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Last October, when the old propane boiler failed at 23 Hardware and Lumber in Askov, owner Scott Peterson did something that many experts say is critical for Minnesota to combat climate change and reach its greenhouse gas reduction goals. He replaced it, not with a traditional boiler or furnace, but with an electric air-source heat pump.

He didn’t do it to save the planet. He did it to save money — and to get air conditioning for the first time.

One year later, he’s happy he made the switch. He admitted to a bit of sticker shock when he got the quote for his new system, which included the heat pump, new ductwork, and a backup propane furnace.

“But, you know, if you’re saving two to three grand a year on propane, it don’t take very long to pay for it,” Peterson said.

Meanwhile, he said his electric bill has increased only modestly, by about $20 to $30 per month.

Peterson hadn’t heard much about heat pumps before he spoke with Chris Prachar, co-owner of D&E Heating and Air Conditioning in Hinckley, who installed his new system. Prachar said few customers have.

But he said once he explains how efficient they are — and the financial incentives available — it’s an easy sell, especially for customers who want to replace an air conditioner.

“After you explain to them the benefits that they get, the tax incentives, the rebates, honestly, it doesn’t make any sense to put in a straight air conditioner.”

Minnesota has seen a surge in installations of heat pumps since 2019, fueled by cost savings and technological improvements that enable heat pumps to operate efficiently even in extreme Minnesota winters.

Now, with additional federal and state incentives in the pipeline for 2024 that could reduce the cost of a heat pump by $12,000 or even more, installers are bracing for an even larger growth spurt.

“When you include all the available rebates and tax credits, it literally is a no brainer,” said Chad Thompson, owner of Twin Ports Custom Climate in Superior, Wis.

“Especially if you’re already putting air conditioning in your house, it should be a heat pump.”

Moving heat

Every winter day in Minnesota, there are tens of thousands of tiny fires burning in homes and buildings around the state. Most are combusting natural gas, or propane, in furnaces and boilers, turning those fossil fuels into heat.

A heat pump, in contrast, doesn’t create heat at all. It moves it. The technology has been around for decades.

“Your refrigerator, for example, is a heat pump. It extracts heat from inside your refrigerator and puts it outside, inside your living space,” explained Jon Sullivan, who leads customer services and programs at Minnesota Power.

An air-source heat pump does the same thing. It can cool your house like an air conditioner — taking heat from inside your home and depositing it outside.

But it also moves air in the opposite direction. Even on cold winter days there’s heat in the outside air. A heat pump extracts that warm air and moves it inside your home to heat it.

“And that allows us to get really efficient heating and cooling from one system. It’s very, very unique in how it can produce heat compared to other alternative heating systems,” Sullivan said.

Since an air pump moves heat, instead of creating it, “It can operate at 150 to 400% efficiency,” said Rabi Vandergon, air source heat pump initiative manager at the Center for Energy and Environment.

Heat pumps do use electricity. But as more electricity is produced from carbon-free sources like wind and solar that means that heat pumps will increasingly generate a lot fewer greenhouse gas emissions. State legislators passed a law earlier this year to produce 100 percent carbon-free electricity by 2040.

And that’s critical, because greenhouse gas emissions from Minnesota homes and apartment buildings have increased 14 percent in recent years. Buildings use about 40 percent of the energy created in Minnesota.

“To meet our goal as a state of net zero emissions by 2050, we’re going to need to figure out how to heat our homes in ways that don’t give off emissions,” said Pete Wyckoff, assistant commissioner for federal and state initiatives with the Minnesota Department of Commerce.

“Heat pumps are an incredibly important tool for that goal.”

Cold climate

For years, Minnesota’s frigid climate has held back air-source heat pumps from gaining a wider foothold. They simply couldn’t keep a home warm enough when temperatures plummeted.

But that’s changed over the past 10 to 15 years, Sullivan said.

“We’re seeing systems that are now rated down to negative 20 (degrees Fahrenheit), or even lower. Which is kind of amazing to think about, that there’s still enough heat that you can extract to heat a home.”

Sullivan said there are some homes that are passively heated and extremely energy efficient and weather-tight that can get by with only a heat pump.

But installers recommend keeping a backup — either electric heat, or a furnace or boiler, that in a typical scenario would provide about 10 to 20% of a home’s heat over the course of a year.

“If something breaks, number one, it’s not an easy fix, usually. Number two, eventually our Minnesota winters definitely will overpower an air-source heat pump,” said Prachar.

Thompson said in his experience, a standard heat pump can heat well down to about five degrees below zero. But the technology is improving rapidly.

“It was only five to seven years ago we didn’t have anything that I would safely install that would run below the 20 degree (above zero) mark,” Thompson said.

According to Thompson, the up-front cost of installing a heat pump may run roughly 20 percent more than a standard natural gas forced air furnace. But homes that install a heat pump he said can expect about a 25 percent savings in yearly heating costs.

Those numbers can vary widely. Heat pumps aren’t the best solution for every home. For some, especially those that heat with efficient natural gas systems, they may not result in many cost savings.

But experts say those who heat with propane, or with electric baseboard heating, can expect significant savings — up to 50 percent annually, according to the Minnesota Air Source Heat Pump Collaborative.

There are also major incentives to entice homeowners to invest in heat pumps. An existing 30 percent federal tax credit allows customers to save up to $2,000 on a system. Utilities currently offer rebates up to $1,000 or more.

In 2019 and 2020, there was a doubling of participation in the utility rebate program across Minnesota, said the Center for Energy and Environment’s Vandergon, who manages the heat pump collaborative.

Heat pump adoption also grew in 2021. Since then it’s leveled off. But nationally, there are now more heat pumps sold annually than traditional furnaces. “That flipped for the first time in 2022. And it hasn’t gone backwards since then, it continues on today,” Vandergon said.

That trend is only expected to accelerate as the Minnesota Department of Commerce prepares to roll out additional state and federal incentives and rebates.

Depending on income level, homeowners will soon be eligible for a federal rebate up to $8,000, and a state rebate of up to $4,000. Additional federal rebates will also be available for home retrofits that result in efficiency upgrades, including heat pump installations.

“We are staffing up in terms of getting ready to offer these programs,” said Wyckoff, adding that a new heat pump staffer just started last week.

“We are a little ways away from actually standing up the program, because there’s been something of a delay from the federal side. It will all work out in the end. But look for a rollout we’re hoping sometime in 2024. It has to be rolled out by early 2025.”

When it is, installers like Thompson expect to be busy. He believes heat pumps will be the majority heating source in the U.S. within the next couple decades.

“This isn’t a silver bullet,” Thompson said. “But if they’re utilized properly, set up properly and installed properly, they can take a huge bite out of our heating costs, and our carbon footprint.”