Will switching to a heat pump save you money? Here's how ...

Many CBC readers have asked about the costs of swapping their heating and cooling system to a heat pump — a key strategy for cutting the main source of residential greenhouse gas emissions, which is burning fossil fuels for water and space heating.

You can find more information on our web, so please take a look.

A new report and online calculator from the Canadian Climate Institute are the latest to show that many Canadian households could save money by making the switch.

The researchers calculated that replacing a gas furnace and an air conditioner with an air-source heat pump (which does both heating and cooling) would typically save money in Vancouver, Toronto, Montreal and Halifax.

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"Despite our analysis being conservative, heat pumps are the lowest-cost option for most households," said Christiana Guertin, research associate at the institute and co-author of the report released Thursday. It was accompanied by a calculator designed to help Canadians get better estimates for their own situation.

The new report is the most recent showing that heat pumps don't just cut greenhouse gas emissions relative to fossil fuel heating, but often save money. 

But that depends on several questions. What kinds of homes are they installed in? In which regions? With what kind of heating? And what kind of heat pump system would they be adopting?

Here's a closer look at those studies, the costs and savings, and the factors that impact them.

Your current heating system makes a difference

While the Canadian Climate Institute study only looked at households with gas furnaces, a 2022 federal government study considered other kinds of heating systems.

The federal study found that by installing a cold-climate air-source heat pump, Canadian households switching from an electric furnace would save an average of $700 to $1,900 a year in utility bills, and those with furnaces that run on heating oil would save $1,000 to $3,500 a year. That was despite the study using data from 2020, when oil prices were low due to the COVID-19 pandemic.

"Those types of heating systems are very expensive, and in that context, choosing a heat pump is a very smart economic choice to make," said Alex Ferguson, research officer at CanmetENERGY in Ottawa and co-author of the study.

WATCH | Atlantic Canada leads country in switch to green heating 

If you're using natural gas, where you live makes a difference

For those with natural gas heating, both the Canadian Climate Institute study and the federal government study show that regional differences in climate and in energy prices impact how much money, if any, you save with a heat pump.

The federal study estimated average savings of $50 to $150 a year in utility bills across Canada in 2020, but found savings were higher in Quebec and the Atlantic provinces. 

The Canadian Climate Institute focused on households with gas furnaces and air conditioners in five cities: Vancouver, Edmonton, Toronto, Montreal and Halifax. Unlike the federal study, it included costs and savings over the lifetime of the equipment, assumed to be 18 years. That included purchase and installation, government incentives and rebates, maintenance, and utility bills (taking into account the rising carbon price and projected future energy prices from the Canada Energy Regulator).

A heat pump cut costs an average of 13 per cent in the cities studied. 

The study found most buildings in Vancouver, Toronto, Montreal and Halifax would save money with a heat pump, including single-family homes, townhouses and many apartments.

The exception in Toronto was multi-residential buildings heated centrally. Guertin said that was due to the heat pump technology required for such large buildings and a lack of government rebates for that equipment.

In Montreal and Halifax, heat pumps save money even without any government incentives or rebates, the report found.

WATCH | Heat pumps can cool a home in the summer and heat it in the winter:

When the report was first published last week, gas furnaces beat out heat pumps in Edmonton, due to its low gas prices compared to other parts of the country and its cold winter climate, as heat pumps are less efficient in very cold weather and systems may need to rely more on electric backup systems, which are less efficient. However, the Canadian Climate Institute told CBC News this week that after adding in a missing rebate that had been overlooked, a heat pump with a gas backup comes out slightly ahead for houses and townhouses in Edmonton in most scenarios.

The new report's Toronto findings were consistent with two 2022 reports by the Ontario Clean Air Alliance, which found the average Ontario homeowner with a gas furnace and air conditioner would save $10,000 or more over the lifetime of their equipment when switching to an air-source heat pump, and up to $24,000 when switching from a gas furnace and air conditioner  to a ground-source heat pump, which performs better in extreme cold. 

Standard vs. cold-climate heat pump

Canadians can generally choose between two types of heat pumps:

• Standard heat pumps, which are typically installed with a backup heat source for below-freezing temperatures.
• Cold-climate heat pumps, which can heat homes without a backup at temperatures as low as –20 C or –30 C, but are sometimes installed with a backup system.

The Canadian Climate Institute report found that a standard heat pump with an electric backup was the cheapest option across Canada.

Standard heat pumps have existed for a long time, and are now not much more expensive than air conditioners. Meanwhile, cold-climate heat pumps are a new technology and are still priced at a premium. In its report, the Canadian Climate Institute assumed that for a townhouse or single-family home:

• Standard ducted heat pumps cost $5,000 to $9,000 to buy and install, and are eligible for a federal Greener Homes Grant of $4,000 (leading to a net cost of $1,000 to $5,000).
• Cold-climate ducted heat pumps cost $10,000 to $19,000 and are eligible for Greener Homes Grant of $5,000 (net cost of $5,000 to $14,000)
• Gas furnaces cost $3,700 to $4,700
• Central air conditioners cost around $5,000.

The report assumes that a cold-climate heat pump would need a backup heat source, adding an additional cost (see next section). Heather McDiarmid, a climate and energy consultant who prepared the reports for the Ontario Clean Air Alliance, questioned whether that would be necessary across Canada.

"There are some homes in Ontario that have a cold-climate ASHP [air-source heat pump] with no backup heater and they work just fine," she wrote in an email. "I see no reason why a home in Vancouver would need one at all." She added that the heat pump in her Kitchener, Ont., home has run for three years, and in that time, outdoor winter temperatures have never been cold enough to trigger the backup heating system.

Kate Harland, mitigation research lead for the Canadian Climate Institute and co-author of the new report, acknowledged that cold-climate heat pumps may be more suitable for the Prairies. But she said they are expected to come down in price over time.

WATCH | Last fall's announcement of new federal grants for replacing oil furnaces with heat pumps

Electric vs. natural gas backup

Backup heat systems can be either:

• Electric: These can work alongside the heat pump to give it a boost in cold temperatures. 
• Natural gas: These are essentially gas furnaces that take over from a heat pump below a certain temperature. (They can't run at the same time.) A heat pump with a gas backup is often called a hybrid system.

In the Canadian Climate Institute study, for those with standard heat pumps, the temperature at which the backup was triggered was 0 C for Toronto, Edmonton and Halifax, and –5 C for Vancouver and Montreal, where electricity is cheaper. For those with cold-climate heat pumps, it was –8.3 C.

The study found that an electric backup was cheaper, at $300 to $1,500, compared to a gas furnace, estimated at around $4,000.

The federal study also found that an electric backup would be cheaper if a homeowner disconnected from gas altogether, as they would save money in fixed monthly charges for gas distribution. But if they kept a gas connection for use with appliances such as water heaters or stoves, they would save more money with a hybrid system, while still cutting their greenhouse gas emissions 15 to 35 per cent.

WATCH | Childhood asthma study reignites debate over gas stoves: 

Both McDiarmid and CanmetENERGY's Ferguson said a gas backup or hybrid system is also typically cheaper in older homes, which usually need an electrical panel upgrade in order to run a heat pump with electric backup, but not with a gas backup. The Canadian Climate Institute study assumed that all homes built before 1980 would need this electrical upgrade, at a cost of $3,400 to $5,100, regardless of whether they chose a gas or electric backup.

Need more info?

Both the Canadian Climate Institute's report and calculator and Natural Resources Canada have lots of additional details that may be helpful to anyone interested in learning more about heat pumps.

Ferguson suggested that people shouldn't get caught up in small differences in costs between different heating or heat pump systems.

"The cost between all these systems are pretty comparable," he said, noting that wasn't the case in the past, when heat pumps were more expensive and less technologically advanced. "I think the story here is that Canadians have more options than they've had before to reduce their carbon footprint [and] to bring cooling to homes that didn't have cooling before."

This page contains helpful information on a variety of topics related to air source heat pumps.

Scroll down or click on the appropriate link below for the following topics:

Why should I consider an air source heat pump?

Air source heat pumps provide many advantages over traditional fossil-fuel or electric resistance systems including:

Energy bill savings. If you heat with propane, oil, or electric resistance heating, you could save hundreds of dollars per year on your heating bill by installing a heat pump.

Efficient all-in-one heating and cooling. Heat pumps provide heating, cooling, and dehumidification in the same system. Improve the comfort of your home year-round!

Flexibility. Heat pumps come in ductless and ducted varieties and can be installed to address different needs—whether you want to replace your existing system or just want to add heating or cooling to one or a few rooms.

Improved air quality. Unlike fossil-fuel heating, hear pumps do not produce harmful emissions like nitrogen oxides, carbon monoxide, and particulate matter.

Lowered carbon footprint. Recognized by the State as a clean heating and cooling technology, heat pumps will help you reduce your greenhouse gas emissions.

Consider cold climate air source heat pumps to be the cleaner, greener alternative to fossil fuels—an alternative that also provides high-efficiency air conditioning at the same time!

How do air source heat pumps work?

Rather than generating heat, a heat pump transfers it in and out of a building. Heat pumps use the same process that makes a refrigerator or air conditioner work: think about it as an air conditioner that can also run in reverse!

Heat pumps can be ductless, providing heating and cooling to individual rooms of your home, or ducted, using your existing or new ductwork to serve as a central heating and cooling system.

Is a heat pump right for me?

Do you heat with oil, propane, or electric resistance and want to save on your energy bill?

Switching to a heat pump system could save you hundreds of dollars a year on your home heating bill even if you’re not ready to replace your whole system yet.

Do you want to add air conditioning but don’t have the ductwork for a central system (or just want to ditch the window units)?

Ductless air source heat pumps can help you reclaim your windows from noisy window AC units and provide you with all of the benefits of a quiet, central air conditioning system without needing to spend thousands just to put in the ductwork!

Does your home have hot and/or cold spots?

No need to replace your whole system: a ductless heat pump can be installed in the zone of the hot or cold spot to provide extra heating or cooling.

Do you want to convert your home to gas but don’t have access in your neighborhood?

Consider a heat pump system to be a cleaner, greener alternative! Heat pumps can provide heat at comparable prices to gas with lower emissions—and you get high-efficiency air conditioning at the same time!

Do you want to have more control over the temperature in individual rooms?

Ductless heat pumps are often referred to as “zoned home comfort solutions.” With ductless heat pumps, you can place indoor units in different zones of your home so that you only need to heat or cool the room that you’re in.

Is your furnace or central AC system over 20 years old? 

If so, your system may be at the end of its expected lifetime.Consider replacing your system before it breaks with a more efficient ducted or ductless air source heat pump.

More Information

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While it’s not required, residential customers are encouraged to get a no-cost home energy assessment to learn more about their home’s energy usage before moving forward with a heat pump installation. Click here to learn more.

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RMLD has contracted with Abode Energy Management (Abode) to provide technical and educational resources to support our customers who wish to install air source heat pumps. Abode will provide sizing and design support to RMLD customers and contractors to ensure that the installed system delivers the savings and comfort expected, as well as reduces the home’s overall carbon impact. Abode can also help customers compare quotes for their heat pump projects.

Customers can connect directly with Abode’s Heat Pump Specialist to ask questions at any point in the heat pump exploration process via the following methods :

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In order to best support customers that are exploring heat pumps, a Participating Contractor List (PCL) will be maintained by Abode and provided as a resource to customers. The goal of the PCL is to be an inclusive resource that customers can use to request quotes from installers that are familiar with RMLD’s rebate program and have a track record of success and customer satisfaction. Customers are encouraged to verify qualifications and references of all potential contractors and are not required to use an installer from the PCL to utilize Abode’s other services or to receive RMLD’s heat pump rebate.

Click here to view the Participating Contractor List. Click here for the list of criteria to become a participating heat pump contractor.

Contractors that wish to learn more about the Participating Contractor List are invited to contact Abode via the following methods:

Email: rmld@abodeem.com
Click here to schedule a 30-minute virtual meetup.
Click here to schedule a 30-minute phone discussion. 

Please note, RMLD does not endorse, guarantee, or warranty any particular contractor, manufacturer, or product.

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Preapproval is an optional step for ensuring that a selected heat pump system is eligible for the Air Source Heat Pump Rebate Program. 

The selected installer can submit the project to Abode for preapproval before installation begins. Abode will review the proposal and provide  feedback. Click here for the Optional Pre-Approval Form.

By preapproving the proposed system and/or providing feedback, RMLD does not warrant or represent that the proposed system is properly sized and/or designed to meet the customer’s needs. The customer shall be solely responsible for proper sizing and design of the system and RMLD shall have no liability therefor. RMLD also does not warrant or represent that the customer will realize any savings. The customer is responsible for determining whether switching to a heat pump system is right for them.

Preapproval does not exempt the project from the required Install Quality Assurance Form, which is required for the RMLD Air Source Heat Pump Rebate.

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Air Source Heat Pump Rebate*

RMLD offers a rebate of $1,000 per ton for new air source heat pump installations and $200 per ton for the replacement of existing heat pump installations. The rebate is available to all customer classes and is capped at $6,000. All projects must go through Abode’s installation quality assurance to qualify for the rebate.

*NOTE: Gas customers who participate in MassSave heat pump rebates are not eligible for this rebate. Click here for MassSave residential heat pump rebates. Click here to MassSave commercial heat pump rebates. 

Click here for program guidelines including a list of eligible equipment, rebate amounts, and details on the application process. 

Electrical Panel Upgrade Rebate Program

RMLD offers an Electrical Panel Upgrade Rebate to support customers who may need to upgrade their electrical panel to a higher amperage to accommodate additional load from electrification activities such as installing an EV charging station, heat pump, or other electrical equipment. 

Click here for program guidelines including a list of eligible equipment, rebate amounts, and details on the application process. 

There are a lot of steps involved to make sure your rebate gets processed. Click on the image below for a clickable version.

Hear from RMLD customers about their heat pump experience including the rebate and installation process and potential savings. Visit our case study page to hear from RMLD customers about their individual heat pump journeys.

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Want more information on Commercial Air Source Heat Pump? Feel free to contact us.