Deployment of heat pumps is a key part of greenhouse gas reduction goals set out in the Inflation Reduction Act. In this paper, a collaboration between RAP and CLASP, the authors analyze impacts of the IRA on heat pump uptake in the United States and recommend policies that states can use to further increase uptake.

Existing literature suggests that the IRA makes a considerable contribution to achieving building decarbonization goals, but that more work is needed. Building on that, the paper models the effects of two key IRA sections, the High-Efficiency Electric Home Rebate Act (HEEHRA, IRA Section 50122) and the Nonbusiness Energy Property Credit (Section 25C of the Tax Code, IRA Section 13301), on a representative housing type: non-mobile homes currently using fossil or resistance electric heating and that have central air conditioning, representing 54 million U.S. households. Our modeling finds that the two IRA sections will motivate an additional almost 1 million of these households to switch to heat pumps over the next 10 years, lifting the number of conversions in the decade from 5.1 million (if the IRA hadn’t been enacted) to 6 million.

While the IRA is an important step forward, decarbonization of home heating will require additional policy initiatives. The balance of the paper explores state-level policy and regulatory actions and strategies that can help fill the gap:

• Public Access and Participation: As they plan for delivering IRA benefits to their citizens, states and local jurisdictions should endeavor to improve their engagement with underserved communities.
• Clean Heat Standards: Performance standards requiring fossil heating fuel providers to deliver a gradually increasing percentage of low-emission “clean heat” resources to customers, promoting the adoption of cleaner and more efficient alternatives such as heat pumps. 
• Hybrid Heat: A strategy that exploits the ability of heat pump technology to both cool and heat, while allowing homeowners to retain their existing fossil heating systems for cold-weather backup.
• Energy Efficiency Programs: Programs run by utilities or independent administrators can be refocused and expanded to promote heat pumps and associated measures.
• Rate Design: Time-sensitive rate designs can take advantage of the relative efficiency and flexibility of heat pumps, helping system managers coordinate electric load and saving consumers money.
• Workforce Training and Development: States will need to address the shortage of technicians with the expertise to install and maintain heat pumps, including by developing training for existing employees and apprentice-based programs.
• Tariffed On-Bill Financing: This approach can overcome an upfront cost barrier faced by customers interested in purchasing clean energy technologies such as heat pumps.