Heat Pumps in Cold Places: Three Questions Wisconsinites Are Asking about Heat Pumps

The Wisconsin Public Service Commission, which regulates public utilities in the state, is currently deciding what role the state’s energy efficiency and renewables program, Focus On Energy, will play in developing the local market for heat pumps. Heat pumps are an efficient, climate-aligned solution for space heating and cooling that can perform well in Wisconsin’s cold climate. By replacing fossil fuel furnaces, heat pumps can also help mitigate future gas infrastructure costs and improve indoor and outdoor air quality that directly impacts health.

With 80 percent of Wisconsin homes still burning fossil fuels for heating, Wisconsinites have questions about heat pumps. In this article we provide answers to the top three questions we are hearing from Wisconsin’s decision makers about the technology. Addressing these important questions now will ensure that Wisconsin makes the right call to ensure an affordable, climate-aligned, and resilient buildings sector.

Check out this heat pump 101 resource for an introduction to the technology.

Do Electric Heat Pumps Actually Reduce Emissions in Wisconsin, Where Coal Is Still on the Grid?

Yes, heat pumps installed today in Wisconsin produce fewer lifetime emissions than a gas or propane furnace.

Heat pumps are inherently more efficient than fossil fuel furnaces or traditional electric resistance heating technology because they move heat instead of generating heat. Our analysis finds that a readily available heat pump that meets the minimum Energy Star efficiency will produce approximately 30 percent fewer lifetime emissions than a gas furnace, assuming Wisconsin is 95 percent carbon-neutral by 2050. This assumption is more conservative than current utility commitments to be 100 percent carbon-neutral by 2050. A higher-performing heat pump sees lifetime savings increase to about 50 percent. High-performance heat pump technology has drastically improved in the past decade, leading to better performance at much colder temperatures than was previously possible. This improved performance, combined with the growing share of renewables on the grid, makes heat pumps an effective climate solution in Wisconsin.

Note: Using standard gas and propane emissions values, the average lifetime emissions are estimated with a 90 percent AFUE propane furnace and a 95 percent AFUE gas furnace. Heat pump emissions are estimated using NREL’s 95x50 Standard Scenario for Wisconsin’s electric grid and a weighted heating season coefficient of performance (COPh) based on Wisconsin’s weather of 3.00 and 3.97 for the Energy Star and high-performance heat pump, respectively.
Source: RMI

Are Heat Pumps Cost-Effective?

Yes, heat pumps are already cost-competitive for key use cases in Wisconsin.

With the annual winter utility shutoff moratorium ending in April, Wisconsinites are now facing serious concerns about how to pay their utility bills. These concerns are compounded by recent increases in natural gas prices, which Wisconsin utilities have warned will lead to utility bill hikes. Since heat pumps are highly efficient and leverage steadier electricity prices, research from the Wisconsin Public Service Commission (PSC) has identified that heat pumps can already reduce costs for residents in key situations.

1. New construction:
Building new homes all-electric is cheaper up-front than building mixed-fuel homes because developers avoid on-property gas infrastructure costs, which can be on the scale of $5,000 for a single-family home.

2. Propane, electric resistance, and gas retrofits:
According to the PSC heat pump report, 300,000 Wisconsin households using delivered fuels, such as propane, or electric resistance for heating could save money by switching to heat pumps.

Retrofit Application Annual Heat Pump Savings
Single-Family Electric Resistance $705
Multifamily Electric Resistance $417
Propane Furnace $531

Heat pumps have an economic advantage in these two situations because they are highly efficient technologies that can leverage steady electricity prices. Heat pumps’ efficiency advantage over electric resistance heat leads to household utility bill savings of up to $700 per year. Compared with propane and gas furnaces, heat pumps are nearly three times as efficient. Due to those efficiency gains and the high costs of propane fuel, households that switch from propane to a heat pump can see savings of over $500 per year.

While low prices have made gas a lower-cost option for customers for years, the sharp increases in gas prices in recent months have made gas less economically attractive. For example, customers of one of the largest state gas companies, Wisconsin Gas, paid 24 percent more for gas during May 2022 than October 2021. Gas prices have been trending upward for years, with Wisconsin Gas customers paying 34 percent more in winter 2021–22 than winter 2018–19.

3. Air conditioner and gas furnace replacements:
As the effects of climate change drive summer temperatures higher, more people will need reliable air conditioning. Unlike fossil fuel furnaces, heat pumps can function as both a space heater and an air-conditioning unit. The PSC-commissioned heat pump research found that heat pumps can cost a quarter as much as buying furnace and AC units separately.

Appliances Up-Front Costs
Gas Furnace and AC Unit $6,600-$8,600
Ductless Air Source Heat Pump $2,300-$4,800
Ducted Air Source Heat Pump $4,200-$9,000
How Will Heat Pumps Impact Wisconsin’s Grid?

Near-term heat pump adoption can reduce gas infrastructure investment without impacting electricity generation capacity needs.

In November 2021, the Wisconsin PSC approved a $370 million gas storage site. This costly project has the capacity to serve approximately 14,000 households per year. Such expensive gas infrastructure costs can be mitigated in the future if Wisconsin instead invests in electric heat pumps. The PSC could have avoided further fossil fuel investments and done so more affordably if it had incentivized 20,000 heat pumps through the state’s efficiency and renewables program, Focus on Energy (roughly the quantity of gas furnaces it incentivizes annually).

However, as Wisconsin becomes less dependent on gas, it is important to consider the impact of this new technology on the electricity system. Wisconsin’s electricity demand peaks in the summer, meaning there is headroom to add heat pumps to the grid without exacerbating the winter system peak demand. Our modeling finds that even if Focus incentivizes 800,000 heat pumps with electric resistance backup (10 times the number of heat pumps as it did furnaces in the past four years), the state will still be able to meet its electricity demand with currently operating power plants, even on the coldest days. Depending on the efficiency of the heat pump, in-state winter generation capacity would still exceed peak demand by 1,400–4,300 MW on the coldest day.

As illustrated in the extreme case scenario in the figure below, impacts to the grid can be further mitigated by deploying higher-efficiency heat pumps. Doing so can deliver benefits in both the winter and summer months, as these technologies provide high-efficiency cooling on summer days while lowering peak demand.

Note: Winter capacity is estimated using EIA’s 860 data and winter capacity factors of Wisconsin plants. Wisconsin’s average and extreme load is estimated from MISO’s local resource zone data and summed with heat pump (HP) hourly load data (Energy Star certified HP: SEER 16, 10 HSPF, and two-stage compressor; High Performance HP: SEER 22, 10 HSPF, and variable speed compressor) functioning in Climate Zone 6. Winter is defined as October–May.
Source: RMI

These results clearly demonstrate that even drastically expanding heat pump programs will not impact Wisconsin's winter peaks and can mitigate future gas infrastructure needs and near-term summer capacity constraints. As Wisconsin continues to explore electrification, demand response and energy efficiency measures can further reduce grid impacts.

Reducing Emissions in Wisconsin’s Buildings Safely and Affordably

In Wisconsin, heat pumps reduce emissions over the lifetime of the appliance, lower consumer costs in key situations, and will have minimal near-term impact on the electric grid. With Wisconsin prioritizing heat pumps, Focus on Energy can be a tool to accelerate the heat pump market, ensuring every Wisconsinite has access to affordable, clean space heating.

Note: This article was updated on June 23, 2022. We have added a second heat pump to the grid-impact analysis to better illustrate the impacts of a more efficient heat pump. The graph depicting electric grid impacts was also updated to include the impacts of electric resistance backup heating on extreme cold days.