Why do heat pumps get so many rebates?

Whether you heat your home by burning wood, with a space heater using electricity, or with a gas furnace, nearly all of us rely on some sort of active way to bring the temperature up a few degrees.

That heat comes with a cost. Around ten percent of all emissions - about as much as the entire agricultural sector - come from burning fuel for home heating and hot water. That fuel is often natural gas - or, as we call it around here, methane.

Burning methane in homes has kept Americans comfortable over the past century. But as the planet continues to heat up and become more polluted, it’s pretty obvious that we have to figure out another way to stay warm inside. Enter heat pumps.

Why heat pumps?

Heat pumps are, quite simply, magic. They do the vital job of heating our homes and our water, and they do it without burning anything at all in your home - no more setting fire to wood, gas, or oil in a box in your basement. We won’t go into it all here, but check out our Top 10 Heat Pumps article for a deeper dive into how they work.

Here, we’ll take a bit of time to talk about why a wide variety of players in the energy space - governments, grid operators, property managers, and everyday folks - have chosen to prioritize heat pumps as the best way to provide comfort in their homes.

1. Heat pumps work.

This might have not been the case in the 70s when heat pumps first started to get attention in the States, but now, with a properly-designed system, heat pumps can keep you warm at almost any temperature our planet can throw at you.  That’s because they’ve actually been around for quite a long time at this point.  Earlier generations of heat pumps were still busy getting up to speed, as they were thousands of years behind the technology known as burning things and standing close to them.

But now, anywhere in the “developed” world, you can find qualified technicians who can install heat pumps in your home that work really well.

Will you ever encounter a heat pump system that doesn’t work well?  Of course!  We don’t need to throw you to the proper Reddit sub for that. Just like every other HVAC system, things can go wrong - whether it’s a poorly-installed duct, leaky radiant flooring, or a poorly-insulated window.

But in our experience, and, increasingly, more and more Americans’ experience - heat pumps work, all the time. And, when properly installed…

2. Heat pumps lower bills. 

‍Instead of burning things, heat pumps use electricity to pull heat out of the air, gently, over a longer period of time. So, while they may not have the “instant blast” feeling of a gas-fired boiler or water heater, they do operate up to many times more efficiently than burning things. 

Gas, oil, and electricity charges vary drastically depending on where and when they’re deployed. Electricity rates even vary at different times of the day, different times of the year, and different locations across the world. But when they’re properly taken-advantage of, electricity rates can be harnessed to make heat pumps cheaper - and in some cases, way cheaper - than burning things to heat your home.

Harvest lowers bills by electricity arbitrage (among other things). That basically means pulling energy off the grid when it’s cheapest and cleanest, storing that energy in a thermal battery, and deploying it when you need it, no matter what the electric rate is. So, with Harvest, your heat pump runs in the middle of the day. Heat pumps are more efficient at heat-generating in the middle of the day, because, well, there’s more heat in the air because of the sun.

We like storing heat in water batteries, for many reasons - water is cheap, doesn’t employ conflict minerals, and doesn’t wear out. Other heat pumps can also do a version of electricity arbitrage by using the home itself as a battery (engineers call this “thermal inertia”), but that’s limited by people’s tolerance for a few degrees of discomfort.  Harvest’s  water battery, in case you were wondering, is a water tank wrapped up in a thick thermal blanket - and it does all the work for you in the background, without any comfort compromises.

Is it possible for bills to go up when you switch from gas to heat pumps? The answer is yes. In areas with expensive electricity and cheap gas, or under poor installation circumstances, monthly bills can get worse with heat pumps.  But if you’re smart about it - which you are - the answer is almost always no, especially with a storage-enabled system. 

3. Heat pumps drastically reduce pollution inside and outside your house.

‍Whether you’re a climate alarmist or a climate skeptic, it’s not difficult to understand why burning gas inside your home is not the best thing for your, or your family’s, health. 

While it’s not exactly leave-your-gas-car-running-in-a-closed-garage level of danger, gas stoves do account for 13% of all childhood asthma cases in the US. And gas appliances - like furnaces and hot-water heaters - pose risks that aren’t rocket science to understand, but are poorly-publicized. For example, a recent Connecticut study found malfunctioning gas appliances or gas lines in approximately 15% of all residences built after 1980. 

Heat pumps (and their hyper-efficient cousins, like induction stoves) can completely eliminate gas appliances from your home. When you can eliminate gas from your home, you make it much harder for things like benzene, NOx, and carbon monoxide to enter your body.

Then, the “outside your house” part. Home heating and hot water with gas appliances account for a shocking 10% of all planet-warming emissions. And climate change caused by those emissions has been identified by the World Health Organization as “a fundamental threat to human health.” 

How can I get the most rebates for heat pumps?

The short version: To maximize electrification and energy efficiency rebates, get a Harvest system, upgrade your insulation, doors, windows, and electrical panel, and electrify all the appliances in your home. 

The longer version: is complicated. Of course, you don’t need to do all of those things. But each of those upgrades gets you a little bit of a federal incentive in the form of a 25C and / or 25D tax credit - or in some cases, a huge incentive. And all of them will increase the efficiency of your home.

To get the most rebates for heat pumps in California, you’ll want to get a Harvest system. Shocker, we know. 

If you’re outside of California, fear not: you’ve still got the 30% Inflation Reduction Act Clean Energy  Tax Credit (and just to be crystal-clear, California gets this too). Depending on your project, that 30% tax credit can either be “capped” - i.e. it maxes out at a certain point, usually around $2,000 - or “uncapped.” Uncapped is better, because 30% just means 30% (or, as the kids say, no cap).  

For example, if your total project cost is $30,000 before rebates and incentives, your “uncapped” tax credit would be $9,000 (30% of $30,000). On the other hand, a “capped” project would be, you know, “capped” at a tax credit of $2,000.

Generally, energy efficiency projects like insulation, doors, windows, and electrical panel upgrades are capped.

And, surprise, surprise: Harvest projects qualify for the uncapped 30% federal tax credit. That’s because it’s a battery. Regular heat pumps without energy storage - basically, central heat pumps and mini-splits - are capped, because they don’t provide as much benefit or flexibility to homeowners or the electrical grid.

If you want to go deeper on this topic, our friends at Rewiring America have a great IRA fact sheet.

And as of today, Harvest gets an extra $11,500 off in our home state. That’s because all Harvest configurations qualify as a Combination System for space and water heating, which carries  a $10,000 incentive. And because we use the refrigerant with the lowest global warming potential in our heat pump, we get an additional $1,500. This program is administered by TECH Clean California. You can see how much money is available in these programs here, under “Single Family Residential TECH HP HVAC” budget. As of Friday afternoon 12/20/2024, $13,820,412 remains. Get in there!

Last-but-not-least, there’s a really nice incentive in California to completely eliminate the gas connection at your house. If you can cap your gas line via replacing all the gas appliances in your home with electric ones, you may qualify for an additional rebate through the California Energy-Smart Homes program, up to $6,150. You, as the homeowner, will apply for this rebate directly through the website - not your contractor.

As you might have guessed: we are not tax professionals. We can offer some guidance here, but please check with a locally-certified tax pro to make sure all of this applies to your specific situation.

We’re working on a Harvest-specific version of a rebate calculator, which will roll out in early 2025. But for now you can check out Rewiring America’s incentive calculator, or get a personalized consultation with real human support from our friends at QuitCarbon.

When’s the best time to install a heat pump?

The best time to install a heat pump, like the best time to plant a tree, is ten years ago. But today will do just fine.

In all seriousness, if you’re in California, the incentives available to you as a heat pump shopper are  really great, because they align with the state-wide benefits that heat pumps can offer when deployed at scale. And they are powered by limited funding. Different programs have different funding levels. All projects sold on or after November 12, 2024 are eligible for the TECH Clean California program mentioned above - but they will run out soon, probably in the first quarter of 2025.

It’s also worth noting that all this information is the best we have as of today, in the last days of 2024. Incentives and rebates change all the time - so, there’s always a chance they could go away, or that a new one could come later. But right now, things look really good - as good as they’ve ever been - for heat pump incentives.

Why is California incentivizing heat pumps so much?

Like a lot of Californians, I wasn’t born here. Sometimes, my home-state relatives in Texas and Kentucky wonder why California does things other states don’t. You may be wondering why California is incentivizing heat pump water heater (and air-to-air heat pump) adoption so proactively. 

We won’t go too far back in time, but we will say that SB 350 has a lot to do with it: “Senate Bill 350 established clean energy, clean air, and greenhouse gas (GHG) reduction goals, including reducing greenhouse gas emissions to 40 percent below 1990 levels by 2030 and to 80 percent below 1990 levels by 2050. The California Energy Commission is working with other state agencies to implement the bill.” That “working with other state agencies” part is exactly why California has great incentives to switch from gas to heat pumps. Those agencies are the ones who write the rules for these programs. They also hire program administrators to write the checks to people like you who switch. 

So: California voters have legislated carbon reductions, to, like, save the planet (which includes California). And the incentives you get to install heat pumps are a part of that.

Oh, and for the record, I also wonder why Texas and Kentucky get things California doesn’t, but that’s a story for another campfire.

A Campfire Metaphor Is Perhaps The Best Place To End An Article About Not Burning Things

And to be triple-clear, there is not a heat pump that can replace a campfire, nor should there be. May your winter-solstice-season be filled with warmth, in either case.