Have electric heat? Here’s how much you could save with heat pumps

Almost everyone’s power bills are going up, but if your home still relies on old-school electric resistance heat or a conventional electric water heater, you’re likely feeling it even more. A new report breaks down how much you could save by switching to a heat pump instead.

A single-family home could save an average of $1,530 a year, or $23,000 over the lifetime of a heat pump, according to an analysis from the energy-focused nonprofit RMI. If every potential house across the U.S. made the switch, customers would collectively save more than $20 billion annually, and avoid around 38 million metric tons of CO2 emissions. (Because of modeling challenges, the analysis doesn’t include apartment buildings, so the total number would be even bigger.) A mass shift from old electric heat to heat pumps would also help significantly ease strain on the electric grid.

Electric resistance heaters work “essentially just like a giant toaster,” says Ryan Shea, a manager on the carbon-free buildings team at RMI. They’re a highly inefficient way to heat a house or apartment, yet they remain common, used in roughly 25 million American homes. Even more households, about 57 million, rely on the same technology for water heating.

Heat pumps, which work by moving heat, are around three times more efficient. They can both heat and cool; new heat pumps are also around 20% more efficient than older air conditioners.

The nonprofit’s Green Upgrade Calculator helps estimate how much you could potentially save at a specific address. The biggest savings, unsurprisingly, are in colder climates with particularly high electric bills, such as parts of the Northeast, where the payback period can be just a few years. But the switch can pay off anywhere electric resistance heat is still in use. In Texas, where the older technology remains especially common, homeowners could collectively save nearly $2 billion a year on energy bills if everyone upgraded.

In a place like Texas, a mass transition would make a major difference for the grid. “Given the substantial increase in efficiency of the units, they can result in lower peak demand, and when done at scale, address some of the peak demand concerns that are really cropping up,” says Shea. It’s possible to reduce peak winter demand in Texas by 7.5 gigawatts, or the equivalent of 25 gas-fired power plants. By eliminating that extra power use, the grid can be more reliable—helping avoid situations like Winter Storm Uri, where 4.5 million Texans lost power—and can potentially delay building some new infrastructure, helping keep overall power costs lower.

The analysis focuses on electric resistance heat, but if you use another type of heating system or water heater, the calculator can estimate your potential savings there, too. Fuel oil and propane are also expensive options, while gas can sometimes be cheaper, though prices remain volatile. In many states, utilities and local governments also offer generous incentives to help homeowners switch away from fossil fuels.

Policy can also help nudge more people to switch from older electric heat. Building codes can help make heat pumps the default choice for new construction, for example, or encourage consumers to choose a heat pump when their central air conditioner fails and needs to be replaced. Some utilities offer incentives that make the switch especially simple. Ameren Missouri’s “pay as you save” program covers the upfront cost of new equipment. Customers repay that over time, but their monthly costs are still lower than they were before.

Startups in the space also continue to innovate to reduce cost. Jetson, one company, has optimized installation costs, cutting the cost in some cases from $30,000 to $15,000. (With incentives in certain locations, that could drop as low as $5,000.) In California, where costs are particularly high, a former Apple engineer launched a startup called Merino Energy with an alternative to mini-split heat pumps that also significantly reduces cost. In Europe, Aira sells subscriptions to its heat pumps with monthly costs that are as much as 40% less than customers paid on energy bills before.

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