New Subsidies in 2024 Could Boost Already-Prevalent Heat Pumps in Maine

in December 24th, 2023

The infusion of federal dollars could expand implementation further in the state, where the market has been thriving.

Stephen Singer, Staff Writer, Portland Press Herald

Eben Perkins says his South Portland house used to feel like a “sub-zero tundra” in winter.

After shoring up the insulation a few years back, he and his wife installed an air-source heat pump system with four indoor units but kept their gas boiler as a backup. He said the house is much more comfortable now, and he hasn’t had to use the furnace at all so far this winter.

Perkins is vice president of a Portland energy consulting firm, so he knows more than most about the benefits of electrifying a house. But his advice to others considering moving to heat pumps is to think big.

“Don’t rule out the whole house option,” said Perkins, whose company, Competitive Energy Services, works with customers on market assessments, navigates state and federal energy legislation, and develops strategic plans for energy investment. As long as people have a backup power option, he said, a whole house retrofit can both heat and cool a home efficiently while helping lower greenhouse gas emissions.

Maine already has become a leader in heat pump installation, and the trend seems certain to continue as units become more versatile and as subsidies help defray upfront costs.

Three months ago, Gov. Janet Mills announced that the state has surpassed its goal of installing 100,000 heat pumps by 2025, two years ahead of schedule. She has set an updated target of installing 175,000 more heat pumps in Maine by 2027, and the state soon will have a new source of federal funding to help reach that goal.

The Inflation Reduction Act, which was passed in 2022, will provide more than $71.6 million in home-energy-rebate funding to the state, according to the Governor’s Energy Office. The money will be divided equally between energy efficiency and electrification and appliances, including heat pumps. Both programs will focus on low-income homeowners, who often see the cost of installing heat pumps as an insurmountable barrier.

The Governor’s Energy Office will partner with Efficiency Maine, a quasi-government agency that oversees state energy incentives, and MaineHousing, a state agency that links public and private housing finance, to draft a plan in early 2024. After the U.S. Department of Energy offers guidance, the state will be able to receive and spend the money.

Officials expect heat pumps for multifamily housing units to be eligible for funding, which has not been the case so far. But details about eligibility have yet to be finalized.

Heat Pumps Widely Embraced

Heat pumps have been used for decades to heat homes, but they’ve only recently become more popular, touted by policymakers and the energy industry as a way to reduce greenhouse gas emissions from buildings, which are a major source of carbon.

Heat pumps run on electricity and can be used both to heat and cool buildings. They often replace oil or gas furnaces. The pumps extract heat from outdoor air or underground and transfer it inside – instead of heating a coil in a furnace, for instance. They also cool homes by pulling heat from indoors and dumping it outside or underground.

Now that heat pumps have become more accessible, the focus has shifted to creating multiple heating and cooling zones in homes, said Carson Lynch at LaPlante Electric in Scarborough.

“Now we’re thinking more creatively about system design,” he said.

One reason for Maine’s success at installing heat pumps is a lack of unified opposition, said Joel Rosenberg, senior program manager of special projects at Rewiring America, a nonprofit focused on electrifying homes, businesses, and communities. Businesses that deliver propane or heating oil, for example, tend to be family-owned and are “not a very well-organized group,” unlike natural gas utilities that are strong lobbying forces, he said.

“In Maine, there wasn’t that political force opposing the ability to allow people to switch from delivered fuel oil to heat pump, or at least to get a heat pump installed to take some of the load off of the fuel oil for a good chunk of the year,” he said.

Steve Kahl, a science professor at Thomas College, said the previous owner of his Waterville house burned 1,000 gallons of oil a year for heat and hot water. Coupled with the electric bill, the cost was $3,500 or $4,000 a year, he said. But after he installed two heat pumps in the 1,100-square-foot house, his heating and cooling costs dropped to about $1,200 last year.

The initial investment was $3,000 for the two heat pumps, but he received rebates totaling $750.

“It’s way more efficient and less costly to move heat than to make heat,” Kahl said.

Increasing Access to Incentives

Maine’s energy landscape is contradictory. Approximately 60% of households still use fuel oil as their primary energy source for home heating – a larger share than any other state. But 72% of the state’s net generation of electricity in 2021 was from renewable energy, according to the U.S. Energy Information Administration. Hydroelectric power accounted for the largest share of renewables, at 27%. Maine also ranked fifth in the nation in the share of in-state electricity generation from wind energy, with wind accounting for about 23% of the state’s in-state net generation, according to the EIA.

Efficiency Maine has been promoting heat pump incentives of up to $10,600 – including state rebates of up to $8,000 and a federal tax credit of as much as $2,600. In the state program, low-income applicants can receive 80% of a project’s cost, up to an $8,000 lifetime limit. For higher-income recipients, depending on income, rebates cover 60% of a project’s cost, up to a $ 6,000 lifetime limit, or 40% of the cost, up to a $ 4,000 lifetime rebate limit.

About 150,000 rebates have been issued for heat pumps, said Michael Stoddard, Efficiency Maine’s executive director.

Jim Marcisso, general manager of Pine State Services, an HVAC contractor in Westbrook, said those rebates play a big role in sales, providing an incentive for customers to upgrade equipment to the next level of efficiency. Heat pumps were more popular as air conditioners a decade ago but are now a “big part of our offering,” he said because their ability to heat has improved.

Lynch, of LaPlante Electric, said customers could see a jump in their electric bills with heat pumps – but because of their efficiency, costs will still be lower than for heat using fossil fuels. An effective way for homeowners to cut costs is to combine solar power with heat pumps, he said, although installing solar panels can also cost a lot on the front end.

In a pilot project, Central Maine Power customers also will be able to pay less to run their electric heat pumps using special rates linked to their greater reliance on electricity over fossil fuels.

The new rates launched late last year establish incentives for customers to use heat pumps, buy electric vehicles, or install storage batteries, rewarding ratepayers for running and charging efficient devices with special rates that are cheaper than the common delivery rates.

State regulators also recently approved lower rates for next year as natural gas prices fall. Using the 2024 standard offer rate – which is the default supply for most customers who don’t contract for electricity with competitive energy providers – an average Maine home using 550 kilowatt-hours a month will be paying $59.57, down from $91.30.

Paul J. Nadeau, of Van Buren, said his November electric bill included $120 to run his two heat pumps and $80 more for his other electric use. His bill for such usage might be lower than elsewhere in Maine because he’s a customer of Van Buren Light and Power District, a small, municipally owned utility.

But he used to heat his 1,000-square-foot house by using as much as 80 or 90 gallons a month of oil, which at its peak cost $4 a gallon.

“It more than balances out and saves me money,” Nadeau said of his switch to heat pumps.

Nadeau, who retired from customer service, still has his furnace for security but hasn’t bought heating oil in the last four years, he said.

He turned on the furnace once last January when temperatures in northern Maine plunged below minus 30 degrees Fahrenheit.

“Heat pumps have their limit,” he said.

Photo by Brianna Soukup/Portland Press Herald Staff Photographer


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