Five policies to lower heating bills and accelerate heat pump adoption in Illinois

This policy brief by RMI outlines five strategic policies to increase the adoption of air-source heat pumps (ASHPs) and heat pump water heaters (HPWHs) in Illinois to lower household energy bills and meet state decarbonization goals. The document analyzes the techno-economic viability of electrification for single-family homes, highlighting that while heat pumps can reduce operational costs—particularly for those switching from propane or electric resistance heating—high up-front cost premiums remain a primary barrier. RMI recommends a combination of increased targeted incentives, zero-interest financing, rate design reforms, AC-to-heat pump replacement policies, and electric-friendly building standards for new construction.

• Heat pumps can lower energy bills for nearly all Illinois single-family households, with the most significant annual savings occurring for those switching from electric resistance ($1,110) and propane ($930) furnaces.
• For gas-heated homes, the most cost-effective heat pump design depends on the utility provider. Peoples Gas and Commonwealth Edison (ComEd) customers save an average of $390 per year with all-electric full-load ASHPs, while Nicor Gas customers see marginal savings of $20 with hybrid part-load ASHPs.
• High up-front costs are a major barrier to adoption. Full-load ASHPs may cost $2,000 to $8,000 more than a combined furnace and AC, hybrid ASHPs carry a premium of $1,000 to $2,000 over AC-only replacements, and HPWHs typically cost $1,000 to $2,500 more than alternatives.
• RMI proposes increasing incentives to eliminate cost premiums: $8,000 for all-electric full-load ASHPs, $2,000 for hybrid part-load ASHPs, and $2,000 for HPWHs. It also suggests redirecting approximately $5 million in annual residential gas equipment incentives toward weatherization.
• Zero-interest financing could make heat pumps affordable immediately. For those switching from propane or electric resistance, a 0% financed full-load ASHP would result in annual combined equipment and energy costs approximately $800 lower than market-rate financed traditional systems.
• Rate design reforms are necessary to maximize savings. Specifically, allowing hybrid part-load heat pump users with a 25°F switchover temperature to enroll in ComEd’s electric heating rate could increase annual energy bill savings by $140 to $150 for Nicor and North Shore gas customers.
• Implementing electric-friendly standards for new construction can significantly reduce costs. Electric-ready construction saves roughly $1,200 per home compared to retrofits, and all-electric construction avoids up-front gas service costs estimated between $1,800 and $10,000 per household.

APA

RMI (2026). Five policies to lower heating bills and accelerate heat pump adoption in Illinois. https://rmi.org/resources/five-policies-to-lower-heating-bills-and-accelerate-heat-pump-adoption-in-illinois/

Chicago

RMI. Five policies to lower heating bills and accelerate heat pump adoption in Illinois. 2026. https://rmi.org/resources/five-policies-to-lower-heating-bills-and-accelerate-heat-pump-adoption-in-illinois/.

Wikipedia

{{cite report |author=RMI |title=Five policies to lower heating bills and accelerate heat pump adoption in Illinois |date=20 March 2026 |url=https://rmi.org/resources/five-policies-to-lower-heating-bills-and-accelerate-heat-pump-adoption-in-illinois/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2026five, author = {{RMI}}, title = {{Five policies to lower heating bills and accelerate heat pump adoption in Illinois}}, institution = {RMI}, year = {2026}, month = mar, url = {https://rmi.org/resources/five-policies-to-lower-heating-bills-and-accelerate-heat-pump-adoption-in-illinois/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }