HKS Affiliated Authors
Excerpt
June 26, 2024, Paper: "Background: Electrification through heat pumps is a primary strategy for decarbonizing residential heating in Massachusetts. The state has announced ambitions for 65% of residential-scale heating to be heat pump equipment by 2030 and 90% by 2040, earmarking nearly 4 billion dollars in incentives between 2022 and 2024 to promote uptake. Yet high electricity prices across the state (among the highest in the country) mean that heat pump adoption will increase household heating bills and energy burdens, preventing widespread uptake. Here, we undertake a comprehensive spatial analysis of the effect of heat pump adoption on residential household heating costs in Massachusetts across a range of heating types and fuel costs. Our aim is to identify where heat pump adoption should be prioritized and where policy, financial, or other measures will be necessary to promote uptake.
Analysis: We calculate the annual change in residential heating costs incurred by the average Massachusetts household (1,800 sq ft) converting from natural gas, oil, or electric resistance heating to an air- or ground-source (geothermal) heat pump. We conduct our analysis on a town-by-town basis, using location-specific fuel and electricity costs and heat pump coefficient of performance (COP) values.
Results: In approximately 50% of households in the state, predominately those heated with natural gas, air-source heat pump adoption would increase annual household heating costs, in most cases, by $300–$500 per year. The exception is in regions where electricity prices are substantially lower than the state average. In these households, along with households heated with oil (around 25% of all households), air-source heat pump adoption would reduce annual heating bills, but these savings are small relative to installation costs. In households currently using electric resistance heating, air-source heat pump adoption will decrease annual heating costs, in some cases up to $2,900 per year (for the average-sized MA household). The high annual savings for households with electric resistance heating mean that upfront heat pump purchase and installation costs can typically be recovered in much less than ten years, even without subsidies.
Conclusions: We recommend that state policies to promote heat pump adoption initially focus on the 16% of Massachusetts households with electric resistance heating, where the cost of heat pump installation can be recovered quickly. Obstacles in these households will likely be associated with financing as many of these are rental households where landlords have little incentive to upgrade heating systems. For households with oil heating, savings are marginal and therefore not enough to make heat pump adoption cost-effective. These households could be a secondary target for subsidies, particularly those households with central air conditioning that will, at some point, require replacement. Decarbonizing residential heating across all households will require a substantial decrease in the residential price of electricity relative to natural gas or oil to make heat pump adoption more widely cost-effective."