“We’re not on track,” said Alexander Gard-Murray, director of the Greenhouse Institute, a climate think tank. “We need to speed up adoption dramatically.”
Installations have slowed recently because the cost of installing a new heat pump is significant enough that many homeowners need to borrow money to buy one. That 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 level of incentive 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, a partner at the Rhodium Group, an independent research firm, referring to heating, ventilation and air-conditioning systems.
Other people, including most lower-income Americans, cannot take advantage of the credits because they do not owe enough in taxes.
The Biden Administration’s Environmental Agenda
- Heat Pumps: The devices can heat and cool homes more efficiently than furnaces and air-conditioners. But higher interest rates and a slow rollout of federal incentives are causing sales to drop.
- Solar Factories: A combination of lavish new tax breaks created by President Biden’s signature climate law and tougher restrictions on foreign products appears to be reversing a long decline in U.S. solar manufacturing.
- Offshore Wind Farm: The Interior Department approved a plan to install up to 176 giant wind turbines off the coast of Virginia, clearing the way for what would be the nation’s largest offshore wind farm yet.
- Power Grids: The Energy Department will spend $1.3 billion to upgrade America’s electric grids so they can handle more wind and solar power. But officials warned that the money won’t be enough to meet Biden’s goals to power the country with clean energy.
Unlike air-conditioners or furnaces that cool or heat homes, electric heat pumps can do both by transferring heat into or out of buildings. As a result of how they function, heat pumps can operate at more than 100 percent efficiency, which is much higher than a typical air-conditioner or furnace.
The typical homeowner can save more than $500 a year in energy and heating bills by replacing an older heating and cooling unit with a heat pump, according to Carbon Switch, a renewables and clean energy company.
The I.R.A. 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 favored inverter heat pumps, which are more efficient, are less noisy and work at lower temperatures than older models.