An Analysis of the Potential for Air-Source Heat Pumps to Reduce the Energy Costs and Greenhouse Gas Pollution of Ontario’s Electrically-Heated Homes
How Air-Source Heat Pumps in Ontario Homes Save Households Money and Reduce GHG emissions
Installing cold climate air source heat pumps (ASHPs) or cold climate multi-split heat pumps (mASHP) in Ontario’s electrically-heated single family homes will reduce Ontario’s greenhouse gas (GHG) emissions and save households money on their electricity bills.
There are currently 450,000 electrically-heated single detached and attached homes in Ontario. Using the Independent Electricity System Operator’s (IESO’s) forecasted electricity supply mix in 2030, our analysis* shows that the GHG pollution of Ontario’s gas-fired power plants could be reduced by up to 18% by shifting these homes to highly efficient heat pumps by that date. This would directly reduce Ontario’s GHG pollution in 2030 by 2.2 megatonnes, and 4.0 megatonnes when lifecycle emissions are counted.
There are currently 450,000 electrically-heated single detached and attached homes in Ontario. Using the Independent Electricity System Operator’s (IESO’s) forecasted electricity supply mix in 2030, our analysis* shows that the GHG pollution of Ontario’s gas-fired power plants could be reduced by up to 18% by shifting these homes to highly efficient heat pumps by that date. This would directly reduce Ontario’s GHG pollution in 2030 by 2.2 megatonnes, and 4.0 megatonnes when lifecycle emissions are counted.
Household Savings
A switch to heat pumps would reduce the electricity costs of an average electrically heated home by $2,144 per year by heating homes far more efficiently. That comes to $965 million per year for all electrically-heated homes in Ontario. That is, the electric heating and cooling costs for Ontario’s electrically heated homes would fall by 54%. Such a move would reduce energy poverty for many of our most vulnerable households who disproportionately live in electrically-heated homes. Our electricity cost savings estimates are based on 2021 electricity rates. If electricity rates continue to rise, the actual dollar savings in 2030 would be even greater.
Paybacks of a Heat Pump
Heat pumps are a highly attractive option because they provide heating and cooling in one unit and provide major efficiency gains. Consumers are most likely to install high-efficiency heat pumps when they are replacing their old air conditioning unit or when they want to add air conditioning to a building. In these cases, the incremental costs of the heat pumps are estimated at $8,600 to $11,840 per home. For a detached home, the payback can be as low as 3.2 years if the cost is incremental to replacing the central air conditioner, or 5.8 years if the electricity cost savings from the greater efficiency cover the full cost. This is far less than the 15-year life expectancy of a heat pump system.
Potential Solutions to Incentivizing Heat Pump Uptake
Nevertheless, the significant upfront capital costs of heat pumps are a market barrier to their rapid and widespread adoption for many homeowners. The Government of Ontario could offer no down payment, low or zero interest loans and tie the loans to the homeowner’s utility bills over the 15-year lifespan of the heat pump systems. Such a program would also address the significant gap in consumer and industry awareness of the performance and reliability of cold climate heat pumps.
We modelled the annual net financial benefits of installing heat pumps and found that the installation of air source heat pumps in all of Ontario’s electrically heated homes would provide a net financial saving (electricity bill savings – loan repayment costs) of $460 to $530 million for homeowners per year assuming current electricity rates.
For homeowners this is a win-win – they pay nothing up front and immediately benefit from reduced energy bills. Why replace your air conditioner with a standard unit when you could pay nothing to start saving immediately with a high-efficiency heat pump? A program to promote heat pump adoption in electrically-heated homes also has the potential to stimulate the economy by $16.1 to $18.8 billion, create 101 to 114 thousand person-years of employment, and help Ontario households adapt to the increasing number of deadly extreme heat events that are already being experienced as a consequence of climate change.
In summary, heat pumps can cost-effectively cut our greenhouse gas emissions, save homeowners money, reduce energy poverty, stimulate our economy, create green jobs, build the capacity for heat pump installation, and save lives during extreme heat events. Now is the time to roll out programs to put heat pumps in every electrically-heated home.
We modelled the annual net financial benefits of installing heat pumps and found that the installation of air source heat pumps in all of Ontario’s electrically heated homes would provide a net financial saving (electricity bill savings – loan repayment costs) of $460 to $530 million for homeowners per year assuming current electricity rates.
For homeowners this is a win-win – they pay nothing up front and immediately benefit from reduced energy bills. Why replace your air conditioner with a standard unit when you could pay nothing to start saving immediately with a high-efficiency heat pump? A program to promote heat pump adoption in electrically-heated homes also has the potential to stimulate the economy by $16.1 to $18.8 billion, create 101 to 114 thousand person-years of employment, and help Ontario households adapt to the increasing number of deadly extreme heat events that are already being experienced as a consequence of climate change.
In summary, heat pumps can cost-effectively cut our greenhouse gas emissions, save homeowners money, reduce energy poverty, stimulate our economy, create green jobs, build the capacity for heat pump installation, and save lives during extreme heat events. Now is the time to roll out programs to put heat pumps in every electrically-heated home.
*The spreadsheet model used in this analysis is available for download on the Ontario Clean Air Alliance website. Users are welcome to use the model to change the input assumptions and observe the impacts on the outcome parameters.
This report was prepared for Ontario's Clean Air Alliance Research.