New York state’s move to all-electric homes: How expensive is it? Will it work?

Syracuse, N.Y. – New York’s aggressive plan to phase out heating systems that use natural gas or other fossil fuels has raised a lot of eyebrows since officials approved it last week.

The plan depends heavily on widespread adoption of air-source heat pumps, a technology that is common in warmer climates like the American South but far less familiar in Upstate NY.

Can pricey electric heat pumps really keep homes warm in our frigid winters?

The answer — according to several people who own them and others who have studied their performance — is yes. A new breed of “cold climate” air-source heat pump is a valid, energy-efficient heating option in Upstate New York.

But the cost is a concern. Installing an electric heat pump is more expensive than other heating systems, even after significant subsidies. The difference in cost is more pronounced when retrofitting an existing house, less so when installing a heat pump during new construction.

But it’s hard to generalize. Many subsidies are income-based. Some low-income residents have even gotten heat pumps for free.

Most of the state subsidies are paid for by utility customers. More money is coming next year from federal taxpayers. Even those who don’t install heat pumps are helping to pay for them.

Do heat pumps save money over the long run?

They are typically about three times more efficient than most traditional heating and cooling systems, although that advantage drops off rapidly at very low temperatures. Several studies indicate they are cheaper to operate over the lifetime of the equipment, especially when compared with high-priced fuels like oil, propane or electric resistance heat.

On the other hand, for some residents who now heat with natural gas, switching to a heat pump might be a money loser.

The technology is still evolving. The U.S. Department of Energy has a competition under way for manufacturers to develop heat pumps that will operate efficiently at temperatures as low as minus 15 degrees Fahrenheit. For now, many heat pumps in cold climates are installed with backup systems (using electric resistance heat or other sources) for extremely cold temperatures.

Cost comparisons also are likely to change as more incentives come online and production ramps up. For now, a lot of questions remain.

Why are we talking about heat pumps?

New York state appears headed toward a mandate that would phase out heating systems that use combustible fuels.

The state Climate Action Council, a 22-member commission created by state law to set policies related to climate change, last week adopted a sweeping plan aimed at reducing greenhouse gas emissions and developing renewable energy.

One section of the plan called for prohibiting the installation of heating equipment that burns fossil fuels in newly constructed single-family homes and low-rise apartment buildings, beginning in 2025.

The council plan also said new commercial buildings and multifamily homes higher than three stories would face the same mandate beginning with building permits issued in 2028.

And beginning in 2030, the owners of existing homes would be unable to replace fossil fuel-burning heating equipment after it reaches the end of its useful life, according to the Climate Action Council document.

As a practical matter, those mandates will spur the use of electric heat pumps. The council anticipates the installation of 1 million to 2 million heat pumps in New York homes by 2030.

Buildings account for roughly one-third of the state’s greenhouse gas emissions. To solve that, the council focused on raising efficiency standards and making buildings run on electricity rather than combustible fuels.

To mandate a switch to electric heating systems, the council called for new building and energy conservation codes. Those are set by the state’s 17-member Code Council, which has the authority to revise the codes. Council members are appointed by the governor.

The Climate Action Council spent three years developing policies to meet goals set by the state’s Climate Leadership and Community Preservation Act, a 2019 law that mandates reducing greenhouse gas emissions 40% by 2030 and 85% by 2050. Half of the council’s 22 members were state agency heads. The other half were environmental experts, energy industry leaders and others, all appointed by the governor and legislative leaders.

It’s now up to the governor, state agencies and legislators to implement the council’s policies.

The most efficient alternative to fuel-burning heaters are electric heat pumps, which come in two basic varieties: air-source, which pull heat out of the air; and ground-source (or geothermal), which pull heat from the ground. Because ground-source units are so much more expensive, air-source heat pumps are likely to be the favored option for most people.

Air-source heat pumps operate like reverse air conditioners. They circulate a refrigerant that evaporates even in frigid outdoor air temperatures, transferring heat from outside in. Most models can be reversed in summer to provide cooling.

Ground-source heat pumps circulate a mix of water and antifreeze through underground loops to pick up thermal energy, which is then transferred to a refrigerant in the heat pump. Because of the need to drill wells, ground-source heat pumps are costly to install and less commonly used, even though they are more efficient.

Since 2020, at least 4,900 property owners in Upstate New York have installed one variety of heat pump or the other, according to National Grid. They got subsidies averaging $3,000 each, paid for by utility ratepayers.

How much do heat pumps cost?

HeatSmart CNY, a Syracuse community organization, has helped more than 150 Central New York homeowners replace existing heating systems with heat pumps in the past four years. HeatSmart is a program of the New York State Energy Research and Development Authority.

About 35 of the new heat pumps were ground-source, and about 120 were air-source, said Lindsay Speer, campaign director of HeatSmart CNY.

The average cost of installation for a cold climate air-source heat pump has been about $20,000 to $25,000, but that’s before rebates, tax credits and other subsidies, Speer said. The homeowner typically pays more like $15,000 to $16,000 out of pocket, she said.

By comparison, the average cost of replacing an HVAC system that includes a gas furnace and central air conditioner ranges from about $5,000 to $12,500, according to several online home improvement marketplaces.

A study published this year by Boston-based consulting group Cadmus estimated that homeowners in New York and Massachusetts paid an average of about $18,000 to install air-source heat pumps. The study was based on data from 43 households.

Ground-source heat pumps have averaged about $40,000 to $50,000 in CNY, Speer said. Even after incentives, the actual cost is typically $30,000 to $40,000, she said.

But the cost of incorporating heat pumps of either type into new construction should be lower, Speer said.

“Designing heat pumps into the home from the beginning is a far easier installation process than retrofitting,’’ she said. “The cost of heat pumps for new homes is less than retrofits and should be more comparable to fossil fuel systems as soon as they are no longer a boutique item that homeowners have to demand from their builders, but a standard offering.’’

More incentives are coming

The recently passed Inflation Reduction Act will send $4.5 billion to states in 2023 to subsidize heat pumps and other efficient appliances. According to the nonprofit Rewiring America, which is tracking the funding, the federal heat pump subsidies will be available for low- and moderate-income homeowners beginning sometime next year.

For low-income households (up to 80% of area median income, or roughly $71,000 for a Syracuse family of four), the subsidy is expected to cover 100% of costs up to $8,000, according to Rewiring America. Moderate-income folks (up to roughly $133,000 for a family of four) are expected to get 50% of costs covered, also up to $8,000.

Most state governments are expected to make these incentives available in the latter half of 2023, Rewiring America estimates.

Income levels are a factor in the cost of heat pumps.

Otisco resident Kitty Burns said she paid nothing – zero — for an air-source heat pump she had installed about 18 months ago.

A retiree, Burns qualified for a low-income program at NYSERDA that provides grants of up to $10,000 for approved energy-efficiency upgrades, including heat pumps. EmPower NY grants are available to residents who meet the same income limits used in benefit programs like HEAP and SNAP (for example, $65,820 for a family of four).

That grant, plus the subsidy from National Grid, covered the cost, she said.

The heat pump keeps her warm even on the coldest days, she said.

“It manages to heat the house very nicely,’’ she said. “Last winter, I think there were only two days that I felt that I had to wear a sweater.”

Burns previously heated her house with a wood stove and oil furnace. She has not fired up either since the heat pump went in, she said. And, for the first time, she has air conditioning in the summer.

Her heating bills have dropped from about $1,800 a year to $700, according to HeatSmart CNY.

For new homes, lower costs

For new home construction, the cost of installing an air-source heat pump is not much more than a high-efficiency fossil fuel system, said Robert Howarth, a Climate Action Council member and a professor of ecology and environmental biology at Cornell University.

New homeowners with heat pumps will quickly make back the difference with smaller heating bills, he said.

“The energy costs for the fossil fuel-free home will be less from Day One, when you move into it,’’ Howarth said. “So the new homeowner will have more than broken even and start pocketing savings within six months, moving into a new home under the new rule.’’

Onondaga County is expecting a wave of new construction in the years to come, spurred by an anticipated influx of construction workers and staff for the proposed Micron Technology chip fab in Clay. The prospect of new housing developments may open the door to more geothermal heating systems, said Josh Stack, of Northeast Green Building Consulting LLC.

Under a law signed in September, the state’s major utilities, including National Grid, are authorized for the first time to sell geothermal energy. Each utility is required to undertake at least one pilot project to develop a geothermal energy network serving an entire neighborhood.

By allowing multiple households to tap into one large geothermal network, the upfront installation cost could be eliminated for homeowners. The Public Service Commission will regulate the service, as it does for gas and electric service.

Retrofits are costly for some

For existing homeowners, the financial outlook for switching to an electric heat pump is mixed. Depending on what fuel you heat with, the investment may or may not pay off in the long run.

The Cadmus study of 43 households in New York and Massachusetts estimated that homeowners who switched from oil, propane or electric resistance heating could save between $460 and $680 a year by switching to a heat pump.

But the study also found there was an “energy cost penalty’’ estimated at $150 to $260 a year for customers who switched from natural gas.

A national study published in 2021 in the journal Environmental Research Letters came to similar conclusions. The study found there was little financial reason for households in cold climates to switch from natural gas.

Some 8.7 million U.S. households, or 11%, now have heat pumps, according to the study led by Thomas Deetjen, a research associate at the University of Texas. Another 16.7 million households would benefit financially by installing them, the study said. The best opportunity to save money is for people who currently heat with electric resistance, oil or propane – not natural gas.

“Switching a home’s heating fuel from natural gas to heat pumps rarely produces a benefit, especially in cold climates,’’ the authors wrote.

The study was written when natural gas prices were much lower than they are today. The picture may change if prices continue to rise, as they have this winter.

In any case, heat pumps are the most economical option to replace gas and other fossil fuels, even in very cold climates, according to a 2022 study by the American Council for an Energy-Efficient Economy. If the goal is to eliminate site emissions from households, natural gas will have to be phased out, the study said.

“If we are truly going to reach zero net emissions from buildings by 2050, we will no longer be able to use fossil fuels,’’ wrote authors Steven Nadel and Lyla Fadali.

How green is the grid?

Beyond the question of cost, some critics doubt whether the plan to rapidly electrify all buildings is the most effective way to reduce greenhouse gas emissions. The overall impact will depend on where the extra electricity comes from to power heat pumps, electric cars and other equipment.

Kevin Stack, a veteran consultant and builder of energy-efficient homes in Central New York, said he installed heat pumps at his own home to replace the propane boiler. He supports converting buildings to electric.

Even so, he thinks the state’s plan to mandate so-called “zero-emission’’ systems like heat pumps in all homes is premature, a case of putting the cart before the horse.

“I think we all know they’re not emissions-free until the grid is emission-free,’’ Stack said. “And it’s not.”

Heating a house with electricity doesn’t help the climate if it requires more output from fossil fuel-burning power plants. Promoting heat pumps must be considered in a broader context that includes the power grid’s fuel mix and its capacity to meet a growing peak demand driven by household heating, the Deetjen study said. As it stands today, widespread adoption of heat pumps would improve carbon emissions in about 70% of the country, the study concluded.

Fortunately, the Upstate New York power grid is the cleanest in the nation, according to 2020 pollution data collected by the U.S. Environmental Protection Agency. Emissions of carbon dioxide and other pollutants are relatively low because two-thirds of the region’s power comes from nuclear and hydroelectric facilities. Only about one-quarter is from natural gas plants.

New York City and Long Island are a different story. Power plant emissions of carbon dioxide and other pollutants are significantly higher in that region.

The plan adopted by the Climate Action Council is predicated on developing vast new amounts of renewable energy – mostly wind and solar – to meet the growing demand from electric buildings and cars. Skeptics, including at least one member of the council, questioned the likelihood of meeting those goals.

The New York Independent System Operator, which runs the power grid, estimates that the state’s total generating capacity must more than double by 2040. Gavin Donohue, a member of the Climate Action Council and president of a trade group representing New York generating companies, said the plan approved by the council does not adequately address that need.

As a result, “New York (is) at risk for economy-crushing blackouts and potential public safety risks,’’ he wrote in formal comments. Donohue was one of three dissenting votes among the 22 members.

Bringing an old home into the future

Walter Putter, who lives on the East Side of Syracuse, had a heat pump installed about 18 months ago in his 97-year-old, 5-bedroom Colonial. Along with it, he beefed up his insulation, installed a separate heat pump for hot water, and added a mechanical ventilation system to circulate fresh air. He also added 35 new solar panels to his roof, bringing the total to 65.

Putter estimates the whole project cost $30,000 to $40,000. His main goal was not to save money. He was out to fight climate change.

“When people ask me why we have 65 solar panels, I tell them because we don’t have room for 66,’’ he laughed.

After all the work, his total utility bill averaged $83.50 a month from April 2021 to April 2022, he said.

The heat pump has kept the house perfectly warm in the year and a half it’s been in, Putter said. Like many cold climate heat pumps, it’s equipped with a backup electric resistance heater to supplement the output when temperatures plunge very low. But Putter said he turned that function off.

“We have it there if we need it,’’ he said.

Putter said his wife was skeptical about whether they could keep the house warm “without a fire burning in the basement.’’ They found that they could, he said.

“I’m anxious to help get the word out,’’ he said.

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