Replacing ACs with heat pumps: A backdoor way to decarbonize heating

Heat pumps are often touted as an efficient way to decarbonize home heating. But a new approach to driving their adoption is on the rise in the U.S.

Over the past few months, federal energy-efficiency regulators and state and city building-code overseers have begun to promote policies aimed at encouraging people to replace their existing central air-conditioning systems with heat pumps.

Although heat-pump sales already outpaced gas furnace sales last year, new research from Rewiring America shows that U.S. heat-pump sales need to grow more than threefold from current trends by this decade’s end to fully replace fossil-fueled home heating by midcentury.

Environmental and electrification advocates say the AC-focused policy intervention is vital to cut home heating carbon emissions at the rapid pace needed to meet climate goals.

Since heat pumps are essentially air conditioners that work both to heat and cool homes rather than just cool them, it’s relatively simple to install them in place of existing one-way AC systems. And because increasingly harsh heat waves are driving demand for air conditioning in places that haven’t needed it before — and making cooling not just a comfort but a public-health necessity in hotter climates — the time for rules to encourage homeowners to install bidirectional heat pumps instead of ACs is now, advocates say.

“There’s a really big uptick in AC sales as people are adding air conditioners to deal with extreme heat,” said Ted Tiffany, senior technical lead with the nonprofit Building Decarbonization Coalition. ​“We want to make sure consumers, developers, government agencies are making the investment in heat pumps, or two-way air conditioners, whatever you want to call them — especially with incentives coming out.”

Those incentives include billions of dollars of home and building efficiency and electrification tax credits and grants from the Inflation Reduction Act. States and cities are adding their own incentives, as well as setting policies to encourage the switch from fossil fuels to electric heating.

But most people don’t switch their existing heating and cooling technology until it breaks down. And when they do upgrade, that choice is locked in for a decade or more, Tiffany said. 

Nor can government incentives cover the cost of getting the entire U.S. building stock converted from fossil fuels to electric heating, said Merrian Borgeson, director of California policy with the Natural Resources Defense Council’s Climate & Clean Energy Program.

Advocates say building codes and efficiency standards offer an effective policy route here. Pushing policies to encourage people to opt for heat pumps when they’re ready to replace their existing central AC is another way to ​“scale up electrification of people’s homes without scaling up massive subsidies,” she said.

The climate wins from the AC-to-heat-pump switch 

Tiffany co-authored a report released last month that highlights the money- and carbon-saving potential of standards that make bidirectional heat pumps the mainstay of home cooling. It focuses on California, where the California Energy Commission is considering such a requirement in the ongoing update to building codes set for implementation in 2026.

About one-third of the approximately 5.5 million residential AC systems in California are 14 or more years old, making them prime targets for replacement. If every Californian chose a bidirectional heat pump instead of an AC-only system, the state could fully electrify just over half of all home heating by 2030, compared to its current pace of 19 percent of home heating by 2030, the report states.

The California Energy Commission has already set building codes that strongly encourage home electrification, and state air regulators have set rules that would ban sales of new gas furnaces and water heaters after 2030, Tiffany noted. The San Francisco Bay Area has set an even tighter deadline.

With the California Energy Commission now working on new building codes to be put into effect in 2026, ​“this is critical timing to get it into not just code but into consumer awareness, as we head into these bigger incentives” that could lower the cost of making the switch, he said.

California isn’t the only market where this could work, Tiffany noted. Last month’s report also analyzed New Jersey and found that if every home central AC system was replaced with a heat pump, the state could more than double its current pace of home electrification from 25 percent to 56 percent of homes by 2030.

Central heat-pump systems are more expensive than central AC systems, NRDC’s Borgeson said, with an average $700 premium on a total install cost that can range from between $4,000 to $8,000 for the equipment itself or between $6,000 and $12,000 for all-in costs to homeowners. (Costs can range widely depending on regional market differences, home size and other factors.)

But incentives such as the up to $2,000 federal tax credit now available for heat pump installations, or the up to $8,000 in rebates for heat pumps for space heating available to income-qualified households under the still-in-development High-Efficiency Electric Home Rebate program, could help cover those extra costs, she said.

Some jurisdictions in North America have already taken this step, she noted. The Canadian city of Vancouver has required heat pumps for all new air-conditioning systems since the start of 2023. The town of Aspen, Colorado has set similar mandates, although they don’t force homeowners to replace gas furnaces already in place, Tiffany noted. And the city of Denver will make the replacement of space and water heating at the end of its useful life with all-electric equipment mandatory by 2027, not only to provide more efficient and lower-carbon heating but also to improve indoor air quality.

The U.S. Environmental Protection Agency took a big step on this front earlier this year with a proposal to phase out Energy Star certification for stand-alone central air conditioners and furnaces and reserve the high-efficiency ranking for bidirectional heat pumps.

The EPA cited research from the Collaborative Labeling and Appliance Standards Program (CLASP), an international nonprofit organization, that found that if every U.S. homeowner replaced their central ACs with heat pumps over the course of this decade, home-heating-related emissions would decline by about 11 percent annually by 2032, while homeowners would save a collective $27 billion on energy bills.

The American Gas Association trade group decried EPA’s proposal as restricting consumer choice to more expensive heat pump systems. But environmental groups praised the move for giving consumers, contractors and efficiency-incentive program administrators a clear guidepost for picking products that ​“increase efficiency, lower utility bills, reduce air pollution and improve health, reduce global warming pollution, and deliver better performance.”

Getting consumers — and the HVAC industry — on board 

Nate Adams, CEO of HVAC 2.0, co-authored a study in 2021 that informed the CLASP analysis that EPA cited in its proposal to change its Energy Star rankings. He’s definitely an advocate of replacing central AC systems with heat pumps.

Still, Adams warned that EPA’s proposed change to Energy Star won’t necessarily drive a huge change in how U.S. homeowners and contractors do business. That’s because Energy Star only applies to the highest-efficiency and highest-cost products, which make up roughly 15 percent of all HVAC sales, he pointed out.

Still, ​“I view this as a change in the winds” of government policy on home heating, he said. ​“Now there’s been a finger put on the scale for heat pumps.” 

Replacing central AC systems with heat pumps is also a relatively straightforward change for HVAC manufacturers, according to Adams. While companies that make furnaces may oppose regulations that restrict their future market, many of the world’s leading HVAC equipment manufacturers make both AC systems and heat pumps, he noted. Distributors of home HVAC equipment are likely to support policies that reduce the scope of products they have to carry to meet market demand, he added.

It’s less clear how eager HVAC contractors will be to make the switch from central ACs to bidirectional heat pumps, however. Adding new mandates on what equipment can be installed ​“messes with the sales process, because it brings equipment selection and pricing to the beginning of the process, instead of the end, which is hard,” he said.

Properly selecting the right heat pump to both heat and cool homes in colder climates is also tricky, Adams said. Heating loads are typically larger than cooling loads in those circumstances. That means homeowners who want to replace their AC with a heat pump might have to choose between a system that’s oversized for their cooling needs to cover their heating needs, which will drive up costs, or pick a smaller, cooling-load-optimized heat pump and rely on alternative heating sources for the coldest parts of the winter — what’s called a ​“hybrid heating” approach.

Most Californians have relatively balanced heating and cooling loads, making them good targets for bidirectional heat pumps, Borgeson said. But homes in colder parts of the state may want to leave their furnace in place so they can turn it on when temperatures drop. They’ll still burn far less fossil fuel using that approach, as long as thermostats to control those dual systems are properly installed.

Advances in heat-pump technology over the past two decades have made them capable of keeping homes warm in subfreezing temperatures, Tiffany noted. But still, allowing homeowners to keep their furnaces helps defuse the risk of pushback from consumers worried that their choices about how to stay warm in wintertime are being limited by regulations on what kind of equipment they can install to keep cool in summertime, he said.

Adams agreed that customer choice is a must for a successful policy. ​“We need to get to 100 percent heat-pump installations by 2030,” he said. At the same time, ​“you have to make this about having two choices for home heating, rather than one.”

To be sure, this hybrid-heating approach will eventually run up against future bans on selling and installing new fossil-fueled heating systems. But broader policy support for installing heat pumps to replace AC systems should build HVAC industry capacity for getting these cold-weather heat pumps into customers’ homes, apartments and businesses in far greater volumes.

“We really want to make sure you’re planning for a heat pump if something dies — whether it’s your air conditioner or your furnace,” he said.