India is facing increasingly dangerous heat, with temperatures regularly breaching levels that threaten human life. Even beyond the worst heat waves, summer temperatures now often jeopardize people’s health, livelihoods, productivity, and quality of life.

Helping the country’s 1.4 billion residents stay cool is not simply a matter of comfort; it’s an urgent priority for resilience. But since the vast majority of Indian households lack air conditioning, achieving this will require a massive undertaking.

Moreover, there are serious risks associated with widespread AC use in India, including rising energy bills, increased strain on the power grid, and skyrocketing greenhouse gas emissions that drive temperatures even higher.

Fortunately, there’s a clear pathway to helping more people get AC while preventing unwanted outcomes. Making air conditioners more energy-efficient is a cross-cutting solution that reduces consumer costs, protects the grid, and lowers emissions.

India has a unique opportunity to realize these benefits at a national scale. In many countries, air conditioners were already widespread when ambitious efficiency standards were put in place. But in India, current decisions about AC efficiency will shape hundreds of millions of future purchases.

CLASP’s Marina Baur spoke with Neha Dhingra, the director of our India program, about why efficient cooling has become one of the country’s most important energy and development priorities—and what others can learn from India’s approach.

Marina Baur: Tell me about the role air conditioning currently plays in India and how this is changing as temperatures rise.

Neha Dhingra: I’ll start by saying that cooling—not just air conditioning, but mechanical cooling more broadly, including electric fans and evaporative coolers—is increasingly becoming a public health, economic, and development issue. The Indian government has actually added heat waves to its list of recognized natural disasters, which tells you how far-reaching their impacts are.

Over time, people have found many ways to stay comfortable on hot days, of course. India’s traditional architecture was designed to provide shade, breezes, and materials that absorb heat. And in the last few decades, electric fans have become very important in India; they’re now the primary cooling solution for most homes, schools, and workplaces.

But these measures aren’t enough for the heat we’re experiencing now. In June, temperatures in one city in Uttar Pradesh stayed around 48°C (118°F) for more than a week. I read recently that almost 5,000 cases of heat stroke have been reported in India this year, and that 20 people have died. Unfortunately, these numbers are almost certainly an undercount.

So keeping people protected in this kind of heat requires air conditioning. Past a certain temperature, fans just end up circulating hot air.

But most people in India don’t have access to AC. CLASP recently conducted research that showed that AC penetration in Indian homes is only about 13%.

This poses major challenges from an equity perspective. Many vulnerable communities lack even the most basic mechanical cooling appliances. Especially vulnerable are daily wage earners like construction workers, street food vendors, or vegetable sellers who spend their days working outside in the hot sun and have no air conditioning at home either. They’re at huge risk for heat strokes and other heat-related illnesses. And for them, being sick means they don’t earn any money. So there’s not just a health impact, there’s also an economic and productivity impact.

A woman wearing a red and pink sari sits and fans herself with a green fan while selling handicrafts.

Street vendor at a market in West Bengal, India.

Credit: Tojo Basu / Ratul Pal

I’m optimistic that the new designation of heatwaves as natural disaster can unlock greater public investment in heat resilience and adaptation. This could help expand access to affordable, energy-efficient cooling for vulnerable households, as well as public spaces like schools and healthcare facilities.

But regardless of where this investment comes from, a technological shift is required. Clearly, the question is no longer whether India needs more air conditioning. The question is how we expand access to these appliances responsibly.

It’s not enough to just install more ACs in India, though—we also need to think very carefully about what kind of ACs people will buy. Will they be inefficient models that strain the grid and increase people’s energy bills? Or will they be efficient models that increase thermal comfort, reduce energy bills, reduce pressure on the electricity system, and avoid expensive investments in energy infrastructure that may only be required for a few hours each year?

Experts increasingly understand that efficiency is key, and that efficiency and access reinforce each other. The World Bank recently put out a report that listed AC efficiency as one of its top solutions for helping South Asian cities cope with extreme heat. It also cited India’s efficiency policies as a regional model.

This is the right time to be thinking about AC efficiency in India, since the demand for ACs is predicted to increase ninefold by 2050. Many advanced countries improved their AC standards only after these appliances were widely adopted, but here, a large share of air conditioners that are going to be operated are yet to be purchased. So there is an opportunity to influence the market before it’s fully mature.

Interior view of stores with rows of air conditioners.

Appliance store in Kolkata, India.

Credit: CLASP

Baur: You mentioned straining the power grid. Can you say more about how this plays out and how efficiency can prevent it?

Dhingra: The most important thing to understand is that efficiency allows India to expand access to cooling appliances without proportionally increasing electricity demand. This is key to grid stability.

There are two main challenges when it comes to the grid: the rise in total electricity consumed and the growing peak demand during certain times of day, when many people use their appliances at the same time.

Cooling appliances are one of the largest contributors to India’s peak demand. Every summer, as more people buy ACs, we see peak demand go higher and higher.

During extreme heat waves, when millions of people turn on their ACs at the same time, we see a particularly sharp increase in demand. But if you think about it, this only occurs for a few hours in a year. So it doesn’t make sense for the utilities to add power generation, transmission, and distribution capacity that remains underutilized for the rest of the year.

Air conditioners in Mumbai, India where temperatures reached 40° Celsius (104° Fahrenheit) during a heat wave this year.

Credit: CLASP

And it really doesn’t make sense when you think about the cost to consumers. Building this capacity across the country would be extremely expensive, and that cost would ultimately be paid as part of people’s electricity tariffs. So this is a kind of hidden way that inefficient ACs impact affordability, in addition to just raising electricity bills due to increased energy consumption.

Baur: So what are the solutions? How does India approach AC efficiency?

Dhingra: I’ll zoom out a bit and discuss the broader question of appliance efficiency, not just AC efficiency. One of India’s strengths has been recognizing that appliance efficiency is much bigger than regulation alone.

Efficiency standards provide an important market signal, but successful market transformation—in other words, making sure that the appliances people purchase and use are efficient—also requires appliance testing infrastructure, manufacturers, state governments, technical institutions, financing, consumer awareness, and continuous engagement across the entire value chain.

Policymakers in India have consistently worked at building an ecosystem for appliance efficiency in general, and AC efficiency specifically. They’re taking all these issues into account.

So policymaking is occurring as part of this larger process, within this larger ecosystem. And the policies that are being developed show this level of consideration. Starting in 2028, the minimum efficiency requirement for ACs will rise to a level that will dramatically raise the efficiency of products available in Indian stores. This will bring our efficiency standards up to the highest levels found anywhere in the world, comparable to China and Europe’s.

We’ve been talking about the importance of AC efficiency within India, but it’s also critical to understand how important this is from a global climate perspective. This policy will prevent a gigaton of emissions by 2050. It’s hard to overstate how important that is for broader mitigation efforts.

Baur: What are the main considerations that the government and other key players take into account when shaping AC policy and action in India?

Dhingra: One of the first questions is always, how are ordinary people going to get impacted? In other words, is the purchase price of the appliance going to increase if we improve efficiency?

That’s a key consideration, especially in a growing country where the AC penetration is low and access to cooling is a major challenge. Right now, the average price of an air conditioner in India is ₹35,000 INR ($366 USD), while the median household income is roughly ₹14,000 INR ($147 USD) a month. So policymakers don’t want to put these appliances further out of people’s reach.

A young man standing behind a counter looks at his phone and smiles while a fan blows air on him.

A shopkeeper in New Delhi, India, dependent on fans to keep him cool during rising heat.

Credit: CLASP

Encouragingly, evidence shows that stronger efficiency standards do not necessarily translate into higher prices. As markets mature, manufacturers innovate, production scales up, and competition increases, making efficient technologies increasingly affordable.

Consumers then benefit twice: through lower purchase costs over time as well as through significantly lower electricity bills throughout the lifetime of the appliance. That combination is essential if we want cooling to become accessible to many more households.

A second major consideration shaping AC efficiency policy is supporting domestic industry. Higher efficiency standards don’t simply reduce energy use—they create incentives for innovation, better products, and globally competitive manufacturing. India’s air conditioning industry is quite strong, and higher efficiency standards encourage companies to invest in better products that can compete both domestically and internationally.

A third consideration is industry readiness. Industry—including micro, small, and medium enterprises—needs to actually have the capacity to implement the efficiency standards. Otherwise, nobody will follow the standards and they won’t be effective.

Energy security is an increasingly important consideration as well. India’s energy supply needs to remain reliable, affordable, and resilient to external shocks. Efficient appliances can help with this in several ways. Lower electricity demand reduces the pressure to build new generation capacity and makes electricity system more reliant. It also reduces India’s exposure to volatile international fuel prices. And during periods of extreme heat or supply disruptions, a lower baseline energy need makes the system easier to manage.

So thinking of these issues as part of a single ecosystem has shaped the evolution of India’s air conditioner policy over the last 20 years, which has proven very effective. It has helped drive the market for efficient ACs, created opportunities for domestic and international manufacturers alike, and helped make India an AC manufacturing hub in its own right. These broader economic benefits are becoming just as important as the direct energy savings from AC efficiency.

Baur: The ecosystem approach seems like a very transferable model. What else can people outside India learn from its approach to AC efficiency and access?

Dhingra: The first thing is that countries should act early on appliance efficiency—before appliance ownership becomes universal. Efficiency standards, if they are introduced during the early stages of market growth, can influence millions of future purchases and prevent inefficient appliances from becoming locked into households.

And also, governments don’t have to choose between raising efficiency levels and helping expand access to appliances. With a thoughtful policy and strong partnerships, it is possible to improve affordability, strengthen energy security, support domestic manufacturing, reduce pressure on the electricity grid, and expand access to cooling—all at the same time.

As more countries face rising temperatures, these lessons are becoming increasingly relevant well beyond India.

Interview condensed and edited.

Hybrid Heating 101

Hybrid heating refers to the installation of a two-way air-source electric heat pump to complement the existing fossil fuel heating system or replace one-way air conditioner. The pre-existing furnace remains in place to serve as backup mainly during extreme cold conditions.

Credit: Nate Adams

This pragmatic solution paves the way for heat pump adoption nationwide. In warmer regions (climate zones 1-4), heat pumps alone can handle the service load. In colder climates (climate zones 5-8), a hybrid beating set up offers an energy-efficient, cost-effective path toward electrification

In addition to grid decarbonization, this innovative approach to heating carbonization and super-efficient cooling has crosscutting benefits:

Lower peak season energy demand and bills: Heat pumps offer super-efficient heating and cooling services. Since they require less energy to run than legacy technologies, households and businesses enjoy lower energy bills while placing less strain on local grids. Hybrid heating households can save up to $77–$555 per year for heating services as compared to homes that rely entirely on gas furnaces.¹ Simultaneously, these households can reduce their peak summer electricity demand by up to 10% by running their heat pump for cooling versus using a transition central AC.²
Improved accessibility to heat pump transition: Hybrid heating offers people the opportunity to approach heat pump use incrementally instead of making an all-in jump. This can be a game changer for by reducing the upfront cost of major upgrades, people living in colder regions, or those weary of decarbonization.
Decreased direct impact of global energy crises: Hybrid heat pump systems could reduce fossil fuel use for heating by roughly 39% under conservative assumptions.³ As conflicts across the globe impact global fossil fuel prices, households that can rely even partially on electric heating benefit from more stable pricing and affordable services.

The Role of State Action

States are in a uniquely position to unlock barriers to hybrid heating adoption for families and businesses across the US.

Overcoming federal barriers: Today’s federal political environment is not primed to promote heat pump adoption. State policymakers, however, have many mechanisms at their disposal to overcome the stagnant pace of national progress including the following:

Enact legislative amendments enabling the promotion of fuel switching by utilities (which in turn can permit heat pumps to count as demand side measures (DSM).
Require utilities to consider and propose favorable electricity rates (either generally favorable to heat pumps, or more specifically structured to benefit hybrid heat systems).
Promote collaboration between gas and electric utilities such as with coordination examples that employ revenue decoupling.
Supportive financial measures including tariff on bill financing (TOB) or inclusive utility investment (IUI), rebates and incentives, and various approaches to incentives/rebate stacking (discussed in more detail in the following section.

Supporting affordability: High purchase prices, rate designs that disadvantage electricity use, and inconsistent incentive programs stand as firm barriers to entry for many potential heat pump adopters. To mitigate these challenges, states can take the following actions:

Enact legislation/amendments or updates permitting the promotion of fuel switching
Implement legislative mandates to consider favorable rates for heat pumps/hybrid heat systems maybe put this as ‘Implement favorable electric rate designs that reduce winter operating costs for heat pump users.’)
Provide programs/resources that make it possible to easily access and combine utility, local, and state rebates
Support innovative financing mechanisms that eliminate large upfront payments

Explore the case studies below, highlighting how policymakers in Utah, Minnesota, and Massachusetts have leveraged these tactics to promote hybrid heating in their states.

Case Study: Utah

Utility Collaboration and Fuel Switching

Summary: In 2020, Utah adopted a simple legislative amendment clarifying that heat pumps qualify as eligible DSM measures. This change enabled regulated utilities to actively promote heat pumps and hybrid heating systems through revenue decoupling mechanisms and coordinated utility incentive programs. The result has been growing heat pump adoption, greenhouse gas emissions reductions, and a replicable model for accelerating electrification through utility collaboration.

Context: A key barrier to hybrid heat pump adoption in historically gas-heating dominant states, like Utah, is whether regulated electric utilities are legally permitted to promote “fuel switching.” In states that do not permit fuel switching, electric utilities may be prohibited from offering specific rebates or more favorable rebates and incentives for heat pumps relative to conventional air conditioning and gas furnace systems.

The potential loss of utility revenue associated with reduced gas sales poses another barrier in the state. Without mechanisms to address this issue, gas utilities may have limited incentives to support heat pumps and hybrid heating technologies.

Solution: In Utah, a simple one-sentence legislative amendment in 2020 clarified that heat pumps qualify as eligible demand-side management measures.⁴ This change allowed the state’s regulated electric utility, Rocky Mountain Power (RMP), to include residential heat pumps in its DSM plans and actively promote them as part of the utility’s energy efficiency and emissions reduction efforts. Utah is a strong example of how a relatively straightforward, narrow legislative amendment can permit utility promotion of hybrid heating without overhauling a broader regulatory framework.

A supportive mechanism called revenue decoupling was also essential for the gas utility to develop rebates for heat pumps without a net loss of revenue from selling less gas. Revenue decoupling separates utility revenue recovery from volumetric energy sales, protecting utilities from the lost revenue associated with increased energy efficiency and fuel switching. This enables gas utilities to promote heat pumps and hybrid heating while still meeting financial obligations and regulatory requirements. For electric utilities, revenue decoupling can also help promote energy efficiency without losing revenue from selling less electricity.

Both the electric and gas utilities claim energy savings from the dual-fuel heat pump programs, helping them achieve their respective energy-saving goals. Electric savings (kWh) and gas savings (therm reductions) are both captured and credited toward utility performance goals. Both utilities estimate reduced gas usage through energy modeling of installed heat pump systems. Dominion claims the therms of energy savings directly, while RMP converts therm savings to kWh, with a slight adjustment that subtracts 15% to partially account for increased electricity consumption associated with heat pump operation.

As part of their efforts to promote hybrid heating and heat pumps, both RMP and Dominion Energy offer significant incentive programs.⁵ Customers installing qualifying air-source heat pumps can combine rebates from both utilities, with total rebates of up to $2,400, significantly reducing upfront cost barriers. Incentive levels have evolved over time, with periodic adjustments reflecting budget constraints, performance targets, and market response.

Contractors can apply for rebates on behalf of customers, reducing administrative burden and improving program uptake. In an early phase of the program, contractors received $100 per heat pump installation incentive.⁶ While these contractor bonuses were later reduced to $50, installation rates continued to grow, suggesting that once market familiarity increases, programs may require reduced spending to sustain participation. In addition to incentives, RMP’s program implementer, Evergreen, provides ongoing support through regular “lunch-and-learn” trainings that offer updates on program requirements, technical best practices, and incentive changes.⁷ Participating contractors also have the option to be listed in a preferred contractor network.

Impact: RMP and Dominion Energy’s dual-fuel heat pump incentive programs resulted in nearly 5,900 heat pumps being installed between 2021 and 2023.⁸ The associated greenhouse gas emission reductions are estimated at approximately 14,700 tons of carbon dioxide equivalent annually, equivalent to removing about 2,900 vehicles from the road annually.

By enabling fuel switching through targeted legislative reform and pairing that authority with coordinated rebates and contractor engagement, Utah has created a replicable model for increasing hybrid heating and heat pump uptake. Where utilities are permitted and financially structured to promote electrification, coordinated dual-fuel programs can scale without requiring entirely new funding streams or large infrastructure investments.

Case Study: Minnesota

Coordinated Utility Programs and Fuel Switching

Summary: Through legislation enabling fuel switching, innovative utility electric rates, stacked financial incentives, and comprehensive contractor and consumer support provided by the Minnesota Air Source Heat Pump (ASHP) Collaborative, the state has successfully accelerated adoption of hybrid and cold-climate heat pumps.

Context: Minnesota has created a policy environment that supports hybrid heating. The passage of the Minnesota Energy Conservation and Optimization (ECO) Act of 2021 reformed the 2007 Next Generation Energy Act to allow utilities to promote fuel switching as part of their energy savings goals.⁹ Additionally, Minnesota’s Energy Efficiency Resource Standards (EERS) require utilities to achieve annual energy savings targets of approximately 1–1.75%, creating a compliance-driven incentive to adopt high-impact efficiency measures such as hybrid heat systems. The state allows utilities to count total savings for certain dual-fuel, efficient fuel-switching applications, creating an incentive to promote heat pumps, including in hybrid configurations. Because utilities are permitted to promote fuel switching through ECO programs, equipment incentives can be paired with innovative electric rate designs. Most Minnesota electric cooperatives and investor-owned utilities offer dual-fuel electric rates that significantly reduce per-kWh electricity charges for qualifying hybrid systems compared to standard rates.¹⁰¹¹¹²¹³ These rate structures improve the operational cost-effectiveness of hybrid heating systems. In addition, the Minnesota ASHP Collaborative provides the Heating and Cooling Savings Estimator tool, allowing consumers to compare electricity, gas, and propane rates by utility and home type.¹⁴ Xcel Energy also offers a whole-home electric space-heating rate for both fully electric and dual-fuel systems when the heat pump serves as the primary heating source.

Solution: Minnesota complements its legislative framework with coordinated financial incentives, technical assistance, and workforce development. The ASHP Collaborative, led by the Minnesota Center for Energy and Environment,¹⁵ provides a centralized platform that enables homeowners to identify and stack city, utility, and federal incentives for hybrid and cold-climate heat pump installations. For low- and moderate-income households, up to 70–100% of installation costs may be covered, with additional grant funding available in some cities for rental properties. Many metropolitan-area communities also offer utility rebate matching programs.

Available rebates are organized in two clear tiers: one for air conditioning replacements (hybrid systems that retain a gas furnace) and a cold-climate heat pump tier (including systems paired with a gas system or electric resistance supplemental heat).¹⁶ The platform also includes tools to identify local rebate matches, special dual-fuel or whole home electric rates, financing options, and promotional programs. Helping homeowners locate qualified contractors is another important feature of the platform available via the “Find Contractor tool”.¹⁷ By centralizing these resources, the MN ASHP Collaborative reduces administrative burden and transaction costs for both homeowners and contractors, making participation significantly easier. Recently, the MN ASHP Collaborative compiled information and resources for homeowners in a comprehensive Step-By-Step Guide to help with navigating the sometimes-overwhelming process of acquiring a heat pump.¹⁸

In addition to consumer-facing tools, the MN ASHP Collaborative maintains a technical resource hub for contractors that includes guidance on incentive requirements, equipment selection, installation best practices, system controls, and homeowner education.¹⁹ Regular in-person and virtual training sessions further strengthen contractor familiarity with cold-climate heat pump applications and hybrid configurations, increasing installer confidence and the likelihood that these systems are recommended to customers.

Impact: Minnesota demonstrates how coordinated legislation, utility rate design, stacked incentives, and comprehensive consumer and contractor support can work together to accelerate hybrid heat pump adoption. Market transformation strategies deployed by the Minnesota ASHP Collaborative, together with innovative utility rates, fuel-switching rebates, and the 25C tax credit, have increased air-source heat pump market share from 4% of air conditioning sales in 2022 to 15% in 2025 (when comparing ASHP sales to AC sales).²⁰ Minnesota serves as an example of successfully combining statutory fuel-switching authority, innovative utility programs, and strong workforce support to facilitate hybrid heat adoption.

Case Study: Massachusetts

Summary: In addition to permitting fuel switching, Massachusetts has pursued complementary programs for hybrid heat and heat pump deployment, including utility rate design, Inclusive Utility Investment (IUI) financing pilots, and incentive programs to drive new heat pump adoption.

Solution:

Rate Design

Massachusetts has implemented an innovative seasonal electricity rate structure for households with heat pumps, that is designed to lower winter heating costs and better align electricity pricing with grid use patterns.²¹ Starting November 1, 2025, all three of the state’s major investor-owned utilities (IOUs) (Eversource, National Grid, and Unitil) began offering lower electric rates during the winter heating season (November 1–April 30) for households that heat all or part of their homes with heat pumps, a categorization which includes hybrid heating. IOUs were mandated to investigate and implement rates as part of efforts to meet state climate targets through Climate Compliance Plans. Massachusetts law allows gas utilities to deliver thermal energy as ‘low-carbon’ energy (this means thermal energy may count toward the utility’s emissions obligations, which is classified as low carbon energy), facilitating hybrid heat adoption alongside planned decommissioning of old gas pipelines.

Originally recommended by the state’s Commission on Clean Heat, the Department of Public Utilities (DPU), the Massachusetts Clean Energy Center (MassCEC), the Department of Energy Resources (DOER), and the IOUs collaborated to rapidly design and implement the Massachusetts rate structures and incentive programs over a three-year period. Automatic enrollment for heat pump users was piloted, and while stakeholder engagement was minimal, utilities and program administrators experienced reduced administrative barriers and successfully coordinated the smooth implementation of rates and incentives. MassCEC commissioned a technical study to investigate and propose alternative rates for heat pump households, which formed the basis for the proposed heat pump rate.

The new rates reduce the delivery (distribution and, in some cases, transmission) charges on electricity bills during the winter months for heat pump users, while supply charges remain unchanged. Because heat pump households on average use significantly more electricity than those who heat with fossil fuels, the fixed costs of electricity delivery are distributed across a larger volume of electricity, lowering the effective delivery rate. By lowering these charges in winter when the grid is not capacity-constrained, heat pump users see a 40% reduction in heating cost relative to using the standard rate.²²

Under traditional rate structures, winter electric delivery charges often remained high despite the grid having unused winter capacity because utility pricing is based on summer peak loads. By offering lower winter delivery charges, Massachusetts is more accurately reflecting the lower cost of delivering electricity during periods of lower demand. This makes heat pump operation more financially competitive with natural gas heating, which continues to dominate in the state.²³

Massachusetts aims to install 500,000 heat pumps by 2030, a significant increase from just over 90,000 installed as of 2024.²⁴ State regulators and utilities estimate that these seasonal rate discounts for heat pump customers who switch to the new rate could reduce winter heating costs by an average of $540 per household during the heating season.²⁵ A report commissioned by environmental groups found that if regulators adopt deeper proposed rate changes, up to 82% of Massachusetts homes with heat pumps could see median annual winter savings of $687 because of fairer pricing that reflects actual seasonal grid costs.²⁶

Utility Financing

Massachusetts has piloted alternative financing mechanisms to address the upfront cost barrier associated with hybrid and fully electric heating systems. The Ipswich Electric Light Department (IELD), a municipal utility, launched an IUI pilot program using a tariffed on-bill (TOB) financing model to support electrification and weatherization upgrades.²⁷ The program was initiated with $100,000 in seed funding and focused on enabling comprehensive home energy retrofits aligned with the state’s goal of electrifying 500,000 homes by 2030.²⁸

Under the IUI structure, the utility invests directly in cost-effective home improvements (such as heat pump installations and building envelope upgrades) and recovers its investment through a monthly tariff attached to the electric meter, rather than to the individual customer. The tariff is structured so that monthly IUI payments do not exceed the estimated energy cost savings generated by the improvements, ensuring that participants experience net bill neutrality or savings from the outset. Because the tariff obligation is tied to the meter and transfers automatically to subsequent household occupants if the home is sold, the model avoids reliance on individual creditworthiness and eliminates the need for customers to take on personal debt. This design distinguishes IUI from traditional on-bill financing programs, which function as loans and may exclude households with limited access to capital.

Massachusetts utilities and other program administrators also implement comprehensive statewide incentives through the Mass Save heat pump incentive structure. Mass Save is a statewide energy efficiency and electrification initiative funded by a charge on customers’ utility bills and administered jointly by Massachusetts program administrators as an initiative focused on the state’s energy efficiency and greenhouse gas reduction objectives defined in the Massachusetts Clean Energy and Climate Plan.²⁹ The program’s purpose is to reduce energy consumption, lower costs for participants, and support clean energy goals by offering rebates, technical assistance, and coordinated services for efficiency upgrades, including heat pumps.³⁰

Designed to accelerate electrification while accommodating hybrid configurations, the program offers tiered rebates based on the degree to which a heat pump displaces existing fossil fuel or electric resistance heating.³¹ The program distinguishes among three rebate categories. Whole-home rebates, the largest rebates available, are for eligible customers who install heat pumps as the sole source of heating and cooling. In 2026, these rebates provide $2,650 of financing per ton of installed capacity, up to a maximum of $8,500. Partial-home rebates, intended for hybrid configurations where an existing boiler or furnace remains in place for supplemental heating, offer $1,125 per ton up to $8,500 (installation of “integrated controls” that connect the system to a legacy fossil fuel system is required, as well as set switchover temperature of 30F or less for oil and natural gas, and 5F or less for propane).³² Customers installing properly sized systems that can meet their total heating load needs are eligible for an additional $500 sizing bonus, and those completing recommended weatherization measures may receive a $500 weatherization bonus. Basic rebates, at $250 per ton up to $2,500, apply to installations that do not displace fossil fuel heating, such as cooling-only upgrades or installations in seasonal homes.

Importantly, the program incorporates enhanced incentives for income-qualified households. Low- and moderate-income customers may receive up to $16,000 for whole-home systems, or, in some cases, near-zero upfront cost through turnkey delivery services.³³ For context, average installation costs for whole-home air-source heat pump systems in 2022 were approximately $22,000. Under standard incentives, this reduces net customer cost to roughly $13,500; under enhanced incentives, net costs may fall to approximately $6,000 or lower.

Impact:

Early results from the Ipswich IUI pilot demonstrate that tariff-based financing mechanisms can effectively address upfront affordability barriers to heat pump adoption, particularly for households that may not qualify for traditional financing. Although the pilot relied on external seed funding and participation by a municipal utility, it provides a replicable model for expanding equitable access to hybrid and fully electric heating systems without requiring customers to make significant upfront investments.

While the IUI model delivered the greatest financial benefits when paired with complementary measures such as weatherization and solar installations, early results show that the program enabled HVAC electrification in all participating homes, eliminated approximately 84% of upfront costs for customers, and achieved average energy savings of roughly 20% compared with historic household energy expenditures.³⁴ By integrating electrification and weatherization into a streamlined offering, the pilot also reduced administrative barriers by minimizing the need for customers to independently identify contractors or navigate multiple incentive programs.

Massachusetts has also demonstrated the value of sustained statewide incentives through the Mass Save program. Since 2020, Mass Save has supported the installation of heat pumps in more than 90,000 Massachusetts households, roughly 7% of homes statewide, including both whole-home and hybrid heating systems.³⁵ This scale of deployment reflects both sustained funding and program stability.

The Mass Save program further illustrates how incentive design can support both hybrid and full electrification pathways. By combining tiered rebates based on system configuration, income-based enhancements, weatherization bonuses, and clear technical requirements for system sizing and hybrid controls, the program addresses multiple barriers to adoption, including upfront costs, system performance, and building efficiency. Together with seasonal electric rate reforms and innovative financing models such as IUI, Massachusetts provides an example of how complementary utility and state policies can reduce operating costs, lower upfront financial barriers, and accelerate deployment of hybrid and electric heat pump systems.

Conclusion

Hybrid heating is well recognized as a pragmatic pathway for advancing building decarbonization in the US. Federal incentives under the IRA had a very limited impact on national heat pump adoption, and funding uncertainty further highlighted the limits of relying on federal programs alone to meaningfully scale heat pump adoption. Even so, the featured case studies demonstrate that meaningful progress on heat pump deployment is still occurring at the state level.

Across Utah, Minnesota, and Massachusetts, several effective practices emerged.

Statutory authority for fuel switching is foundational; without it, utilities face regulatory barriers to promoting the adoption of heat pumps and hybrid heating
Revenue decoupling or performance-based incentives reduce institutional resistance by protecting utility financial stability
Stable, predictable incentive structures that are sustainably financed are more effective than short-term, high-dollar rebates that run out of funding or expire quickly
Contractor support and training and simplified consumer-facing platforms increase the likelihood of customers accessing programs and funding for heat pumps, and make contractors more likely to recommend heat pumps/take advantage of funding for heat pumps
Favorable rate design (particularly seasonal or dual-fuel electric rates) can improve the operating cost of hybrid heat systems while leveraging existing grid headroom, minimizing the need for near-term infrastructure expansion and making adoption more financially feasible

The case studies also illustrate how hybrid heating advances equity objectives. Layered incentives particularly in Minnesota and Massachusetts demonstrate that low- and moderate-income households and rental properties can be meaningfully included in electrification efforts when administrative barriers are reduced, and financing mechanisms are structured to avoid debt burdens.

Amid federal uncertainty, hybrid heating programs offer states a variety of sustainable, effective pathways to sustain electrification momentum and reduce carbon emissions.

^0.Malinowski, Matt, Vivian Cox, Dave Farnsworth, et al. 2023. Accelerating Heat Pump Adoption through the Inflation Reduction Act (IRA) and Complementary Policies. CLASP, RAP.

^1.MN CEE. 2025. Hybrid Heating Programs and Dual-Fuel Tariffs: Minnesota Case Study Internal Report

^2.Malinowski, Matt, Vivian Cox, Dave Farnsworth, et al. 2023. Accelerating Heat Pump Adoption through the Inflation Reduction Act (IRA) and Complementary Policies. CLASP, RAP.

^3.HB 431 Energy Efficiency Program Amendments, H.B. 431, Utah State Legislature 2020 General Session (2020).

^4.Kolwey, Neil (Southwest Energy Efficiency Project (SWEEP)). 2024. “A Unique Partnership to Promote Dual-Fuel Heat Pumps: Dominion Energy and Rocky Mountain Power – Southwest Energy Efficiency Project.” July 3.

^5.Kolwey, Neil (Southwest Energy Efficiency Project (SWEEP)). 2024. “A Unique Partnership to Promote Dual-Fuel Heat Pumps: Dominion Energy and Rocky Mountain Power – Southwest Energy Efficiency Project.” July 3.

^6.Kolwey, Neil (Southwest Energy Efficiency Project (SWEEP)). 2024. “A Unique Partnership to Promote Dual-Fuel Heat Pumps: Dominion Energy and Rocky Mountain Power – Southwest Energy Efficiency Project.” July 3.

^7.Kolwey, Neil (Southwest Energy Efficiency Project (SWEEP)). 2024. “A Unique Partnership to Promote Dual-Fuel Heat Pumps: Dominion Energy and Rocky Mountain Power – Southwest Energy Efficiency Project.” July 3.

^8.216B.2403 Consumer-Owned Utilities; Energy Conservation and Optimization., 216B.2403 § Section 216B.2403 (2025).

^9.Minnesota Air Source Heat Pump Collaborative. 2026c. “Incentives, Rates, & Financing | Air Source Heat Pump Collaborative.

^10.McFarlane, Ashley (Minnesota Center for Energy and Environment). 2025. “The MN PUC Approves New Space-Heating Rates for ASHPs |.” March 26.

^11.MN Center for Energy and Environment. 2023. Developing Electric Rates for Hybrid Air Source Heat Pumps in the Midwest.

^12.Minnesota Air Source Heat Pump Collaborative. 2026a. “ASHP Models Compatible with Load Management Controllers | Air Source Heat Pump Collaborative.”

^13.Minnesota Air Source Heat Pump Collaborative. 2025b. “Starting Your ASHP Journey Now: A Step-By-Step Guide.” July 7.

^14. MN CEE. 2025. Hybrid Heating Programs and Dual-Fuel Tariffs: Minnesota Case Study Internal Report. Minnesota Center for Energy and Environment

^15.Minnesota Air Source Heat Pump Collaborative. 2026e. “Utility Rebates.”

^16.Minnesota Air Source Heat Pump Collaborative. 2025a. “Find a Heat Pump Service Contractor.” https://www.mnashp.org/find-contractor.

^17.Minnesota Air Source Heat Pump Collaborative. 2025b. “Starting Your ASHP Journey Now: A Step-By-Step Guide.” July 7.

^18.Minnesota Air Source Heat Pump Collaborative (ASHP). 2026d. “Training & Events.”

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Every day, millions of Indian households rely on ceiling fans to stay cool. In this video, Neha Dhingra explains why the small manufacturers behind these fans are essential to delivering affordable, energy-efficient cooling, and how the right support can help them meet evolving efficiency standards and reach more people while supporting India’s energy and climate goals.

Play

Building an Efficient Fan Market with India's Small Manufacturers

Running time: 2:06
Region: India, Asia
Featuring: Neha Dhingra

Explore CLASP’s YouTube channel for more videos about the transformative power of efficient appliances.