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Beat the Heat with Heat Pumps


September 7, 2022  by  Lou Finazzo
Category:  Climate Change Energy Resources and Conservation Guest Author

Beat the Heat with Heat Pumps

The last two summers brought record-breaking heat waves to the Pacific Northwest (e.g., the infamous June 2021 heat dome). As the effects of climate change increasingly impact Washington, communities throughout the state will face extreme heat events with greater frequency and intensity.

Only 53% of homes in Washington have air conditioning, leaving many residents — particularly low-income and Black, Indigenous, and people of color (BIPOC) community members who are less likely to have access to air conditioning — vulnerable to heat-related illnesses and death. Local governments are utilizing a variety of tools to prepare their communities for climate change and extreme weather. One method is incentivizing heat pump installations as a means of cooling and heating homes.

This blog will provide an overview of heat pumps, examples of local government incentives in Washington State, and emerging state and federal programs.

What Are Heat Pumps?

Heat pumps use electricity to transfer heat in order to warm or cool a home. During the heating season, heat pumps transfer heat from the outdoors into the home, and during the cooling season, transfer heat from the home to the outdoors. The most common heat pumps in the nation are ducted air-source heat pumps (for homes with existing HVAC ducts) and ductless air-source heat pumps (for homes without existing HVAC ducts).

By transferring heat rather than generating heat or cooling hot air, heat pumps are highly energy efficient. These efficiency gains result in energy cost savings, reduced greenhouse gas (GHG) emissions, and both adaptation and resilience building for communities facing extreme heat.

Given these benefits, why aren’t heat pumps being rapidly adopted in Washington? In short: the financial burden. Installing a heat pump system can cost up to $10,000 or more depending on the type of heat pump, the heat pump’s efficiency rating, labor costs, and other factors. High costs make heat pumps inaccessible for low-income households and prohibitively expensive for most moderate-income households. This is where incentive programs can have a significant impact.

How Local Governments Are Incentivizing Heat Pumps

Local governments are using rebates, loans, and other approaches to incentivize homeowners to install heat pumps. Let’s look at how each is designed and offered.

Rebates

The most common incentive for heat pump installations is a rebate. Rebates are most often distributed to approved, qualified installers who then pass the savings on to utility customers in their installation bid. Some public utility districts (PUDs), such as the Benton PUD and the PUD No. 1 of Clark County (commonly known as Clark Public Utilities), offer rebates ranging from $100 to $2,000 depending on the type of heat pump (ducted or ductless), the heat pump’s efficiency rating, and the home’s existing heating method. Some city-owned electric utilities, including Centralia City Light, Ellensburg Electric Utility, and Seattle City Light, offer rebates between $300 and $1,600.

Loans

Another approach is to reduce the financial burden on residents through loans. Loans for heat pumps are subject to various requirements, including the use of approved qualified contractors and that the home’s existing heat source is electricity, among others.

Tacoma Power offers different loan options for ducted and ductless heat pumps. For ducted heat pumps, Tacoma power offers seven-year, 0% interest loans of up to $10,000. For ductless heat pumps, there are two loan options: The first is a seven-year, 0% interest loan of up to $4,000 and the second loan option, which is designed for income-qualified customers, offers a $3,500 loan plus a $500 rebate. The homeowner must repay the loan if, at a future date, the home is sold to a new owner.

Clark Public Utilities also offers loans for ducted and ductless heat pumps. The loans for both heat pump types have a 4.99% interest rate and repayment terms of five years for projects that cost less than $10,000 and seven years for projects more that cost more than $10,000. Applicable incentives, such as rebates, are deducted from the total loan amount.

Partnerships and group purchasing

An innovative approach currently being piloted is the Energy Smart Eastside collaborative heat pump program. The program brings together  the cities of Bellevue, Issaquah, Kirkland, Mercer Island, and Redmond, and a variety of partners to pool incentive resources and bolster outreach efforts.

The program utilizes a group purchasing model in which interested eligible residents can purchase heat pumps as part of a group order and, in turn, receive a discounted rate. The program offers at least $500 off for installation and the incentive can be stacked with city and utility (in this case, Puget Sound Energy) incentives. Income-qualified residents are eligible for additional benefits. For example, income-qualified residents of Bellevue are eligible for a mix of incentives and financing options that may result in no-cost installations.

State and federal incentives

The Washington State Department of Commerce offers Clean Energy Fund Building Electrification grants for projects that will support the installation of electric equipment (e.g., heat pumps) and fuel switching (e.g., switching a building’s heat source from gas to electric). Local governments can apply to receive grant funds for both their own buildings and as program administrators. The application materials will be available fall 2022.

Passed by the United States. Congress in August 2022, the Inflation Reduction Act appropriates funds for a high-efficiency residential electrification rebate program that includes heat pump rebates of up to $8,000 for low-income households (distributed by state energy offices and tribal governments). Non-income eligible households will qualify for up to $2,000 in tax credits for having a heat pump installed. The rebates will become available in 2023 and tax credits will apply to equipment installed Jan. 1, 2023, or later.

Conclusion and Resources

As extreme heat becomes the summertime norm, increasing access to affordable, efficient, and reliable cooling is essential for all Washington residents, especially low-income and BIPOC community members. By incentivizing heat pump installations in conjunction with state and federal resources, local governments can help their communities build resilience and adapt to climate change in an equitable way.

Below are additional resources from MRSC:


MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

About Lou Finazzo

Lou joined MRSC in May 2022 as a Public Policy Intern. He is pursuing a Master of Public Administration degree from the University of Washington with concentrations in policy analysis & evaluation, environmental policy, and public financial management.

Lou has previous experience as a litigation assistant and research analyst at Sierra Club where he focused on a variety of topics including climate change, environmental justice, fossil fuel infrastructure, and transportation.

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