Has the heat pump’s era arrived? What Michiganders need to know.

A Planet Detroit Climate Guide | Residential heat pumps were something out of a science fiction novel for decades, especially in colder climates. But technology has advanced. Here’s what you need to know.
Air source heat pump setup outline concept. Efficient domestic central heating system for family home. Sustainable and energy saving solution for households. Optimal heat energy generation technology.

Residential heat pumps were something out of a science fiction novel for decades, especially in colder climates. But technology has advanced, and these gadgets are getting a new look as electrification becomes imperative for fighting the climate crisis. Even stalwart Mainers are embracing the technology in their frigid climate.

Planet Detroit explains what you need to know about these alternative heat and air conditioning devices, including the potential climate benefits, cost, return on investment, and whether Michigan’s grid is ready.

What is a heat pump?

Heat pumps are an alternative to gas or oil furnaces and air conditioning units.  There are several types of heat pumps, including air-source heat pumps, ground-source (geothermal) heat pumps, and water-source heat pumps. Each type has unique advantages and disadvantages, but they all work by transferring heat energy. 

Rather than converting fossil fuels into heat through combustion, heat pumps transfer heat from the environment and pump it throughout a home or building using a compressor and a circulating fan/coil system. Heat pumps rely on electricity to operate.

The compressor inside the heat pump can change the direction of the refrigerant flow for cooling during the summer and heat during the winter. This process also helps defrost the unit in winter.

The most popular kind is an air-to-air heat pump that captures heat from the outside air and moves it inside. This is the best fit for a home with air ducts for a central heating and cooling system. 

Geothermal or ground-source heat pumps move heat from deep beneath the soil through underground pipes into the home. Geothermal heat pumps are more expensive than air-source because installation requires digging trenches into the ground around the home, and they are not easy to alter once installed.

Wayne Appleyard has been an architect for 40 years, focusing on making homes and buildings more energy efficient. He installed heat pumps with a backup oil furnace in his 1966 home in Manchester, Michigan, in 2019. 

He said heat pumps are quiet and warm a home more evenly than a furnace because the fans run at variable speeds. 

“It’s a more subtle form of heat. Because the fans are variable speed, you don’t hear it come on or go off. It’s very, very quiet. And the house is much more evenly heated than it was. So we’re very happy with that.”

How is a heat pump better for the environment and your health?

According to the U.S. Department of Energy, air-source heat pumps can provide up to three times more heating than the energy they consume. Ground-source (geothermal) heat pumps can be even more efficient, with some systems providing up to four times more heating than the energy they consume.

It’s worth noting that the environmental impact of using a heat pump depends on the source of the electricity used to power it.

A heat pump can be considered a clean and sustainable heating and cooling solution if the electricity comes from renewable sources, such as solar or wind power. If the electricity comes from non-renewable sources, such as fossil fuels, then a heat pump will still produce some carbon emissions indirectly through energy use.  

As Michigan’s electric generation is increasingly transitioning to include more renewables, electrification options like heat pumps will avoid more greenhouse gas emissions.

According to the Environmental Defense Fund, fossil fuels used for heating, cooking, and hot water make up more than 10% of carbon emissions in the U.S. 

Heat pumps can also improve the air quality inside your home by reducing asthma-triggering and cancer-causing indoor air pollutants. 

One study from the University of Michigan determined heat pump adoption aligns well with decarbonization. According to the study, if all single-family homes adopted heat pumps across the country, it would reduce residential CO2 emissions to 346 metric tons — a reduction of 160 metric tons or 32%, which amounts to $6.4 billion in annual climate benefits.

Drew Michanowicz, a scientist at the PSE Health Energy Research institute, said natural gas, propane, and wood-fueled appliances all contain small amounts of hazardous pollutants like nitrogen dioxide, benzene, formaldehyde, and other substances linked to asthma, cancer, and heart disease. 

Plus, getting rid of combustibles in homes and buildings is safer, according to Appleyard.

“Aside from indoor home health, your home is less likely to burn down when everything is electric,” he said. 

How much will a heat pump cost, and will it save money?

Depending on the size, system efficiency, brand, and type of heat pump (air-to-air, water-to-air, geothermal, dual fuel, mini-split), on the low end, air source heat pumps average out somewhere between $4,000 and $8,000, including installation. On the high end, one could cost somewhere between $6,000 and $12,000

The actual savings and time to pay off depend on the cost of the fuel being replaced by electricity. 

In Michigan, most residents have natural gas furnaces. A 2022 break-even analysis commissioned by the Michigan Public Service Commission showed that replacing a natural-gas furnace with a heat pump in a home built before 1978 offers no payoff based on current costs and conditions. 

“At the time the study was conducted, it appears that when natural gas prices are low and electricity prices are high, cold climate heat pumps may not be the best financial option for customers,” MPSC spokesperson Matt Helms told Planet Detroit. “This would be especially impactful for low-income customers.”

But electric rate increases, incentives, and changes in the price of natural gas could alter that equation. Appleyard noted that natural gas prices might increase, especially as the U.S. ramps up liquefied natural gas exports to Europe.

The payback for other fuel types is better. A heat pump replacing electric resistance heating + AC can break even in 4 years. According to the analysis, a fuel-oil-powered furnace can pay off in 7 years, and a propane furnace + A/C in 8 years.

The UM study found substantial impediments to widespread heat pump adoption. It found a net economic benefit for just 21% of US single-family houses.  For 8% of US houses, heat pump adoption either increases CO2 emissions or incurs very high costs. 

And widespread adoption may be crucial to achieving a benefit – the study also found that while very high adoption rates of 80%–90% may cost-effectively reduce greenhouse gas emissions, such uptake is unlikely given current economic conditions. The study found that low-level heat pump adoption leads to higher CO2 emissions and sharp increases in peak electricity demand, potentially stressing electrical grids. 

What incentives are available for homeowners?

The U.S. Department of Energy reported that some homeowners could save up to $1,000 in utility costs with the help of energy rate discounts. 

Through the Inflation Reduction Act, homeowners can receive a tax credit of up to 30% of the purchase cost and up to $2000 for installation. In addition, homeowners who earn up to 150% of the median area income could get a point-of-sale rebate. The federal government rebate has a $14,000 cap. 

According to the Michigan Public Service Commission, all electric utility providers (DTE, Consumers Energy, and Upper Peninsula Power Co) offer some heat pump rebates through the commission’s Energy Waste Reduction (EWR) programs. 

DTE provides rebates up to $1,000 based upon a heat pump’s efficiency level and fuel type, as well as a 30% discount on electricity rates in the winter and a 10% discount in the summer for Michigan homeowners with heat pumps. 

In 2021 and 2022, Consumers Energy ran a program to provide heat pumps for 400 income-qualified multifamily households and another 300 for single-family homes. The heat pumps provided no more than a 51% fuel switch, so customers still drew from backup heating sources. 

Under a recent settlement agreement, Consumers, in collaboration with the Michigan Energy Efficiency Business Council and other advocates, will propose a pilot for electrifying residential use of propane, fuel oil, and other unregulated fuels in its next electric rate case. 

Michigan Saves, the nation’s first green bank, offers low-interest financing options for home improvements that increase energy efficiency or install renewables. Heat pumps qualify under the program.

Are heat pumps an option for low-income residents?

There are some programs out there that could help make the transition to heat pumps easier for lower-income homeowners. 

At the federal level, under the High-Efficiency Electric Home Rebate Act (HEEHRA), low- and moderate-income households across America can electrify their homes with a consumer point-of-sale rebate. 

Under this program, your electric appliances need to be ENERGY STAR-certified. But HEEHRA could cover 100 percent of electrification project costs for low-income households and 50 percent for moderate-income households for installing heat pumps and other projects, up to $14,000. 

State and non-profit incentives also exist for low-income households. Detroit nonprofit EcoWorks collaborates with city and state energy efficiency assistance programs to provide 0% interest on home repair loans for furnace replacements and contractors for energy audits. It’s also working to help distribute Inflation Reduction Act incentives for heat pump installation. 

“With Inflation Reduction Act money, our hope is to provide low-income qualifiers with a tax credit of up to $8,000. For mid-high income households, we hope to provide a $2,000 credit,” EcoWork’s energy analyst Brittany Turner told Planet Detroit.

Turner wants to see Michigan power companies do more to support Detroiters in accessing heat pumps.  

“Programs are on a roll in Ann Arbor, but there’s still some work that has to be done to get DTE’s utility assistance program to a place where it’s not just putting another gas furnace in someone’s home, but actually putting in a heat pump in Detroit,” she said. 

According to Helms, the MPSC is working on programs to help low-income households access heat pumps.

Despite these programs, Mac McCabe, a contract manager with Michigan Saves, is concerned heat pumps could still be too expensive for low-income homes. He said natural gas would remain the cheapest heating option in Michigan in the foreseeable future.

“Natural gas is really cheap right now. We have to be careful not to increase the energy burden of low-income neighborhoods,” McCabe said. “It takes the right contractor and evaluation of the house to ensure you’re not doing that.”

Can the electrical grid handle electric heat pumps in Michigan?

Most of the upper Midwest uses natural gas to fuel home heating, meaning the local grid may not be prepared to handle high peak loads in the winter and would likely need investment to be able to handle the additional loads.

As climate change increases, extreme weather events cause widespread power outages – like the February outages that left 600,000 nationwide without power for days. 

Wecong Su, a professor of electrical engineering at the University of Michigan, warned that the government might be jumping the gun by offering incentives for EVs and heat pumps but skipping the infrastructure piece of the puzzle. 

“We could reach a point where we’re pushing the limits of local grids that supply a neighborhood,” Su said. 

When the limits of the grid are pushed, that could cause outages and rate spikes to occur, furthering the energy burden of low-income communities. “We really need to pay attention to how this transition will impact underserved communities,” Su said. 

Su added that people without the extra income to afford technologies like solar panels or battery backup systems are more vulnerable to rate hikes caused by an overburdened grid. 

As high-consuming technologies like heat pumps become widespread, Michigan will need a plan for generating more sustainable electricity with wind and solar energy. 

McCabe said solar might be a better first step in making Michigan’s grid more resilient.

“I know it seems like solar is really expensive. It’s hard to imagine solar panels on a large scale in low-income neighborhoods,” he said. “But once you put a solar panel on your roof, it reduces your electrical load, thereby making your kilowatt hours cheaper.”

What is the process of getting a heat pump?

The first step is to get a home energy audit to determine the safest, most efficient route for installing a heat pump.

One challenge may be finding a qualified contractor. According to McCabe, Michigan could use more contractor education programs that train on heat pump installation and home/building energy efficiency. Many contractors aren’t aware that heat pump technology has evolved to the point where it’s a feasible option in cold climates like Michigan.

Audits are home energy assessments completed by the homeowner or a contractor. A certified Detroit home energy auditor will inspect your home for 3-4 hours. An audit should include the following: 

  1. Visual inspection of your attics, crawl spaces, and basements for insulation and ventilation.
  2. Health and safety tests for natural gas leaks and carbon monoxide testing in your furnace and water heater exhaust.
  3. Efficiency evaluations of your heating and cooling equipment and ductwork system.
  4. Door testing to measure the total amount of drafts in your home and compare to indoor air quality standards.
  5. Thermal infrared scans to identify missing or flawed insulation and to locate the source of your drafts and air leaks.
  6. Indoor air quality testing. 
  7. Detailed quotes for how much it would cost to install your home’s insulation, HVAC, or renewable energy solutions.
  8. Details on available energy efficiency rebates, tax credits, and financing.

Michigan Saves has a contract center where it provides training on energy efficiency and heat pumps. Home and business owners can find and contact a qualified contractor to do the energy audit through this program. 

The benefits of having an audit done on your home or business are to find ways to reduce energy bills through energy efficiency. An audit should also help measure the payback of a heat pump or solar panel and inform your eligibility for any energy tax credits, rebates, and other financial incentives.

Once an audit is complete, the contractor will determine and install the best heat pump for your home. 

In Detroit, homeowners have the option to get a geothermal heat pump or the following air-source heat pumps

  • Centrally-ducted air-source heat pump:  typically used when ducts are already available throughout the home. This is the best option for most homes with an existing furnace and central AC.
  • Multi-head ductless mini-split system: this option is installed when there is no existing ducting or if the homeowner wants zoned control of individual rooms. This is a good option for homes that don’t have central heating and cooling. 
  • A single-head ductless mini-split system: This is a good option for an add-on room that isn’t ducted. 

A properly trained contractor will know what system works best depending on the kind of ducting your home or building has.

Our reporting 

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