Energy

R.I.’s New Heat Pump Program Offers Incentives to Install Energy-Efficient Systems

With such a high upfront cost, the current program leaves the state’s low-income and disadvantaged communities behind

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Rhode Island recently rolled out a new program to spur the installation of heat pumps. (Frank Carini/ecoRI News)

Hot or cold, Rhode Islanders can’t win when it comes to regulating their homes’ temperature.

The state registered its first heat wave of the year last month when temperatures exceeded 90 degrees for six consecutive days. Residents in the Providence area experienced the fourth-warmest July on record and the third driest, with less than half an inch of rain measured.

With 73% of the state’s housing stock built before 1980, Rhode Island residents are more likely to feel the heat, and spend more on heating or cooling their homes.

But Rhode Islanders looking forward to the colder months to beat the heat will still be sweating — Rhode Island Energy, formerly National Grid, announced last month ratepayers would be paying more for electricity and natural gas this winter.

Resident customers will pay an average of $52 more a month as the utility doubles its summertime rates for the winter, from 7.8 cents per kilowatt-hour to 17.8 cents starting in October.

The utility cited the rising cost of natural gas worldwide and increased demand for it in Europe and Asia as the reason for raising prices. The final rate is subject to approval by state regulators before it goes into effect.

Ratepayers regardless will feel that pinch; 54% of homes in Rhode Island are heated by natural gas. Another 32% rely on home heating oil, and they won’t be getting a reprieve from high prices either. The average price of home heating oil in New England has hovered around $5 a gallon for much of the summer, a time when prices are typically half that.

Relief may be on the way.

Gov. Dan McKee has rolled out the state’s new High-Efficiency Heat Pump Program (HHPP), allocating $25 million from American Rescue Plan Act money to spur the installation of heat pumps and provide funds for workforce development in the HVAC sector.

“Shifting our thermal sector to electric heat and away from fossil fuels is critical in our fight against climate change,” McKee said in a press release. “Furthermore, the reduction of greenhouse gas emissions will help lower pollution-induced health impacts, especially for those living in communities with high asthma rates.”

The program allocates $11.2 million for residential incentives, applicable to any homeowners who heat their home with natural gas, propane, or heating oil, according to the latest draft of the program from the Office of Energy Resources (OER). Under the proposal, homeowners would be eligible for a $1,250 incentive for every ton of cooling and heating capacity of the equipment used.

Another $7.2 million would go toward “enhanced incentives” targeting low-income and disadvantaged communities, while $5.2 million would go for community incentives, available to small businesses, nonprofits, and other organizations. The program also allocates $1.3 million for workforce development.

The governor has pledged 40% of the funds will go toward the state’s disadvantaged communities, as defined by the U.S. Department of Energy.

“Heat pumps are energy efficient,” Hank Webster, Rhode Island director of the Acadia Center, said. “They are at least three times more efficient than even natural gas furnaces, and many more times that for oil and propane.”

A fossil fuel heating system running on propane, natural gas or heating oil must heat something else and then transfer that heat in the building, losing a lot of potential energy in the process.

But heat pumps can both heat and cool a home using only electricity. They operate similarly to air-conditioners: removing the warm air from a home in summer and adding warm air in winter.

“It’s much more efficient because it’s moving heat as opposed to generating it,” Webster said.

Heat pump installation will be key to meeting the emission reduction goals of the Act on Climate law. Combined, residential, commercial, and industrial heating make up the largest share of greenhouse gas emissions statewide at 35.4%, according to the Rhode Island Department of Environmental Management’s latest inventory.

Heat pumps are about as close to zero emissions as most major appliances get. Instead of running on fossil fuels, they run on a building’s electrical supply, meaning the only emissions result from the way the building’s electricity is generated. For advocates, heat pumps are renewable grid ready.

The Acadia Center estimates a home switching from heating oil to a heat pump reduces the equivalent emissions from taking a dozen cars off the road for one year. A home can reduce its emissions by 58 tons over the lifespan of the equipment.

Only 8% of Rhode Island homes run on electric heat. Meanwhile states such as Maine, with even colder winters than here in southern New England, have installed more than 46,000 heat pumps since 2013, and state officials have pledged to install another 100,000 by 2025.

But adoption here in Rhode Island remains slow. A 2020 study commissioned by National Grid showed that 60% of residents surveyed said they had no prior knowledge of central heat pump systems. Another 64% said they had little to no prior knowledge of ductless heat pump systems.

McKee’s new heat pump program lists consumer education as one of its key goals but allocated no specific amount of money for outreach initiatives. The money for outreach will be expected to come from the three categories of incentives or workforce development funds.

Costs are a big barrier to heat pump adoption, hence state incentives for consumers. Equipment needs and installation costs can vary, making gauging average costs difficult.

Changing an existing home to a ductless mini-split heat pump could cost on average up to $15,582 on its own, according to the 2020 National Grid study.

“The high cost of heat pump installation also presents a major barrier to adoption, with the average customers noting they were ‘not very likely’ to install a heat pump with incentives,” wrote the study’s authors.

They continued, “The willingness to pay study revealed that incentives of at least $3,600 per system are needed to drive the average consumer to be likely to install a heat pump, with many scenarios requiring significantly higher incentives.”

Current incentives are distributed by OER from Regional Greenhouse Gas Initiative (RGGI) proceeds, and Rhode Island Energy from energy-efficiency funds.

OER committed $2.75 million to its heat pump incentive program in April 2020. From March 2021 to December 2021, the incentives from OER helped 450 customers convert from fossil fuel systems to heat pumps.

On the utility-side incentives, 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.

This year’s RGGI proposal filed with the Rhode Island Public Utilities Commission would allocate $1.5 million to heat pump incentives.

But with such a high upfront cost — much of the existing incentives in place function as rebates or zero interest loans — the current program leaves the state’s low-income and disadvantaged communities behind, much of whom already suffer from higher temperatures thanks to the urban heat-island effect and lesser amounts of tree canopy shade.

Forty percent of the funds from the new incentive program will go toward communities in census tracts designated as disadvantaged communities (DAC) by the U.S. Department of Energy. Forty census tracts in Rhode Island are designated as DACs, primarily clustered in the urban core. It includes 20 tracts in Providence, 10 in Pawtucket, four in Central Falls, two in Cranston, and two in East Providence.

As proposed, the new incentives could cover between 50% and 100% of the total cost, including equipment, installation, and other necessary upgrades.

A 100% incentive will be automatically available to low-income residents enrolled in the Supplemental Nutrition Assistance Program (SNAP), Low-Income Home Energy Assistance Program (LIHEAP), Supplemental Security Income (SSI), Medicaid, Rhode Island Works, public assistance, or if they are a discounted rate customer to the utility.

Residents who live in a disadvantaged community are eligible for a 50% incentive.

OER said it expects the new program to go online sometime in winter 2023, with the final allocations for each incentive subject to change. Until the end of the month, the department is soliciting public comment and feedback on the program as drafted.

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