Lower Bills, Better Grids: Heat Pump Benefits for Electric Resistance-Heated Homes

Quantifying affordability, peak demand, and carbon pollution benefits of upgrading millions of electric resistance homes to heat pumps and the policies to help make it happen.

With large new electric loads coming online and household energy bills rising, policymakers and utilities cannot afford to leave proven solutions on the table. One of the clearest opportunities is upgrading homes that still rely on electric resistance heating to highly efficient heat pumps.

Today’s modern heat pumps for space and water heating are roughly three times more efficient than resistance heating, delivering immediate bill savings for households while reducing peak demand on the grid and cutting carbon pollution. For the millions of homes still heating with electric resistance, these upgrades represent a win across affordability, reliability, and pollution goals.

This article answers five key questions:

1. How many homes in the United States still use electric resistance heat?
2. How much can a heat pump lower energy bills for homes heated with electric resistance?
3. How much peak demand can these upgrades avoid?
4. How much carbon pollution can they prevent?
5. Which policies and programs can accelerate adoption and unlock these benefits at scale?

Over 60 million homes still heat their home or water with electric resistance

Today, more than 25 million US homes — about one in five — are heated primarily by electric resistance. Most of these homes are in warm or moderate climates where heat pumps perform best and can easily provide all heating and cooling demands throughout the year. Electric resistance space heating is also disproportionately concentrated in multifamily housing. Although multifamily buildings only make up about one-quarter of US homes, they account for nearly half of homes using electric resistance heating.

Due to limitations modeling shared heating systems in multi-family homes, the energy affordability, peak demand, and carbon results below reflect only single-family homes. The total impacts would be larger if multi-family homes were included.

Electric resistance is even more prevalent for water heating. More than 57 million U.S. homes — nearly half of all US households — rely on electric resistance water heaters. Unlike space heating, electric resistance water heating is broadly distributed across geographies and housing types, closely mirroring the overall housing stock.

Heat pumps save these customers thousands on energy bills

Because air-source heat pumps (ASHPs) and heat pump water heaters (HPWHs) are significantly more efficient than electric resistance heat, they can significantly reduce energy bills for these customers.

“Single-family electric resistance households in the United States could save an average of $1,530 per year — and nearly $23,000 over the equipment’s fifteen-year lifetime — by upgrading to heat pumps for space and water heating.”

Using RMI’s Green Upgrade Calculator, we found that single-family electric resistance households in the United States could save an average of $1,530 per year — and nearly $23,000 over the equipment’s fifteen year lifetime — by upgrading to heat pumps for space and water heating.[1] The highest energy bill savings per household are in states with higher heating demand and higher electricity prices, as in much of the Northeast. These substantial bill savings pay back a heat pump’s up-front cost in just a few years, which is typically a few thousand dollars higher than traditional systems.

If all single-family electric resistance homes upgraded to heat pumps for space and water heating, US customers would save over $20 billion annually in energy bills. Texas residents alone would see nearly $2 billion in annual energy bill savings.

Heat pumps reduce peak electric demand for these homes

Replacing electric resistance space heating and air conditioning (AC) with an ASHP significantly reduces a home’s peak electric usage, both in the summer and winter.

• In summer, new high-efficiency heat pumps are around 20% more efficient than existing, older ACs, and use less electricity during the hottest days. Because heat pumps and ACs use the same technology, savings stem from upgrading older equipment to newer, higher-efficiency models.
• In winter, new cold-climate heat pumps are around 150%–200% more efficient than electric resistance heating. Even at 5° F, they can deliver the same heat using about half the electricity.

Upgrading electric resistance water heaters to HPWHs also reduces a home’s peak electric usage, given year-round hot water needs. These demand savings from equipment replacements reflect efficiency gains alone. HPWHs are also well-suited for load shifting, so peak demand may be decreased further through demand flexibility.

When deployed at scale, these per-home savings translate into substantial system-level peak demand reductions. Using NREL’s ResStock database, Rewiring America estimates that upgrading single-family homes alone from electric resistance space and water heating to heat pumps could reduce typical residential summer peak demand by 11 gigawatts (GW) and winter by 51 GW across all states[2]. Texas alone could reduce residential winter peak demand by 7.5 GW. That’s equivalent to avoiding the need for roughly twenty five 300-MW gas-fired power plants for peak winter demand in Texas, freeing up capacity headroom for other large electric load growth.

Winter peak reductions can meaningfully lower grid reliability risks and defer costly new power generation. This is particularly important in states where winter peak demand rivals or exceeds summer peaks — including most of the Southeast and Northwest United States today — and soon to be in other states advancing home and vehicle electrification. For example, during Winter Storm Uri in 2021, unexpectedly high demand alongside 10 GW of power plant outages caused 4.5 million Texans to lose power. Widespread adoption of properly sized heat pumps in electric resistance homes could have significantly reduced peak demand and eased the reliability shortfall.

Beyond reliability, lowering peak demand reduces the need for new generation investments that ratepayers typically bear. By cutting peak loads, heat pumps can help reduce investment costs and, with appropriate cost allocation, put downward pressure on long-term electricity rates, improving affordability for all customers.

Heat pumps reduce carbon pollution from these homes

By requiring less electricity, heat pumps also cut air and carbon pollution, particularly in the Great Lakes and Mid-Atlantic regions, which have dirtier electricity generation sources and higher winter energy demand.

Using RMI’s Green Upgrade Calculator, we found that heat pumps for space and water heating could slash total carbon pollution from single-family electric resistance households by around 40%, or 2.8 metric tons of carbon dioxide equivalent (MTCO₂e) in the first year alone.[1] Those carbon pollution reduction benefits are equivalent to two-thirds of the tailpipe emissions from a gas-powered vehicle annually.

If all single-family homes with electric resistance upgraded to heat pumps for space and water heating, US customers would reduce 38 million MTCO₂e per year. The largest state-wide benefits today are in Texas, with over 3.2 million MTCO₂e per year saved across all single-family electric resistance homes.

Policymakers can help customers with electric resistance heat upgrade to heat pumps

Policymakers have several effective tools to help households that rely on electric resistance heating transition to more efficient and affordable heat pumps. Building energy codes are a particularly powerful leverage point. Updates are typically considered every three to six years, giving jurisdictions regular opportunities to steer new construction and equipment replacements toward heat pumps while preserving builder and homeowner choice.

The following policy levers can help accelerate this transition.

Update building energy codes to discourage electric resistance as the primary heating source in new construction and retrofits.
Each year, roughly 700,000 electric resistance heating systems are installed nationwide in new homes or retrofits, locking in decades of higher energy use and peak demand. Energy codes can prevent much of this avoidable load growth. Most energy codes already offer multiple compliance pathways — such as prescriptive and performance-based options — making it possible to discourage inefficient electric resistance heating without mandating another technology. Jurisdictions can prohibit electric resistance heating as the primary system in the prescriptive pathway, while maintaining flexibility in the performance pathway. Newer model codes already take this approach for energy efficiency in commercial and multifamily buildings, such as the 2025 edition of ASHRAE Standard 90.1.

Update building codes to encourage heat pumps for new home construction.
New construction represents another major opportunity. Roughly 1.5 million homes are built each year, including around 200,000 with electric resistance heating. Installing heat pumps at the outset is the lowest-cost and least disruptive moment to provide efficient electric heating. Avoiding electric resistance systems at this stage prevents decades of higher energy bills and elevated peak demand. Building energy codes can reinforce this shift by making heat pumps the default compliance pathway in new construction.

Update building energy codes to encourage homeowners to replace failing central air conditioners with heat pumps.
When a central AC fails, it creates one of the largest and most predictable opportunities to upgrade from electric resistance heat to a heat pump. Approximately 1 million central AC units are installed each year in homes heated by electric resistance. Because a central heat pump is essentially a two-way central AC, (it uses the same ducts, outdoor unit, and installation footprint to provide both cooling and heating) this is a natural, straightforward trigger moment for upgrading to a heat pump.

AC replacement is also the most common HVAC decision moment in these homes since electric resistance furnaces often last 25–30 years — nearly twice as long as ACs. Jurisdictions can leverage energy codes to capitalize on this moment by encouraging homeowners to replace a one-way central AC with a two-way heat pump (“AC to heat pump”).

Set electric resistance-to-heat pump targets and allocate resources.
State leaders can accelerate progress by setting clear targets to replace electric resistance heating with heat pumps and aligning incentives, financing, workforce training, and outreach to meet them. Prioritizing these homes maximizes affordability, peak demand, and emissions benefits.

Well-designed programs can make it easier for customers with electric resistance heat to upgrade to heat pumps

Heat pumps offer clear benefits but typically cost a few thousand dollars more up-front than electric resistance and AC systems. States, utilities, and localities can address this by designing programs where heat pumps become the easiest, cheapest, and default option for customers with electric resistance heating. The following program design elements can help make that shift possible.

Incentivize the right equipment at the right level
Programs should prioritize incentives for HPWHs and variable-speed ASHPs over ACs or electric resistance equipment. For space heating, this means supporting ducted ASHPs in homes with ductwork, and ductless or window ASHPs in homes without it. Window ASHPs can be particularly helpful in multifamily buildings — where half of electric resistance heat exists today — because they cost less than variable refrigerant flow (VRF) and mini-split heat pumps and can help overcome renter-owner split incentives by enabling the renter to own the HVAC equipment and lower their energy bills.

Determine accurate incentive levels for utility energy efficiency offerings
Program incentives should be large enough to influence customer decisions — making HPWHs competitive with electric resistance water heaters and ASHPs cost-competitive with AC-only systems or ACs paired with electric resistance heat.

For customers with electric resistance heat, utility programs are the primary source of heat pump incentives, which are typically set through energy efficiency filings that reference Technical Reference Manuals (TRMs) or similar modeled estimates to justify incentives to utility regulators. Keeping these models up to date is essential, as outdated assumptions about cold-climate performance or system benefits can cap or exclude incentives.

Standardize and streamline incentives through midstream program delivery
Even generous heat pump incentives fall short if they aren’t designed with installation contractors in mind. Midstream programs — delivered through distributors or installers rather than directly to homeowners — reduce friction in the sales process and enable faster heat pump installs. Standardizing utility program offerings across a state or region can further streamline implementation, reduce confusion, and lower administrative costs, making it easier for contractors to participate and for customers to benefit.

Pair incentives with simple, accessible financing
Although heat pumps deliver lifetime energy bill savings that typically far exceed their higher up-front cost compared with electric resistance systems, initial cost remains a major barrier for many households.

Financing can help to bridge the cost gap — if it is low-interest, easy to access, and designed to serve a broad range of customers. Tariffed on-bill financing (TOBF), also known as Inclusive Utility Investment, is particularly well-suited to upgrading electric resistance homes to heat pumps. By removing up-front costs and tying repayment to the meter rather than the individual, this approach converts long-term savings into immediate bill reductions, minimizes credit barriers, and resolves renter-owner split incentives.

Market directly to customers with electric resistance heat and connect them with trained contractors
Utilities have valuable data identifying which accounts rely on electric resistance heat. They can use this information to proactively market heat pump incentives to those households and connect them with vetted, approved contractors through a trade ally network. Policymakers and regulators can support this approach by ensuring that laws and regulations allow utilities to conduct targeted outreach. Connecting customers with approved contractor lists simplifies the decision-making process, builds confidence in installation quality and pricing, and increases close rates for participating contractors.

When designed thoughtfully, programs can make heat pumps the default replacement for electric resistance or central AC systems. By reducing heat pump costs through incentives and financing without the sales process, and by proactively reaching eligible households, heat pump programs can unlock faster adoption, deliver meaningful bill savings, and capture substantial grid benefits.

[1] View all RMI analysis assumptions here.

[2] See all Rewiring America analysis assumptions here.