How much money has been spent subsidizing heat pumps in Maine?

Oil remains the dominant source of home heating in Maine, but is being displaced by electric heat pumps in a race instigated by Gov. Janet Mills and funded by federal taxpayers, state taxpayers and other funding sources.

The governor has made the installation of electric heat pumps a centerpiece of her administration’s energy and climate policy, drawing national attention to Maine. That comes at a price: More than $135 million has been spent in the last decade to subsidize the installation of electric heat pumps in Maine, and at least $125 million is planned.

“With nearly a third of Maine’s carbon emissions coming from buildings, efficiency improvements in heating and cooling are a key strategy for reducing the state’s greenhouse gas emissions,” Mills said in an Oct. 4 statement.

Mills credits the increasing use of heat pumps for a noticeable decrease in Mainers’ dependence on heating oil. Census Bureau data shows the number of households using electric heat pumps in Maine nearly tripled to 79,160 in 2023, up from 28,040 in 2014, when a state program to encourage heat pump installation began. Heating oil use fell from 342,185 to 323,666 homes, a 5.4% decline over the same period, according to one-year estimates from the American Community Survey.

Heating oil still dominates the energy source for private households with a share of 52.5% last year, compared to a share of 62.2% in 2014. The share of use of electric heat pumps has more than doubled and will be in 2023 12.8% of all energy sources.

Maine is “still heavily dependent on fossil fuels,” Mills said, pointing to census data that also tracks household use of natural gas, liquid propane and coal. Wood heat, used in about 58,000 households in 2023, has fallen by a quarter since 2014 and accounted for about 9% of home heating.

With 2,137 solar power systems installed in private households, the number last year is low, compared to a barely noticeable 451 in 2014.

Heat pumps use electricity to heat and cool buildings and often replace oil or gas furnaces that contribute to greenhouse gas emissions. The pumps extract heat from outside air or the ground and transfer it indoors, rather than, for example, heating a coil in a furnace. They also draw heat from indoor spaces and direct it outside or underground to cool homes.

Andrew Price, president and CEO of Competitive Energy Services, a consulting group in Portland, said the switch to electric heat pumps is “actually the primary driver of the decline in oil consumption.”

“I expect electric heat pumps will continue to take significant market share away from oil in the coming years,” he said in an email. “The conversion from oil to natural gas also plays a minor role – although this is obviously limited to more urban areas that already have a natural gas pipeline.”

Efficiency Maine, the state agency that promotes energy efficiency, could not break down how much money was spent on heat pump incentives each year, but provided information on spending over multiple years. Chief executive Michael Stoddard said the group spent $25.6 million on heat pump incentives in the 2014 to 2019 financial years. The program has ramped up slowly and most of the money has been spent in the last two years, he said.

In July 2023, Mills announced that Maine had met one of its key climate goals two years early, installing 100,000 heat pumps by 2025. Maine had provided rebates for the installation of 104,000 pumps. Efficiency Maine said it spent about $61 million on incentives for heat pump installations in the state’s 2020-23 fiscal years, which ended June 30.

In fiscal year 2024, Efficiency Maine spent $32.7 million toward a new goal set by Mills: to install an additional 175,000 heat pumps by 2027. That’s a total of $119.3 million since 2014.

Funding did not come from state tax revenue. Efficiency Maine utilized the Regional Greenhouse Gas Initiative, a cooperative program between Maine and ten other states to limit and reduce carbon dioxide emissions from the energy sector. Federal Pandemic Relief Fund; electricity ratepayers; an agreement with the New England Clean Energy Connect transmission project; and proceeds from an energy auction in New England.

MaineHousing, the state housing authority, has also invested millions of dollars in installing heat pumps through its own income-based programs. The agency spent about $15.7 million in federal heating assistance and U.S. Department of Energy funds from 2020 to 2024 to install heat pumps in 4,236 homes, said Scott Thistle, spokesman for MaineHousing.

Efficiency Maine expects Mills’ goal of installing 175,000 heat pumps over the next three years to be driven in part by consumers purchasing heat pumps without taking advantage of an Efficiency Maine rebate.

More money for electric heat pumps is on the way. Mills announced in July that Maine would receive between $45 million and $72 million from the U.S. Environmental Protection Agency to install electric heat pumps.

The EPA grant has not yet been received by the primary recipient, the Connecticut Department of Energy and Environmental Protection, which handles the paperwork, Efficiency Maine said. A significant amount is likely used for heat pump water heaters in Maine.

An additional $35 million from the U.S. Department of Energy earmarked for heat pump installation will benefit the state. A second phase will add another $35 million, expected to arrive in early 2025. The grant money will be spent over several years.

Additionally, a separate $10 million federal energy grant is expected in the next few months to expand heat pumps in manufactured homes and mobile homes, Efficiency Maine said.

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