Legislature contemplates rebates for installing heat pumps as system gains popularity

MINNEAPOLIS -- When Emily McPherson bought her Minneapolis home, it didn't have air conditioning.

Installing the necessary infrastructure for typical A.C. installation was expensive, so her family turned to window units and costs for that also added up, McPherson said. A couple of years later, they made the switch to an air source heat pump.

"We really wanted to add cooling to the house, but we don't have ductwork. So heat pumps were really good solution to add cost-effective solutions in the summers and we also use it to offset some of the heating in the milder months," McPherson said.

A heat pump can both heat and cool homes, all in one unit. It operates similarly to a refrigerator. Instead of generating heat or cold air powered by fuel, it and moves air in and out of home to achieved desired temperatures -- pumping heat out of the air in the summer and extracting it from the outdoor air in the winter.

Experts say it's a more energy efficient option and can make a dent in carbon emissions. And last year, heat pumps exceeded the sales of gas furnaces, according to an analysis by nonprofit Rewiring America.

"In heating season it's fairly cost neutral with the gas boiler, but compared to a standard air conditioner it saves money," said McPherson, who works for the Minnesota-based Center for Energy and Environment.

But McPherson still has a gas furnace she uses during the worst of winter. Demand may be increasing, but heat pumps in the past haven't been as viable -- and therefore appealing -- in cold climates like Minnesota's.

The Center for Energy and Environment in a recent report, though, determined more advanced technology is making it easier to have a functional heat pump in in freezing weather. Some newer models can sustain can function well in temperatures as cold as -13 degrees. For older models, efficiency, and capacity drops "significantly" for temperatures below 40 degrees.

It's why the Citizens Utility Board of Minnesota, a consumer watchdog group, advises that you have an alternate heat source.  

The Center also estimates an efficient heat pump can save single-family homeowners $1,000 per year in heating costs. The U.S. Department of Energy estimates heat pumps can reduce electricity use for heating by half furnaces and baseboard heaters.

Legislature considers rebates for installation, federal tax incentives also available

The Federal Inflation Reduction Act passed last year included financial incentives for energy efficiency and clean energy investments, including for heat pumps -- which are expensive between the cost to purchase and install.

Those tax credits and rebates are expected to be rolled out in Minnesota by December, according to the Minnesota Department of Commerce. The package includes $2,000 tax credit for heat pumps and a $8,000 rebate for them.

A bill discussed in a House committee Tuesday would create a state rebate of up to $4,000 for the heating and cooling alternative. In order to qualify, a Minnesotan would've needed to received or applied for the federal program.

A homeowner would also need an energy audit of the residence in the past 18 months, and installed recommended insulation and air sealing to maximize energy efficiency. The bill also requires the Department of Commerce to develop training for contractors on installing heat pumps.

It was laid over for possible consideration in an end-of-session budget bill.

You can find contractors vetted by the Minnesota Air Source Heat Pump Collaborative, which is a joint effort by the Center for Energy and Environment and utilities including CenterPoint and Xcel Energy, by clicking here.