3H Hybrid Heat Homes: An Incentive Program to Electrify Space Heating and Reduce Energy Bills in American Homes

This report proposes a low-barrier, least-cost policy package to rapidly deploy efficient space heating and cooling solutions in the United States. It aims to “raise the floor” for electric space heating in the residential HVAC market, delivering 45 million new installations over 10 years and paving the way for more ambitious decarbonization efforts.

Steve Pantano, Matt Malinowski, Alexander Gard-Murray (Harvard University), and Nate Adams (HVAC 2.0)

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This report was produced in collaboration with Alexander Gard-Murray (Harvard University) and Nate Adams (HVAC 2.0)

A temporary incentive program for residential electric heat pumps could save Americans more than $27 billion on their energy bills and deliver $80 billion in additional societal benefits over a ten-year period.

Heat pumps are a critical technology on the path to net-zero emissions, but their deployment to date has been slow. This document proposes a low-barrier, least-cost policy package to rapidly deploy efficient space heating and cooling solutions in the United States. It aims to “raise the floor” for electric space heating in the residential HVAC market, delivering 45 million new installations over 10 years and paving the way for more ambitious decarbonization efforts.

Residential heating and cooling account for 51% of household energy use and 40% of household energy bills in the US. Inefficient gas and electric resistance furnaces and air conditioners (ACs) account for more than 80% of all products currently in use. Heat pumps, which can provide both cooling and heating services, are up to four times more efficient than traditional equipment and have the potential to save consumers money on their energy bills and reduce greenhouse gas emissions.

The 3H Hybrid Heat Homes program centers on a comprehensive Federal subsidy beginning in 2022 with a regulatory backstop to take effect in 2029. By ensuring that heat pumps are available and installed at the time of every future AC replacement, the market share of heat pumps in the US can increase from 10% to 44% by 2032. Over a ten-year period, the program will save Americans more than $27 billion on their energy bills and deliver $80 billion in additional societal benefits.

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