Upfront Cost of Home Electrification

Single-zone heat pump: A single “mini-split” heat pump installation consisting of one outdoor unit and one indoor unit. Can heat a large room, a couple of connected rooms, or an open-floor-plan apartment up to about 1,000 square feet.

Hybrid heat pump: A heat pump installation that provides some but not all of the heating for a home, used in conjunction with a fossil or electric resistance backup system. This can be a centrally ducted heat pump, a single mini split, or a mini split with multiple indoor units.

Whole-home heat pump: A heat pump installation that provides all of the heating and cooling for a home. This can be a centrally ducted heat pump or a ductless system (mini split typically with multiple indoor units, and sometimes multiple outdoor units).

Massachusetts has a relatively cold climate. The Massachusetts Clean Energy Center (MassCEC) ran a Residential Air-Source Heat Pump Program from November 2014 through March 2019, which provided incentives ranging from about $500 to $3,000 depending on heat pump size. They have provided a detailed dataset of around 21,000projects, which we have disaggregated into single zone (8,000 projects), hybrid (8,500 projects), and whole-home heat pumps (3,500 projects) for use in our model. The median total project cost across all installation types was around $8,300 before incentives.

MassCEC also ran a Whole-Home Heat Pump Pilot from May 2019 through June 2021, and that detailed dataset has 158 projects. For these projects, Mass Save, the state’s energy efficiency program, offers a whole-home rebate of $10,000. The median total project cost was around $18,300 before incentives, and ranged from $5,000 to $58,000. At the beginning of the pilot program, backup heat was encouraged, but by the end they removed that recommendation, “reflecting growing acceptance of the ability of cold-climate heat pumps to serve as a stand-alone heating solution.”

The TECH Clean California program has provided rebates on heat pumps and heat pump water heaters (HPWHs) since 2021. The TECH Clean incentive is given to contractors, and depends on the size of the system. These incentives were usually $3,000, and the funding ran out in a few months. With new funding for 2023, they have reduced the incentive to $1,000. They collect data about every install and release public updates each month. As of December 2022, the median total project cost for the 9,000 heat pump projects was around $17,000 before incentives, and ranged from $3,000 to almost $70,000. All of these installs were whole-home, as they all either decommissioned previous infrastructure (89% of projects), or left it in place to run for emergency use only.

Maine is one of the coldest states in the country, but air source heat pumps are being adopted by households at twice the rate of the rest of the US. The statewide rebate program, run by Efficiency Maine, offers rebates up to $2,000 for Low and Moderate Income (LMI) residents, and up to $1,200 for everyone else. Efficiency Maine states that the installed cost of a heat pump is $4,600. While they don’t specify what this covers, we assume it is for a single-zone heat pump. Efficiency Maine also pays for heat pump water heaters to be installed in low-income households at a fixed price of $2,500 for electric resistance replacement, and $2,900 for fossil replacement (equipment plus installation).

Despite the great uptake of heat pumps, Efficiency Maine has not been publishing data on the equipment or installations themselves. One small dataset from South Portland, ME includes 36 projects completed in Fall of 2022. The total project cost ranged from $3,000 to $33,000 before incentives, with the lower end for a single-zone heat pump, and the upper end for 4-5 indoor units and sometimes a second outdoor unit. The average cost per zone (total cost divided by total number of indoor units) from this dataset is around $5,200.

New York is also in a cold climate. As part of a 2017–2019 Air-Source Heat Pump Program, the New York State Energy Research and Development Authority (NYSERDA) offered rebates of $1,500– $4,500 to households who installed heat pumps, depending on heat pump size. NYSERDA published an analysis of their program including pricing data for 386 projects. The total project cost ranged from $10,000 to $30,000 before incentives, with an average cost of $16,300.

The data plotted below represent total project costs (equipment plus installation costs) for a whole-home heat pump installation, derived from the TECH Clean California dataset and the two Massachusetts datasets. These costs have been adjusted to representpresent-day national averages by correcting for inflation (since installations took place over the past decade) and location-specific materials & labor costs (since Massachusetts and California are relatively expensive markets).

In the data plotted below, the lines represent our modeled cost estimates. The black line is the median cost, the red line is the 25th percentile, and the blue line is the 75th percentile. Half of all projects fall between the red and blue lines, with 25% of installs cheaper (below the red line) and 25% more expensive (above the blue line).

Our modeled cost estimates for the 25th to 75th percentile of whole-home air source heat pumps are as follows:

These are national estimates, and costs will vary significantly from market to market. Homes in moderate climates or with better insulation require less heating/cooling capacity and are likely to fall at the lower end of these ranges. Homes in colder climates or in regions with high labor costs are likely to fall at the higher end of these ranges. Hybrid heat pump installations with continued fossil-fuel backup in any size home and region will cost less than whole-home installations.

Other factors, such as supply chain constraints, the familiarity of local HVAC contractors with heat pump technology, and the degree of price competition within local markets will also affect pricing, but are not possible to model with the available data.

To quantify some of the variability in costs based on climate, location, and home characteristics, we have developed a model that takes into account more information about a home in addition to its square footage, including whether the home needs new ductwork, whether the heat pump is installed in a cold climate, heat pump size/capacity, and heat pump efficiency. The results of this model are as follows below.

Based on this, we can generate cost estimates for more detailed project parameters in specific regions of the country. For example, a heat pump installation in a cold climate like Vermont is projected to cost $5,300 more than for a similarly sized home in a warmer climate, assuming a $2,800 premium for cold climate, $1,800 for an extra ton of heating capacity, and $700 for an increase in heating efficiency (measured in terms of Heating Season Performance Factor or HSPF).

*Estimated to be 60 percent of the cost of a heat pump from a recent decarbination cost study. and verified to be close to $8,000 for HVAC replacement via Thumbtack.

The data plotted below are total project costs (equipment plus installation costs) for a single-zone heat pump installation, derived from the Massachusetts Air-Source Heat Pump dataset. These costs have been adjusted to represent present-day national averages by correcting for inflation and location-specific materials and labor costs.

In the data plotted below, the boxed area represents the 25th to the 75th percentile of project costs. The yellow line in the middle represents the median, or 50th percentile, cost.

Based on this, we would expect the middle range (25th to 75th percentile) for an installed single-zone air source heat pump to be:

The data plotted below are total project costs (equipment plus installation costs) for a heat pump water heater installation, derived from the TECH Clean California dataset. These costs have been adjusted to represent present-day national averages by correcting for inflation and location-specific materials and labor costs. In the data plotted to below, the boxed area represents the 25th to the 75th percentile of project costs. The yellow line in the middle represents the median, or 50th percentile, cost. Costs are disaggregated between households replacing gas water heaters and households replacing electric resistance water heaters.

For heat pump water heaters, we did not identify a strong correlation between cost and any of the input features (e.g., square footage, water heater size in gallons, or water heater efficiency). However, if the household was replacing a gas water heater, the additional wiring required for a gas-to-electric swap made it more expensive than just replacing an existing electric resistance water heater.

Based on this, we would expect the middle range (25th to 75th percentile) for an installed heat pump water heater to be:

To translate heat pump water heater costs from national averages to location-specific cost estimates, we multiply by location-specific cost factors.

We use three large datasets of heat pump installations to estimate heat pump installation cost:

• Massachusetts Residential Air-Source Heat Pump Program | 21,000 projects, including 3,500 whole-home heat pumps and 8,000 single-zone heat pumps | 2014-2019

• Massachusetts Whole Home Pilot | 158 projects, all whole-home heat pumps | 2019-2021

• TECH Clean California | 9,000 projects, all whole-home heat pumps | 2021-2022 (more updated data is available, but our model currently only incorporates data through 2022)

For each project in the dataset, we adjust the cost to represent a present-day national average by correcting for inflation using a Construction Price Index (since installations took place over the past decade) and correcting for location-specific materials & labor costs using RS Means cost factors (since Massachusetts and California are relatively expensive markets). Based off this corrected data, we develop a quantile regression model that predicts whole-home heat pump cost given six pieces of information about a home:

1. Square footage

2. Heat pump efficiency (as measured by HSPF)

3. Heat pump size in tons

4. Whether the installation was a cold climate (note that this may encapsulate both the installation of a cold-climate heat pump, and other complexities related to installing heat pumps in cold climates, such as requiring more precise load calculations

5. Whether the ductwork needs to be replaced or upgraded

6. Whether a panel upgrade is required

Home square footage is the single best predictor of project cost in the TECH dataset, so we also develop a simpler model to estimate cost ranges for four representative home sizes. We perform a quantile regression on project cost vs. home square footage to predict the median cost, the 25th percentile, and the 75th percentile. For all modeling, we use a quantile rather than a linear regression to capture the median project cost rather than the mean project cost, since the project cost distribution has a long upper tail.

For single-zone heat pumps, we simply calculate the median and the 25th and 75th percentile costs, since there is not a strong correlation with any of the input features.

Since this methodology is based only on California and Massachusetts data, we validate this methodology using datasets from other states. We will continue to add to this table as more validation data becomes available.

We use the TECH Clean California dataset, which has data from over 1,200 heat pump water heater installations, to estimate heat pump water heater costs. Similar to the heat pump data, we adjust the cost of each project to represent a present-day national average by correcting for inflation and location-specific materials & labor costs. The main predictor of heat pump water heater cost is whether the household switches from a fossil fuel water heater, which likely requires electrical work, or from an electric resistance water heater. We therefore separately calculate the median and quartile costs for households switching from fossil and for households switching from electric resistance.