Study: heat pumps would save most Americans money

Re-posting this here from the Nerd Corner 🤓

Researchers at the National Renewable Energy Lab (NREL) published the most comprehensive assessment to date of the impacts of converting home heating systems to heat pumps. The study was published in the journal Joule (though it's mostly behind a paywall), and there's also an informative NREL press release and Heatmap article from Emily Pontecorvo.

Not accounting for subsidies provided in the Inflation Reduction Act or by states, the study found that heat pumps would be cost-effective for 59% of American households, cutting home energy use by 31–47% on average. Also improving home insulation and installing the most efficient heat pumps would reduce monthly energy bills for the vast majority of households, but would add upfront costs. Improving insulation plus a heat pump would reduce home energy use 41–52%. Almost all homes that use fuels other than natural gas would save from converting to a heat pump, if they also have air conditioning:

For the 49 million homes that use electricity, fuel oil, or propane for heat and have air conditioning, 92% to 100% of homes would see energy bill savings, with median savings of $300 to $650 a year depending on heat pump efficiency.

But fewer households would see savings if they don't have air conditioning (because the heat pump does both jobs; but they would get the added cooling benefits!) or if they have a natural gas heating system, as the left column of these maps illustrate:

Percentage of homes that currently have air conditioning that will see a positive cash flow from switching to a heat pump from natural gas, electricity, and fuel oil and propane.

There are two key factors in the economics of heat pumps. First, reducing their upfront costs, which the Inflation Reduction Act and local incentives can help with a lot. Second, the price difference between electricity and natural gas. That should improve as more cheap solar and wind deployment reduces power costs, and rising liquified natural gas (LNG) exports increase domestic natural gas prices.

Crucially, the study also concluded that heat pumps would cut residential sector greenhouse gas emissions by 36%–64%, and overall US emissions by 5–9%, if fully adopted. So, we need to get as many heat pumps out there as possible!🤓

5 Replies

@Dana Nuccitelli Sadly, this confirms what I was already told by Rewiring America: under current circumstances, a heat pump will not save us money. Our home has natural gas heating and lacks air conditioning, and we've already upgraded our insulation, so our heating bills are extremely low. So the question is not how long a heat pump will take to pay for its up-front cost in energy savings, but how much we're willing to spend (both up-front and every year after) for the sake of the climate.

As you say, this could change if electricity becomes cheaper relative to natural gas. Electric prices will fall as low-cost solar and wind come to dominate the grid, and natural gas prices could go up if we get a carbon fee passed. Also, I suppose even more efficient heat pumps might become available. But I don't know how long any of that will take.

By the way, I was puzzled as to why a study on this topic would be in Cell, a molecular biology journal, so I clicked through. It's not in Cell; it's in an energy journal called Joule, which makes a lot more sense.

Oh yeah thanks for the Cell/Joule correction, @Amy Livingston. And yes, heat pumps won't be cheaper in every scenario unless upfront costs come down significantly. If you're in a cold climate that literally never requires A/C despite global warming, and using a natural gas furnace, it's a difficult change to justify from a purely financial standpoint. But if you can afford the switch you'll be contributing to lower climate and other air pollution, and hopefully incentives make it more affordable, and maybe someday you'll need that cooling 🤓

@Amy Livingston I fear that some of these cost comparisons are being done “wrong” - in particular, without a “total cost of ownership" perspective that includes forecasts of the future changes in gas and electricity rates (all forecasts that have seen show gas rates increasing far faster than electricity rates), and with zero $ benefit allocated to the many close-to-monetary and non-monetary benefits of heat pumps (more valuable homes, more comfortable homes, reduced local air pollution, reduced climate impact, opportunities to earn money from DER/VPP participation, etc). 

Furthermore, these studies rarely consider the fact that folks can, in many places, generate their own electrons (solar) and time-shift their electricity usage (soon, with vehicle to home EV chargers). 

When we run the numbers (which we do for 1,000s of homes in CA, for free :) we find that in almost all circumstances, heat pumps ARE an economically sensible choice. 

@Cooper Marcus I'm not disputing that a heat pump could eventually be the most economical choice, once gas prices rise and/or electricity prices fall. But right now, it does not make economic sense to spend thousands of dollars to tear out a gas boiler that's only ten years old and over 80 percent efficient and install a heat pump that would, under present conditions, cost us an extra $200 a year to run. Electrification may be cost-effective for “almost all” homes in California, but not necessarily in New Jersey.

@Amy Livingston Thanks Amy - I guess the point I'm trying to make is that when considering if a purchase of a machine (heat pump) is economical, the consideration needs to be made over the lifespan of the machine, or something close to it. Reason being: If you discovered that a heat pump WOULD reduce your bills next month, but then would INCREASE your bills the following month - would you buy it? Or not? No one buys big machines like this for a month or two - they invest in changes that are essentially permeant, and thus the timeframe over which economics needs to be considered should be a lot closer to the lifespan of the machine. 

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