A case study from the Southwest Energy Efficiency Project (SWEEP)
July 3, 2024 | Neil Kolwey, Industrial Program Director & Building Electrification Specialist
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In Utah, Rocky Mountain Power (RMP), the largest investor-owned electric utility, and Dominion Energy Utah, the largest investor-owned gas utility, have been offering complementary programs to encourage adoption of dual-fuel heat pumps, which are electric heat pumps that are combined with a backup gas furnace. This unique partnership between a gas utility and the electric utility has achieved nearly 5,900 heat pump installations over the last three years.
Program features
The key elements for the success of the heat pump program are:
- Generous rebates from both utilities, which can be combined by customers installing heat pumps.
- Coordination between the two utilities through the program implementers, making it easier for contractors to apply for rebates on behalf of customers.
- Training and outreach to HVAC contractors and homeowners to increase their knowledge of heat pumps and make them aware of the rebate programs.
Rebates
As shown in Table 1, Dominion Energy Utah offers rebates of $1,000 for a “tier 1” system, which includes installing a new ducted heat pump and new gas furnace. RMP offers a rebate of $1,450 for the same equipment, which can be combined with the rebate from Dominion Energy. The minimum efficiency requirements of Dominion and RMP are fairly consistent, which allows the HVAC contractor to choose a system that meets the requirements of both utilities, and if so, the homeowner can receive a total rebate of $2,450.1 In addition, RMP also gives an incentive to the contractor of $50 for each heat pump system installed.2
Note that if the customer does not “need” a new gas furnace, RMP would provide the same rebate of $1,450 for the heat pump alone, and Dominion Energy would provide a rebate of $700.3 Also, RMP offers a “non-AHRI-rated” (Air Conditioning, Heating, and Refrigeration Institute) tier4 (see Table 1), to encourage customers to replace their air-conditioning (AC) system with a heat pump when the AC system needs to be replaced, without requiring the existing furnace to have integrated communication with the new heat pump, and only requiring a minimum efficiency of 80% for the existing furnace. Installing a heat pump rather than replacing the AC, with the suggested changeover temperature of 40 degrees, still achieves a significant reduction in the customer’s gas use for heating.
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Table 1: Utah dual-fuel heat pump rebates
| Utility | Type | Rebate amount | Equipment minimum efficiency5 |
| Dominion Energy Utah6 | Tier 1 dual-fuel heating system | $1,000 ($700 without new gas furnace) | Ducted heat pump: HSPF 9.0+/HSPF2 7.7+, SEER 14+/SEER2 13.3+; ENERGY STAR certified natural gas furnace (AFUE (Annual Fuel Utilization Efficiency) ≥ 95%), changeover setpoint ≤ 40o F |
| Dominion Energy Utah | Tier 2 dual-fuel heating system | $1200 ($850 without new gas furnace) | Ducted heat pump: HSPF 10.0+/HSPF2 8.5+, SEER 18+/SEER2 17.1+; ENERGY STAR certified natural gas furnace (AFUE ≥ 95%), changeover setpoint ≤ 40o F |
| RMP7 | Dual fuel heat pump – AHRI rated | $1,450 | HSPF2 7.5+, SEER2 14.3+; 90+ AFUE furnace; or HSPF2 8.5+, SEER2 15.2+; 80+ AFUE furnace |
| RMP | Dual-fuel heat pump – non-AHRI rated | $700 | HSPF2 7.5+, SEER2 14.3+; 80+ AFUE furnace |
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Program implementation and contractor training
In addition to the generous rebates, another element that has made the heat pump program successful is that both utilities use program implementers with technical and customer engagement expertise in-house. For example, Evergreen Energy Partners is responsible for the RMP residential HVAC portfolio’s program management, marketing, contractor network, quick payment processing, and future measure development. RMP’s marketing includes a heat pump campaign to educate customers about heat pumps and their benefits.8 This holistic program approach, along with collaborative relationships with other implementers and alignment of heat pump rebate requirements, contribute to the dual-fuel heat pump program’s success.
RMP and Dominion do not offer technical training in heat pump installation, as some utilities do, such as Xcel Energy in Colorado.9 However, the program implementer, Evergreen, offers periodic one-hour trainings on the rebates and program requirements, either online or as part of manufacturer heat pump installation training programs. Through attending these trainings, the network of heat pump installers has grown to over 400 contractors over the last three years.
In addition, RMP encourages heat pump contractors to become more proficient in their heat pump installation skills through listing the top installers under a “Pro Network” category. The goal of the Pro Network is to identify and highlight heat pump contractors that have increased their knowledge of heat pump installation, who actively promote heat pumps to their customers, and who provide premium quality customer service. To be listed in the Pro Network, heat pump contractors must meet these criteria:
- Perform load calculations on the home/building in most cases, to properly size the heat pump.
- Submit the rebate applications on behalf of participating customers and offer the rebate to the customer at the time of customer billing.
- Demonstrate higher numbers of heat pump installations compared to other contractors, and show consistent numbers of heat pump installations over several years.
- Attend manufacturer and RMP energy efficiency program trainings.
Program success
Through offering these rebates and other elements described above, the two utilities have achieved impressive and growing numbers of heat pump installations, as shown in Table 2.
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Table 2: Number of heat pumps rebated in existing homes
| RMP | RMP | Dominion Energy Utah | |
| Dual-fuel heat pump | Ductless heat pump | Dual-fuel heat pump | |
| 2021 | 1,368 | 237 | 1,098 |
| 2022 | 1,512 | 296 | 1,320 |
| 2023 | 2,989 | 522 | 2,796 |
| Total | 5,869 | 1,055 | 5,214 |
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Regulatory background and utility benefits
One of the keys for Dominion Energy deciding to offer the heat pump rebates is that its residential rate has been “decoupled” from revenue by the Utah Public Utilities Commission (PUC). This means that if Dominion Energy sells less gas because of its energy efficiency or heat pump programs, the PUC will adjust its residential gas rate upward the following year so that Dominion continues to earn the same amount of revenue. With revenue decoupling in place, the Dominion Energy’s managers were able to convince the upper management of the company (at the headquarters level, in Virginia) that the heat pump program would not affect the company financially. In addition, the Utah managers felt that the heat pump program would lead to increased customer satisfaction for Utah homeowners.
For RMP, the key policy that allowed it to offer the heat pump program is the ability to do “fuel-switching.” A simple amendment to the rules for electric utility “demand-side management” (DSM) programs was passed by the legislature in 2020. This amendment specifically includes heat pumps in the types of DSM programs the state’s regulated electric utility (RMP) is allowed to pursue.10 Based on this, RMP began to actively promote heat pumps in its 2020 and subsequent DSM plans.
Through offering increased rebates for heat pumps, RMP helps its residential customers satisfy their desire to reduce their home’s carbon footprint from heating. In addition, RMP earns more revenue with increased electricity sales, at least for several years.11
Energy savings
In addition to satisfying their residential customers, both Dominion and RMP are able to claim energy savings from the heat pump program. Both utilities estimate the reduced gas usage (in therms), through energy modeling of the heat pump systems installed. Dominion claims the therms of energy savings directly, and RMP converts the therms of savings to kilowatt-hours (kWh), with a slight adjustment of the savings (subtracting 15%).12
Greenhouse gas (GHG) emissions
Although neither utility is required to report reductions in GHG emissions, these reduced emissions are important and worth mentioning. The GHG emission reductions from installing nearly 5,900 heat pumps in Utah homes from 2021-23 are about 14,700 tons of carbon dioxide equivalent per year, which is equivalent to taking about 2,900 cars off the road.13
Advantages of dual-fuel heat pumps
As we point out in the SWEEP 2022 heat pump study, dual-fuel heat pump systems are generally much more cost-effective than all-electric heat pump systems for existing homes in climate zones 5 and higher.14 For these climate zones, keeping the backup furnace (or installing a new efficient furnace if needed) rather than installing a new cold-climate heat pump with only electric resistance backup reduces the costs to homeowners in three ways: a) it avoids expensive duct improvements to allow the higher air-flow needed by the heat pump at colder temperatures, b) it avoids expensive electrical panel upgrades to serve the backup electric heating, and c) a “tier 1,”non-cold climate heat pump costs significantly less (by ~$4,000-5,000) than a cold-climate heat pump. (For climate zones 4 and lower, cold-climate heat pumps and backup furnaces are generally not necessary.15)
Note that it is more cost-effective to avoid a backup furnace in new homes in climate zones 5 and higher than in existing homes; and for new homes, there is the additional benefit of avoiding new gas infrastructure.16
Lessons for other utilities
We encourage all gas utilities, and in particular those with revenue decoupling, to offer rebates for heat pumps, partnering with their respective electric utilities. We also urge electric utilities to incorporate the other keys to successful heat pump programs, which include:
- Align the rebate requirements with any partner organizations (gas utilities, state government, or local governments) that offer complementary rebates.
- Provide contractor training on rebates, efficiency requirements, and tips for successful installations. Also encourage contractors to attend manufacturer installation training sessions.
- Encourage HVAC contractors to promote heat pumps to their customers and help with rebate applications, such as through recognizing the highest performing contractors.
With good heat pump programs, gas and electric utilities can help their residential customers reduce their homes’ carbon footprint, while in many cases also improving comfort and reducing annual heating costs.17
Notes
- To satisfy both utilities’ requirements, the HVAC contractor should choose a heat pump with efficiency ratings of HSPF2 7.7+ and SEER2 14.3+, and a gas furnace with AFUE 95%+. Ideally, the two utilities should harmonize their minimum efficiency requirements more closely to make this choice more obvious and simpler for contractors.
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︎ - Prior to May 1, 2024, the incentive to the contractor was $200 per heat pump installation, which probably contributed to the program’s success. Now that the program has gained momentum, RMP felt it could reduce this incentive.
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︎ - To qualify for the rebates shown without purchasing a new furnace, both Dominion and RMP require that the existing furnace: a) must meet minimum efficiency requirements – for RMP, it must meet the requirements shown in Table 1; for Dominion, the existing furnace must be AFUE 90%+ and have an ECM motor, and b) the existing furnace’s controls must be able to communicate with those of the new heat pump. RMP also suggests that the furnace and new heat pump should be “AHRI-matched,” meaning the furnace and heat pump are from the same manufacturer and considered by AHRI to be matched; however, this is not required.
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︎ - “Non-AHRI rated” means that the furnace is not required to be an “AHRI-matched” system with the heat pump. See previous footnote.
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︎ - SEER means “seasonal energy efficiency ratio” and is a measure of the heat pump’s cooling efficiency. HSPF means “heating seasonal performance factor” and is a measure of the heat pump’s heating efficiency. SEER2 and HSPF2 ratings are based on newer, modified testing methods compared to the SEER and HSPF ratings.
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︎ - Dominion Energy’s residential rebates can be found here: https://www.thermwise.com/wp-content/uploads/2024_Appliance_Rebates.pdf.
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︎ - RMP’s rebates can be found here: https://s41786.pcdn.co/wp-content/uploads/2024/03/UT-050124-changes-45-day-notice.pdf. These are the rebates that are currently offered as of May 1, 2024. The “Non AHRI-rated tier” shown above is new as of May 1.
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︎ - For example, see RMP’s website, “Heat Pump Benefits,” https://wattsmarthomes.com/heat-pump-comfort/.
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︎ - Xcel Energy offers a free one-day, in-person training, and contractors must attend this training once a year in order to offer Xcel’s rebates and be listed as a qualified heat pump installer on Xcel’s website.
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︎ - The new language states, “’Demand side management means an activity or program that promotes electric energy efficiency or conservation, the use of heat pumps, or more efficient management of electric energy loads.” See Section 54-7-12.8.(1)(a) of HB 431, passed in 2020, https://le.utah.gov/~2020/bills/static/HB0431.html.
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︎ - Every few years, the PUC adjusts RMP’s rates and can adjust them downward to at least partially offset increased revenues from higher electric sales.
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︎ - This adjustment at least partially accounts for the increased electricity consumption with the heat pump.
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︎ - This estimate assumes a changeover temperature for the heat pumps installed in Utah of 32 F, and uses the National Renewable Energy Laboratory’s projections for the declining carbon-intensity of Utah’s electricity grid over the next 15 years. See “Benefits of Heat Pumps for Southwest Homes,” SWEEP, June 2022, https://www.swenergy.org/directory/sw-heat-pump-study-may-2022/, p. 37-38. To increase the GHG emission reductions of dual-fuel heat pumps, we suggest that programs encourage or require ENERGY STAR’s minimum efficiency requirements for heat pumps (15.2+ SEER2, 7.8+ HSPF2), with a changeover temperature of 25-30 F.
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︎ - The vast majority of homes served by RMP and Dominion Energy in Utah are in climate zones 5 and higher.
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︎ - This is definitely true for climate zones 2 and 3, but climate zone 4 is a gray area. Generally, efficient Tier 1 (non-cold-climate) heat pumps can provide efficient heating down to a design temperature of 20 F. But avoiding the backup furnace at this design temperature without costly upgrades also depends on the home’s current ducts and electrical panel capacity.
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︎ - For a discussion of the challenges and opportunities of all-electric heat pump systems in new homes in climate zones 5 and higher, see “Love Electric: For Builders and Developers,” https://loveelectric.org/for-builders-developers/.
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︎ - In general, whether a heat pump reduces heating costs or not compared to a gas furnace depends on a) the efficiency of the heat pump, and b) the ratio of electricity to gas price. For example, for Salt Lake City, a Tier 1 dual-fuel heat pump will reduce heating costs compared to a gas furnace by about 8%. See “Benefits of Heat Pumps for Southwest Homes,” SWEEP, June 2022, https://www.swenergy.org/directory/sw-heat-pump-study-may-2022/, p. 21.
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︎The post A unique partnership to promote dual-fuel heat pumps: Dominion Energy and Rocky Mountain Power first appeared on Southwest Energy Efficiency Project.