Looking Into Heat Pump Systems? Watch Out for These Hidden Costs

If you work in construction, you might have heard about heat pump systems and how they’ve become synonymous with energy efficiency. These temperature control systems are steadily improving, with models that passed the DOE’s Cold Climate Heat Pump Challenge expected to reach homes by the end of the year.

Heat pumps don’t just warm your house efficiently; they can cool it, too. In 2023, heat pumps outsold gas furnaces for the second year in a row. Heat pumps do a better job than air conditioners and are more efficient than traditional heating and cooling methods, like gas furnaces. So, no matter where you live, there’s a heat pump that’ll work for you — a major shift from a decade ago. 

“[Heat pumps] really are technological advancements, and they perform better, which is why you’re seeing a lot more of them,” said Brooke Greenwood, director of product management for the heat pump manufacturer Carrier. “Depending on the region that you’re in, we have different heat pumps that provide different efficiencies. Now, when it’s below freezing outside, you can still have a heat pump warm your home. Depending on the model and its Energy Star rating, we have different certified efficiencies and comfort technologies based upon what you need for your application.” 

So what’s the catch? Are heat pumps really as great as they’re made out to be, or are there pitfalls homeowners should keep in mind? Here’s everything to know about these appliances. 

What is a heat pump and how does it work?

Despite the inclusion of “heat” in its name, heat pumps can warm and cool your home. 

“In cooler months, the heat pump will actually pull heat from cold, outdoor air and transfer it indoors,” Greenwood said. “In the warmer months, it pulls the heat out of your indoor air to cool your home.” 

Heat pumps are powered by electricity rather than natural gas, which is primarily the fossil fuel methane, and they transfer heat using refrigerant to provide year-round comfort. 

Because they don’t burn fossil fuels, they’re more sustainable, and their energy efficiency makes them an upgrade to traditional air conditioning systems. 

“It’s an opportunity to get away from gas furnaces and fossil fuel usage,” Greenwood said. 

Are there hidden costs of getting a heat pump?

Whether it’s your cable bill, your cellphone or buying a car, we’ve all experienced the “too good to be true” hidden costs that catch up with you after time. 

While there aren’t necessarily “hidden costs,” there are things that could affect the cost of installing a heat pump.

“It’s generally straightforward,” Greenwood said. “There’s really no hidden cost. But there are some things that you need to be aware of.” 

New ductwork

Not every heat pump will require new ductwork or even changes to existing infrastructure in your home. Traditionally, Greenwood said, “heat pumps will use the existing ductwork and just replace your air conditioning unit.” 

But there are some exceptions. 

For instance, very old homes — especially in the Northeast and  South — may need some adjustments, such as ductwork or additional wiring. But generally speaking, if your ductwork is fairly new, you should be set for a heat pump. 

“It’s really about the contractor who built the house or installed the ductwork,” Greenwood said. “Those really haven’t changed a lot over the years. So if it was done correctly, you’re pretty much good to go.” 

If you don’t have ducts at all,  there’s a solution for that too. 

“Some historic homes don’t actually have ductwork going through the home,” Greenwood said. “But we have a solution, which is our ductless heat pumps. They require minimal construction but would give you a heating and cooling solution that’s quicker and more cost effective to install in that application.” 

Permitting

Broadly speaking, Greenwood said most homeowners don’t require any permits to change to a heat pump. 

But every city is different, and some areas will have different requirements. 

And if you do find yourself in a home that requires a ductless heat pump, it may be because you live in a historic or otherwise protected district, which can be very strict on changes. So be sure to check with your local municipality’s guidelines before making any decisions. 

Improving your electrical system

The most likely change you’ll need to make in order to accommodate the installation of a heat pump will be electrical upgrades. 

Greenwood said often, when replacing a gas furnace and an air conditioning unit with a heat pump, you’ll require an electrical upgrade to move the connection from 115 volts to 230 volts. You may also need a larger electrical panel or additional wiring work.

The good news is that there are federal, state and local incentives available to help you make that upgrade. One easy way to ease the burden is with a tax credit for a new electrical panel from the IRS. 

Higher electricity costs

Electricity costs can vary dramatically depending on where you live. So if you’re switching from a gas furnace to a heat pump that runs on electricity, you’ll want to account for the difference in cost between natural gas and electricity. 

“[Heat pumps] can be more expensive to run with higher electricity costs, compared to the gas heat provided by a furnace,” Greenwood said. 

Your utility company may also charge a disconnect fee if you’re canceling your gas service altogether. 

Home insulation 

It’s not a requirement for adopting a heat pump, but Greenwood said upgrading insulation could be a key to ensuring your new appliance is working efficiently. This problem would affect air conditioners, furnaces and heat pumps alike. But if efficiency is your overall aim, the installation of a heat pump would be a great time to improve your home’s insulation. 

Your home’s insulation plays a vital role in how hard your HVAC equipment must work to maintain a comfortable temperature.

“[In a poorly insulated house], to maintain the level that you want, your equipment would have to operate more, as compared to a home that’s better insulated and would hold the warmth or cool in,” Greenwood said. 

How to save money when getting a heat pump

If you’re committed to a heat pump but want to save money, your first step  should be to search for incentives and tax credits in your area. 

For instance, part of the Inflation Reduction Act allows you to claim 30% of the cost (up to $2,000) of a heat pump that meets certain efficiency standards. 

There are a variety of local utility rebates for high efficiency systems installed by participating contractors, Greenwood said. Some manufacturers offer rebates and states and municipalities have their own credits available.

“Really, it’s to move to a more sustainable solution,” Greenwood said. “It’s an opportunity to get away from gas furnaces and fossil fuel usage. So this really gives people a way to get there and incentivizes them to do so.”