Heat Pump Program Receives $25M Boost
August 28, 2023
PROVIDENCE — There’s good news for folks seeking to electrify their homes and adopt heat pumps this winter: state officials this week are expected to announce the last of a new incentive program to tackle home heating emissions.
The program, dubbed Clean Heat RI by the Office of Energy Resources (OER), provides an additional $25 million to the state’s existing suite of heat pump incentives to spur early adoption of the climate-friendly technology in homes and businesses around the state. At least 40% of the funds, which are allocated from federal American Rescue Plan Act dollars, are earmarked for incentives for underserved communities in compliance with federal guidelines set by the federal Department of Energy.
An OER spokesperson told ecoRI News that a press rollout was expected this week, and that the agency expected to start accepting applications after the Labor Day weekend.
Gov. Dan McKee and OER originally announced the program in July 2022, and the agency spent all of August collecting public comment on the program as designed.
As proposed, $23.6 million will be eligible in three categories: residential incentives for all homeowners currently using fossil fuel; enhanced incentives toward low-income and disadvantaged customers; and a community incentive available for small businesses, nonprofits, community organizations, and public buildings.
The rest of the money, about $1.3 million, will be allocated for workforce development programs for the heating, ventilation, and air conditioning (HVAC) industry.
In May, OER awarded a $3.5 million contract to Concord, Mass.-based Abode Energy Management LLC, an energy management consulting firm, as program administrator.
Proponents of heat pumps have long called them the embodiment of energy efficiency. Fossil fuel energy systems, whether natural gas or home heating oil furnaces, must burn fuel to generate heat, and then transfer that heat throughout a building, which loses a lot of potential energy in the process.
Heat pumps can heat and cool a home using only electricity, losing less potential energy. The science behind heat pumps compared to traditional home furnaces is simple: a heat pump generates no heat; instead, it operates like an air conditioner by removing the warm air from a home in summer, and adding warm air to a home in winter.
The downside? Switching to a heat pump isn’t as easy as plug-and-play. It’s pretty technical work and comes with a big price tag. A 2020 study performed by National Grid, the then-owner of Rhode Island’s utility company, estimated switching an existing home to a ductless mini-split heat pump could cost on average $15,882.
The program will be a shot in the arm to a state that desperately needs a solution to its fossil fuel addiction. Residential and commercial heating accounts for 28% of all greenhouse gas emissions in Rhode Island, according to the latest emissions inventory from the state Department of Environmental Management.
A 2020 report from the Acadia Center, an environmental nonprofit dedicated to climate and renewable energy solutions, estimates switching a home from heating oil to a heat pump reduces the equivalent emissions of taking dozens of cars off the road for a year. Over the lifespan of the equipment, a home can reduce its emissions by 58 metric equivalent tons.
It’s emblematic of a New England state where fossil fuels are still king — 54% of homes in Rhode Island are heated by natural gas, and another 32% rely on home heating oil. Only 8% of Rhode Islanders are estimated to use electricity to heat their homes.
With 73% of the state’s housing stock built before 1980, Rhode Islanders’ homes are far less likely to be appropriately weatherized to retain heat.
Meanwhile, fossil fuel addiction comes with a steep price tag.
Last winter the Public Utilities Commission approved big increases in electric and natural gas rates for October to this past March. Customers using natural gas provided by Rhode Island Energy paid, on average, $89 more a year under the new rate.
Rhode Island Energy raised the natural gas rate again in March, adding an additional estimated $51 to customers’ bills every year, or a $140 annual hike over the past 12 months.
Electric customers weren’t immune to the volatile pricing in natural gas. The bulk of the electricity provided by Rhode Island Energy is generated at natural gas plants around the region. Utility company officials cited the global rise in demand for the fuel — and disruption from the war in Ukraine — as the prime reason behind a historic 47% hike in the electric rates last fall.
Electric rates saw a slight decrease, around 25%, in the spring, unlike natural gas, but that’s about to be wiped out. In July, Rhode Island Energy announced a 24% hike in winter electric rates, putting the cost of utility bills close to par from last winter.
Meanwhile, the current heat pump incentives distributed by OER, derived from Regional Greenhouse Gas Initiative (RGGI) auction proceeds, are paltry in comparison to the announced new program.
OER committed $2.75 million to a heat pump incentive program in April 2020. From March 2021 to December 2021, the incentives helped 450 customers convert from fossil fuel systems to heat pumps.
The utility is helping, too. Rhode Island Energy has awarded $3.1 million in rebates to customers who installed a total of nearly 4,000 central and mini-split heat pump systems.