Although heat pumps are a real technology, they may seem a bit magical. They are the secret to saving money on your heating bills. If you put one unit of electrical energy in, a heat pump will pump out two to four units of heat. They thus, routinely operate at efficiencies over 100%, which may seem impossible. This is possible, because rather than simply making heat from electricity like your toaster, heat pumps move it, which allows them to get crazy high efficiencies even for low-cost systems. Your toaster, however, is never going to break 100% efficiency no matter how hard it tries. Heat pumps are like having a combination furnace and air conditioner. They move heat inside in the winter to keep you warm and extract heat from your home in the summer to keep you cool.
Most people who want to take full advantage of tax incentives buy heat pumps through certified contractors, which help with installation. Mitsubishi Electric, Carrier, and Daikin are among the most popular brands, although there are dozens to choose from and even big-box partners like Home Depot or Lowe’s may offer installation services.
Not surprisingly, these ultra-efficient devices are selling like the proverbial hot cakes. Last year, according to shipment data from the Air-Conditioning, Heating, & Refrigeration Institute, Americans bought 32% more air-source heat pumps than the now obsolete gas furnaces. That smashes 2023’s record-setting lead of 21% and we can expect an even larger number this year. This is great news as we are catching up with countries like Sweden, where more or less everyone heats their homes with heat pumps.
Heat pumps are just an efficient technology that simply makes good economic sense in most of the world.
There are some places where heat pumps struggle to deliver economic benefits. Heat pumps use electricity to run and they run more if it is really cold. If it is too cold they become less efficient. Thus, in places like the upper peninsula of Michigan, heat pumps have everything working against them: super cold temperatures, super high electric prices, and relatively cheap natural gas.
What if you live in one of these places, can heat pumps still work for you?
Yes, with a trick. Heat pumps can still be economic winners with a little help from another rapidly expanding technology —solar energy.
Solar Energy
Solar energy is the least expensive source of electricity in history, according to a 2020 report by the International Energy Agency. That’s still the case as solar costs have even dropped more in the last five years. Period. With no subsidies, solar is simply less expensive than all other options. The cost of solar has dropped so fast and so far that the super cheap solar electricity can be used to essentially subsidize heat pumps. Thus, with a solar powered home, not only do you get ultra-low-cost electricity but you can also push the economics of heat pumps into the black even in the worst case scenario locations. A recent study that I conducted, along with KTH Royal Institute of Technology researcher Nelson Sommerfeldt, showed that North American residents can profitably install residential solar plus heat pump systems, earning a positive return even in cold and cloudy upper Michigan. The same trick even works in Canada. The study suggested northern homeowners have a clear and simple method to reduce their energy costs even for heating by making an investment that offers a higher internal rate of return than savings accounts, Certificates of Deposit in the U.S. and Guaranteed Investment Certificates in Canada.
Heat Pump and Solar Investments
It is important to think of an investment in solar system or a solar-powered heat pump as long term investments. For example, most solar panels have a warranty on the power output for 25 years. So you can think of them as 25-year investments in financial security and if used to power a heat pump, in a warm and cozy home.
