Tips on Reducing Utility Bills with a Heat Pump
Hint: you may need to switch your rate plan
Because buildings make up about 30% of global energy consumption, upgrading buildings to run on electricity is key to achieving our climate goals. As more and more of the electric grid runs on renewables, using electricity to power modern, more efficient appliances is better than using fossil fuels. Indeed, the Biden administration has a goal of having 80% of the US power grid run on renewables by 2030. The market is changing: Heat pumps outsold gas furnaces for the first time in 2022, and that’s even before Inflation Reduction Act rebates (up to $8000 for a heat pump installation) arrive.
“How much will it cost to operate my heat pump HVAC system?” is a common question. To start, let’s look at how heat pumps work.
How a heat pump works
You already have a heat pump in your house – it’s called your refrigerator. Have you ever noticed warm air coming out of the back your fridge? Your fridge takes the hot air out of the inside of the fridge and moves it outside the appliance to cool your food. Heat pumps are different from electric resistance heating in that they use a refrigerant to MOVE heat, not MAKE heat.
Why a heat pump is different from other kinds of heating
A gas furnace burns gas to make heat. An electric resistance heater is like a toaster: it uses electricity to heat up some metal coils. When you think about cost, you also need to consider efficiency. The industry term called the COP or Coefficient of Performance describes how much energy you have to put in, to get heat out. A gas furnace can be 30-90% efficient, or a COP of 0.3 to 0.9; electric resistance can be about 100% efficient (COP of 1.0), but heat pumps, because they move heat, not make heat, can be 150-400% efficient (COP of 1.5-4) for air source heat pumps (even more for ground source types). Because heat pumps move heat, they don’t make heat, they are WAY more efficient and therefore can cut your utility bills significantly compared to using electric baseboard heaters or portable electric resistance heaters.
Comfort and air quality matter, not just cost
With a gas furnace, it generally only operates in blasts of hot air, then turns off. That means in the winter, you’re probably too hot or too cold. As a yoga teacher, I care about air quality indoors because I don’t want to be doing deep breathing exercises and breathing in the scent of a smelly old gas furnace. While building codes require that gas furnaces be ventilated, in my past experience as a renter, I found that running a gas furnace indoors just stinks. Literally. So before I got a heat pump, to teach yoga indoors in the winter, I would put on a portable electric resistance heater. While they’re cheap to buy, electric resistance is not a very efficient form of heating as noted earlier. So, compared to gas, heat pump HVAC systems are just better. If you are a renter, you can get portable heat pumps that go in your window, too (from fancy to economical).
Energy efficiency and electrification are better together
A study of upgrades to two commercial districts in San Francisco by the SF Department of the Environment shows that the best results happen when you combine efficiency AND electrification together. In a June 2023 presentation with BayREN on The Grid: What is it and Should it Shape Policy for All-Electric Buildings?, speaker Barry Hooper shared results of comparing a baseline (with gas) scenario to electrification only, energy efficiency only, or combining electrification and energy efficiency (EE). Check out his 11 min talk on YouTube for details, but I think this graph says it all.
Ways to manage your utility bills with a heat pump
Build or retrofit to passive house standards
A passive house needs hardly any heating/cooling. Here’s a 25 minute public presentation by architect Graham Irwin of an existing house that was retrofitted to be a passive house, in Santa Cruz, CA (slides here), courtesy of BayREN, the Bay Area Regional Energy Network. This Wall Street Journal article talks about “triple digit heat, but no electric bill” as a benefit of passive house design. If you don’t want to do a total gut job renovation, then consider the following changes.
Add insulation
The Building Decarbonization Coalition recently had a webinar about the benefits of insulation to reduce energy use (and therefore save money on utility bills). Check out the webinar recording and summary of the webinar for details. If you just pick one thing, start with attic insulation. While I agree it’s annoying to install insulation while you’re living somewhere, if you are able to do this before buying a house or as part of other larger renovations (e.g. when you’re already taking down walls for plumbing or electrical work), insulation can really lower your bills.
Pick the right electric rate plan
Image drawn by the author. © Katharine Bierce, 2023.
On a tiered plan, you get a small allowance of electricity at a low rate and then rates go up when you use more. Avoid this with a heat pump! Check your PG&E bill to see if you’re on this plan and then consider changing to one of the following.
A time of use rate plan – this gives you low rates at off-peak times, when there is a lot of cheap clean solar power on the grid, and you pay more only at peak times (e.g. 5-8 or 4-9 pm). You can think of it as the “happy hour” plan.
Electric home rate from PG&E – this has a combination of peak rates and partial peak rates, with lower rates at off-peak times. This rate plan is available to anyone with a heat pump, an electric vehicle, or if you have battery storage. While you don’t need to have an all-electric home to be on this plan, California Energy Smart Homes will give you thousands of dollars in rebates back if you do upgrade to all-electric appliances.
Turn off the heat pump during peak rate hours (5-8 pm or 4-9 pm in California)
Get solar panels.
Note that it can help to wait for a year until you have actual usage data so you don’t under or over-size your panels. According to a 3rd party research study by Opinion Dynamics of Californians who installed heat pump HVAC systems and heat pump water heaters with the TECH Clean CA program:HVAC customers were more likely to perceive a decrease in monthly energy bills if they had air conditioning before the heat pump or if they have solar PV. A minority of HVAC customers (13%) said their monthly energy bills went up, while one-quarter (25%) said their monthly bills remained the same, and two-fifths (41%) said they had decreased. (The remainder (19%) were unsure about bill changes.) Over half (154 of 268; 57%) of customers whose monthly energy bills reportedly went down have a solar PV system that generates electricity for their homes. Those who had air conditioning before the heat pump were also more likely to perceive their bills decreased than those who did not previously have air conditioning. Respondents were instructed to consider both gas and electric utility bills combined, if applicable.
Check out resources from PG&E for consumers: https://guide.pge.com/resources
If you’re a Californian and you want more personalized advice, a few resources to consider:
QuitCarbon is a company that acts as a concierge service to help people create personalized electrification plans (currently California only). They connect you to contractors.
Sealed is a company that makes the upgrades for you, then you pay them back over time.
Request to speak to an expert via the Switch is On, a program of the nonprofit Building Decarbonization Coalition. Note that these experts are volunteers and can share personal stories of what it’s like to upgrade to electric appliances, but they don’t do detailed analysis for you.
Last but not least, you can always go DIY: click “Make the Switch” and then “Find Incentives” or “Find Contractors’ from the Switch is On site. The contractor finder tool includes contractors who are in the TECH Clean California and BayREN incentive programs. Note that if you get a recommendation from a friend or neighbor about a contractor, not every contractor is in the program, so you can also use the Contractor Finder tool to check what rebates (TECH, BayREN, or both) that they process. There are also some rebates and tax incentives (at tax time) that you apply for as a homeowner.
With IRA rebates coming in 2024-2025, you can also get up to $8K for a heat pump means that in combination with other local, regional, state, and federal tax credit rebates, getting a heat pump is likely less expensive than replacing a gas furnace in up-front cost, and you get the benefit of cooling. If you do a bit of insulation and then get on a good rate plan, that can help minimize your bills.