A look at three home electrification scenarios
If you’re looking to replace your older gas furnace and an older air conditioner and are considering a heat pump, you might wonder if the switch is a smart financial move, or if you’ll save the most money by sticking with your existing energy sources.
To find out, we modelled a typical Ashland electrification upgrade using the new Green Upgrade Calculator from our friends at RMI. It combines the upfront purchase costs with annual operating costs to calculate the financial payback over time for going green. The great thing about this tool is that it makes its estimates based on regional costs and local utility rates — the only online calculator that we’re aware of that uses local data to predict financial payback.
Most researchers and manufacturers say that heat pumps and gas furnaces last between 15 and 20 years on average. A financial break-even point after 10 years or less to the homeowner is considered good.
Scenario #1: You’re a homeowner who qualifies for federal and local incentives
In the first scenario, we assumed the homeowner qualifies for the $2,000 Federal Tax Credit as well as the $900 Ashland Electric heat pump incentive. These incentives offset the somewhat higher cost to buy and install a central-ducted heat pump. Switching to a heat pump will cost this homeowner about the same up-front as traditional equipment and will modestly reduce utility bills right away.
Scenario #2: You’re a homeowner who doesn’t pay income tax
In another scenario, we looked at the cost of switching for a homeowner who doesn’t pay income taxes and can’t get a tax credit. We assumed this homeowner could get a 7% loan over 10 years to fund the upfront equipment costs for a highly efficient mini-split heat pump system. In this scenario, the homeowner will break even after 10 years and save money on utility bills after that.
Scenario #3: You’re switching out your baseboard heaters
Finally, we looked at the cost of switching from inefficient electric baseboard heaters for another homeowner who doesn’t pay income tax and can’t get a tax credit. We assumed this homeowner could also get a 7% loan over 10 years to fund the upfront equipment costs and would also choose a highly efficient mini-split heat pump system. They would qualify for a $1200 efficiency incentive from Ashland Electric. In this scenario, the homeowner will save money right away due to lower utility bills. Savings from lower utility bills will significantly outweigh the interest on the loan.
Please note that all of the above are computer models based on numerous assumptions and estimates. They may or may not accurately reflect your own house and your own needs. To estimate savings for your specific circumstances, play around with RMI’s Green Upgrade Calculator.
While switching to a heat pump will likely result in savings, you should be aware that increased comfort is not a guarantee. Comfort depends on both environmental factors (temperature, thermal radiation, humidity, and air speed) and personal factors (activity and clothing). Heat pumps, especially variable speed heat pumps, can provide a more even, temperate air flow and less noise, leading to greater comfort. On the other hand, older houses built before 1980 are more likely to be poorly insulated and drafty. This can both increase costs and reduce comfort, regardless of the fuel source.
If you have concerns about your building envelope and/or financial payback, you can obtain a free assessment from one of our friendly local Electrify Ashland Now volunteers. Just fill out our home intake form.