How to buy a heat pump for your home

Nov 17, 2023

Last year, my furnace failed during a cold snap. My wife and I huddled in our condominium researching how we could install heat pumps instead of a gas furnace. These miraculously clean and efficient machines, essentially refrigerators running in reverse, can heat water and homes using only electricity.

As temperatures plunged toward freezing, we grew more desperate. My journey led to days of dead ends, confused contractors and wildly expensive quotes. We finally surrendered to the status quo, installing the most efficient gas furnace we could find, even if it saddled us with a fossil-fuel albatross for another decade or so.

Learn from my mistakes. As the United States begins spending millions of dollars to incentivize new heat pumps, homeowners and landlords are facing the same question: How do I install one?

The good news is that we’ve entered a golden era of home heating and cooling. There have never been as many efficient or effective heat pump models on the market. Your furnace, water heater and clothes dryer are all available as heat pumps. And thanks to an unprecedented flood of rebates and incentives from local, state and federal governments, they’ve never been this affordable, either.

The bad news? Getting one into your home is not so easy.

Millions of Americans are flooding into the heat pump market, pushing up sales. The demand is huge: About 86 percent of the 124 million homes in the United States don't have heat pump heaters, estimates the U.S. Energy Information Administration. To reach net-zero emissions by mid-century, the country will need to replace most of these in the coming decades, say researchers at Princeton University.

As it is, wait times stretch for weeks or months amid a shortage of machines and skilled contractors. Permits can be a pain. Rebates are arcane. These bottlenecks may worsen as more Americans rush to take advantage of rebates, some of which only become available this year under the Inflation Reduction Act.

Answering a few simple questions can make this process much easier. Here is a guide to installing a heat pump.

"Take stock of what's in your house already and how old it is," says Sam Calisch, an engineer at Rewiring America, a nonprofit organization dedicated to electrification. Once you’ve found the serial or model number on your furnace (or water heater, clothes dryer and air conditioner), search online to see if it's near the end of its useful life. You shouldn't feel bad about swapping out a 10-to-20-year-old gas or oil-burning appliance.

Then take the essential next step in the process: Make a plan. "For people who care about the climate, it's the most important thing you can do," says Calisch. The reason is that the majority of HVAC replacements are emergencies, like mine.

Since heat pump systems are in such high demand, they’re often unavailable on short notice, says Nate Adams, a buildings consultant whose company helps HVAC contractors create cleaner, efficient homes. "You use whatever is on the shelf, and there are no heat pumps on the shelf," Adams says, advising people not to wait until their old system dies.

So start planning now. Get a quote for a new heat pump system.

If you are ready, then you can rest comfortably knowing you won't be left shivering in your home like I was.

Your expensive investment in a heat pump will just go out the window — and the floorboards, the attic and doors — if your house is poorly insulated. Good insulation allows heat pumps to operate at maximum efficiency by maintaining a constant temperature. How efficient? The best gas furnaces on the market can convert 95 percent of the energy they consume into useful heat. Heat pumps manage a remarkable 550 percent in ideal conditions. They do this by moving heat around — pumping a liquid that expands into a gas and compresses back into a liquid — rather than burning a fuel like oil or natural gas to generate it. And modern heat pumps can do this even in temperatures down to minus-31 degrees Fahrenheit. (Maine loves them.)

Take a quick look in your attic, walls — via depowered electric outlets — and common leaky areas. That's enough to confirm if you have adequate insulation or need to call in the pros.

The average cost of adding heat pumps to existing homes is about $14,000, according to estimates by Carbon Switch, a website analyzing electrification technologies. In smaller homes or condos, a single installed heat pump may cost as little as $3,500, and renters can even buy window units for $500 to $2,000.

But a more useful way to think about the expense is how much heat pumps cost compared to replacing conventional heating systems. After incentives, the difference may be just a few thousand dollars. You’ll save money over the long run since the operating costs are lower. Carbon Switch estimates heat pumps will shave anywhere from $100 to $1,300 off your utility bill per year, based on data from the National Renewable Energy Laboratory.

But considering this a solely financial transaction misses the main reason many people make the switch: comfort and health. On both counts, heat pumps come out ahead since they avoid toxic emissions and maintain more consistent temperatures.

Luckily, almost every American is now eligible for heat pump incentives from federal, state and local governments. Here's a quick roundup:

Once you decide to buy a new system, what's the best way to finance it?

You can, of course, pay cash. That will save you any interest costs. But it may not be the most convenient or best use of money. There are attractive loans, especially from credit unions or state-run green banks, for energy efficiency projects.

There are also companies like Service 1st Financial that offer low monthly payments to lease heat pump equipment with a service contract for repairs and emergencies over as long as 15 years. Customers can upgrade, extend, purchase or return the system.

Then there are some willing to electrify your entire home. Independent "full-stack electrification service providers" are popping up from Oregon to New York. Some like Colorado-based start-up Elephant Energy partner with local contractors to install new systems, bringing down the costs of equipment, installation and financing. Others like New York-based Sealed offer to finance home energy upgrades including air sealing, insulation, HVAC and smart home technology, and then pay themselves out of the energy savings.

Lauren Salz, co-founder and CEO of Sealed, says it's risk-free for owners since they only make money if energy savings materialize, something Sealed models based on virtual and on-site home inspections. If the house doesn't save energy during a given month, the company says, Sealed receives no payment.

"Over time we figured out [these upgrades] were too much of a hassle and too expensive," says Salz. "The hassle is so big they don't even get to the point of how do you pay for it." The company, founded in 2012, serves New York, New Jersey and Connecticut, as well as counties around Philadelphia, Pittsburgh and Chicago.

DIY isn't the best approach here since you’re still facing lots of questions: Should I upgrade my home's electrical panel? What kind of heat pump should I get? What size? Do I get a single-stage, two-stage or variable-speed model?

Fortunately, more and more groups are connecting building owners with contractors with heat pump experience. It pays to shop around. You want a contractor you can trust for installing these systems. Ideally, they help bundle the incentives and advise on complementary home electrification services.

That's why some utilities, government agencies, nonprofit groups and even heat pump manufacturers now maintain a list of contractors, especially if a registered contractor is required for claiming a rebate. The Building Performance Institute has a national list of contractors by Zip code who can perform home energy audits and sometimes other services. There are state-specific lists for Colorado and California.

It's smart to get the ball rolling amid a historic shortage of skilled electricians. HVAC installers are favoring big jobs and deep-pocketed customers first. Don't be dissuaded if a contractor is unavailable or tries to push you toward a traditional furnace.

The same thing happened in the early days of electric vehicles, when car dealers peddled gasoline-powered cars to customers because that's what they knew — and it padded their bottom line. As the United States embraces the energy transition and puts money behind incentives to accelerate it, it makes sense to get ahead of the curve.