Reforming Energy Efficiency Programs to Increase Heat Pump Adoption

This report by RMI provides best practices for reforming energy efficiency incentive programs to accelerate the adoption of heat pumps. It argues that current programs are often too complex, deterring participation—particularly among low-to-moderate income (LMI) households—and recommends streamlining applications, aligning equipment specifications, and tailoring incentives to local climates to better support decarbonization goals.

• Energy efficiency incentive programs in the US are underutilized due to excessive complexity, with only 0.5% to 3% of households participating despite an annual spend of approximately $9 billion. Low-to-moderate income (LMI) households are particularly affected, being only one-third as likely to receive incentives as moderate-income households.
• To simplify programs, administrators should use easy-to-understand incentive structures. Incentives based on a per-unit basis ($/unit) are preferred for downstream programs to avoid encouraging the oversizing of space heating equipment, whereas per-BTU ($/BTUh) structures can lead to oversized units if not capped or verified via Manual J and Manual S calculations.
• Program administrators should align equipment performance specifications with federal standards to reduce confusion for the supply chain. Specifically, aligning with the Inflation Reduction Act (IRA) appliance rebates (which require ENERGY STAR certification) and the 25C federal tax credit (which requires the highest CEE tier for air-source heat pumps) is recommended.
• To increase market adoption, programs should offer up-front or direct discounts via midstream incentives, as customers are more likely to participate when costs are reduced instantly. To support this, contractors should be reimbursed promptly, ideally within two weeks of project completion, to maintain their cash flow.
• Heat pump incentives must be tailored to regional climates to ensure home comfort and efficiency. For example, in cold climates with humid summers, sizing should be between heating and cooling loads, and higher incentives should be provided for variable speed heat pumps or dedicated dehumidifiers to ensure sufficient moisture removal.
• Program durability requires long-term funding and stability to allow contractors to invest in training and business model adjustments. The report recommends establishing funding levels for at least three to five years to avoid the risk of a surge and subsequent collapse of incentives.
• To improve equity, programs should integrate 'pre-electrification' measures for LMI customers, such as electric panel upgrades, roof and wiring repairs, and toxic chemical removal, as these are often necessary prerequisites for installing heat pumps in low-income housing.
• States should shift toward a 'climate-forward' efficiency framework that prioritizes greenhouse gas (GHG) reductions over simple energy savings. An example is California's Total System Benefit metric, which values GHG emissions reductions and reduced electric grid burden alongside energy savings.

APA

RMI (2025). Reforming Energy Efficiency Programs to Increase Heat Pump Adoption. https://rmi.org/resources/reforming-energy-efficiency-programs-to-increase-heat-pump-adoption/

Chicago

RMI. Reforming Energy Efficiency Programs to Increase Heat Pump Adoption. 2025. https://rmi.org/resources/reforming-energy-efficiency-programs-to-increase-heat-pump-adoption/.

Wikipedia

{{cite report |author=RMI |title=Reforming Energy Efficiency Programs to Increase Heat Pump Adoption |date=26 March 2025 |url=https://rmi.org/resources/reforming-energy-efficiency-programs-to-increase-heat-pump-adoption/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2025reforming, author = {{RMI}}, title = {{Reforming Energy Efficiency Programs to Increase Heat Pump Adoption}}, institution = {RMI}, year = {2025}, month = mar, url = {https://rmi.org/resources/reforming-energy-efficiency-programs-to-increase-heat-pump-adoption/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }