The State of Electrification in 2023

Written on: April 10, 2023 by Joe Uglietto

Electrify everything” is gaining ground at the Federal level and in many Northeast States. Heat pump incentives, clean energy tax credits and legislation to ban fossil fuels are all on the table in some shape or form. In States such as Massachusetts and Vermont, policies to create new Clean Heat Standards have either passed or are likely to pass in the coming months.

A key driver of the electrification movement in 2023—and likely for many years into the future—is the Inflation Reduction Act (IRA). The recently passed IRA will provide substantially higher incentives for homeowners to install electric heat pumps than what has been offered in the past. Rebates for low-income households can reach up to $14,000 for an air-source heat pump system. These rebates will make converting to heat pumps financially competitive in comparison to the installation of new, higher efficiency, low carbon liquid fuel and propane systems.

Additionally, several Northeast States have earmarked millions of dollars of IRA funds for broad-based consumer education campaigns to promote heat pumps and improve perceptions of heat pumps and heat pump technology among the public. The use of IRA funds for consumer outreach and education is likely in response to the relatively slow adoption of heat pumps thus far. Massachusetts provides an excellent example: the State set a target of installing 100,000 heat pumps beginning in 2020 with the goal of one million heat pump installations completed by 2030. According to reporting conducted by The Boston Globe, 461 heat pumps were installed in 2020.

However, the slow adoption of heat pumps hasn’t given electrification advocates pause about the merits of wholesale electrification. The “carrot” of rebates and incentives will likely give way to the “stick” in the form of attempted non-electric fuel bans and clean heat standards. A State-by-State clean heat standard would require the heating oil, natural gas and propane industries to reduce the carbon intensity of their fuel, sell less of their fuel or pay others to reduce the carbon intensity from heating technologies. Clean heat standards would increase the cost of energy and further incentivize the installation of cold-climate air-source heat pumps.

It is crucial that every stakeholder in the industry prepare for a future that completely embraces renewable, low-carbon heating fuels, a future of clean heat standards and carbon reduction, and a future that will require a strategic and forceful response in the form of political advocacy and consumer outreach.

Renewable Energy Insights is a regular column by Joe Uglietto, President of Diversified Energy Specialists, consultant to the industry with a focus on emissions reductions and renewable energy innovation.