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Five findings from an extremely thorough study by the National Renewable Energy Lab.
Some Americans install heat pumps because they care about climate change. But most people aren’t going to make the switch until it makes sense economically. Pinpointing where and for whom heat pumps are a good investment is surprisingly tricky because U.S. housing is so diverse, with a wide range of building sizes and ages, situated in different local climates with different utility rates.
But for the first time, researchers at the National Renewable Energy Lab have sorted through much of this complexity to get deeper to the truth about the costs, benefits, and challenges of deploying heat pumps in the U.S.
Ultimately, they found that heat pumps are a cost-effective choice in roughly 65 million U.S. homes, or about 60% of the country — and that’s before taking into account available subsidies. But there are substantial economic barriers to widespread adoption.
It’s hard to overstate how detailed the study is. The authors started with a model of 550,000 statistically representative households — basically housing archetypes that typify different combinations of building size, age, occupancy level, local climate, heating usage patterns, and existing heating systems. Each one represents about 242 real-world households. Then the authors looked at how switching to a heat pump would affect greenhouse gas emissions and energy bills across all of these different homes in a wide range of scenarios. They considered heat pumps with lower and higher efficiency ratings, and whether or not the building owner pursued insulation upgrades. They looked at different scenarios for how quickly the grid would decarbonize, how sensitive the results were to energy prices, and how subsidies from the Inflation Reduction Act affect the economics.
The paper has many interesting findings beyond the top-line result. Here are five things that stood out.
Eric Wilson, a senior research engineer at NREL and the study’s lead author, told me one of his motivations was to try to settle the question of whether heat pumps reduce emissions.
“I see a lot of people saying, well, the grid is still dirty in this state, and maybe it makes sense to wait five years to put in a heat pump because it could increase emissions,” he said.
But he found that in each of the 48 contiguous U.S. states, switching to a heat pump reduces emissions today, even if that heat pump is one of the cheaper, less-efficient models. Heat pumps are just so much more efficient than other options that they still reduce emissions despite today’s relatively dirty grid.
On average, each home could cut between 2.5 to 4.4 tons of carbon over the approximately 16 years the equipment lasts, meaning widespread adoption could result in a 5% to 9% drop in national economy-wide emissions. The effect is much more pronounced in some states, like those in the Northeast, where a lot of homes currently use fossil fuels for heating. A household in Maine that installs a high efficiency model, combined with completing insulation upgrades, would reduce emissions by an average of 11 tons per year — or about the equivalent of taking two cars off the road for a year.
The study breaks down the costs of switching to a heat pump in a few different ways.
First, there’s the up-front costs of upgrading to a heat pump, which are relatively high. A lower-rated, less efficient heat pump system may be a cheaper option than a new furnace or boiler for about 43% of households. But a higher-performing heat pump is almost always more expensive, costing an extra $8,000 to $13,000 before government subsidies (more on them later). That alone might keep heat pumps out of reach for many households.
Next, there's the potential for bill savings — which is significant. Using state average electricity and gas rates in the winter of 2021 to 2022, the study found that 86% of households can save money on their utility bills by switching to a medium-efficiency heat pump, and a whopping 95% of households will see their bills go down if they install the highest efficiency system.
So in theory, if homeowners do have the extra cash to put down, there’s a chance they could make up for high up-front costs in bill savings over time. But how good a chance?
Putting this all together, the authors looked at what percentage of households that upgraded to heat pumps would see a positive cash flow, calculated as the “net present value,” from the initial investment. Here, the results were less rosy. In many cases, high up-front costs cancel out potential savings. For example, despite the near-certain bill savings from buying one of the most efficient heat pump models, only 21% of households would see an overall economic benefit from the switch.
Still, more than half of all homes would see a positive cash flow by switching to a cheaper, minimum-efficiency heat pump.
Distribution of energy bill savings, upgrade costs, and unsubsidized net present value, relative to a reference equipment replacement scenario, using energy prices from winter 2021 to 2022 Courtesy NREL / Wilson et al., Heat pumps for all? Distributions of the costs and benefits of residential air-source heat pumps in the United States, Joule (2024), https://doi.org/10.1016/j.joule.2024.01.022
These findings underscore the importance of bringing down the cost of more efficient heat pump models, which are out of reach for many Americans but can provide significant energy bill savings. The authors suggest that policymakers can help by deploying incentives more strategically and pursuing research on “lower-cost, higher performance, and easier to install equipment.” There also may be opportunities for bulk purchasing and aggregating installations across an apartment building or neighborhood.
When it comes to bill savings, the study found that those who have systems that run on propane, fuel oil, or electric resistance heaters will pretty much always lower their bills by switching to a heat pump, no matter how efficient it is. But those who use natural gas are far more likely to lower their bills if they can afford to switch to one of the pricier, better-performing heat pumps — which cuts into the value proposition.
The following maps show the percentage of homes in each state that would see a positive cash flow from switching to a heat pump, looking at those switching from natural gas, electric resistance, or fuel oil and propane, illustrating how the value proposition is most challenging for those using natural gas.
Percentage of homes that currently have air conditioning that will see a positive cash flow from switching to a heat pump from natural gas, electricity, and fuel oil and propane. Courtesy NREL / Wilson et al. 2024
The authors also note that fixed charges on natural gas bills can play a significant role in the economics of switching to a heat pump. Most natural gas utilities charge customers a fixed amount each month, regardless of how much gas they use. If a homeowner switches to heat pumps but continues using gas for cooking, they’ll still have to pay the full fee, which can be as high as $34 a month, whereas homes that fully electrify can avoid these fees.
The results I described in the previous two sections include homes both with and without existing air conditioning systems of some kind. (With the exception of the maps, which only consider homes that have air conditioning already.)
But since heat pumps provide both heating and cooling, the economics are actually quite different for those households who already have air conditioners versus those who don't. If a household already has A/C, heat pumps appear more favorable, because a family would be able to replace two systems — an air conditioner and a furnace — with just one. If there is no pre-existing air conditioner, the heat pump will not only have higher up-front costs, but it’s more likely to increase energy bills, since the family might start using the heat pump for cooling in addition to heating.
Here are the same maps included in the previous section, but looking just at homes that do not have air conditioning.
Percentage of homes that do not have air conditioning that will see a positive cash flow from switching to a heat pump. The first column is homes that currently use natural gas, the second column is those that us electricity, and the third is those that use fuel oil and propane. Courtesy NREL / Wilson et al. 2024
There are basically zero cases where a house with natural gas heating, and no A/C, will save by switching to a heat pump. However, that result doesn’t take into account the benefits of getting air conditioning for the first time.
“They didn't include the new value that someone has, especially in a warming world and a world with more heat waves, of now having an air conditioner in your home,” Kevin Kircher, an assistant professor of mechanical engineering at Purdue University, told me. “So if you add that in, I think the economics look better.”
None of the results in the previous sections take into account the various subsidies that states and the federal government offer for heat pumps. For example, the Inflation Reduction Act included a $2,000 tax credit for heat pumps and an additional $11,500 in rebates for low- and moderate-income households. Both will increase the percentage of households for whom the investment will pencil out.
The study also doesn’t take into account the potential for homes to use smart controls that optimize their systems, or the opportunity for households to participate in demand response programs which will pay them to turn down their thermostats by a few degrees when the grid is taxed. Kircher, the Purdue professor, recently published a study of a real-world house in a cold climate where smart controls reduced heating energy costs by 23-34%.
Finally, one big takeaway from the study was that the results are very sensitive to the price ratio between natural gas rates and electricity rates, and there are reasons to believe that may become more favorable. For example, as more renewable energy is deployed, electricity could become more affordable. Meanwhile, if the U.S. increases exports of liquified natural gas, the cost of domestic natural gas could go up. The study cites a 2022 survey of oil and gas executives which found that 69% expect ‘‘the age of inexpensive U.S. natural gas to end by year-end 2025.”
“Big modeling like this entails a lot of assumptions about the future that are really hard to pin down with any real precision,” said Kircher. “But I think there's cause for optimism there.”
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Dozens of people are reporting problems claiming the subsidy — and it’s not even Trump’s fault.
Eric Walker, of Zanesville, Ohio, bought a Ford F-150 Lightning in March of last year. Ironically, Walker designs and manufactures bearings for internal combustion engines for a living. But he drives 70 miles to and from his job, and he was thrilled not to have to pay for gas anymore. “I love it so much. I honestly don’t think I could ever go back to a non-EV,” he told me. “It’s just more fun, more punchy.”
But although he’s saving on gas, Walker recently learned he’d made a major, expensive mistake at the dealership when he bought the truck. The F-150 Lightning qualified for a federal tax credit of $7,500 in 2024. Walker was income-eligible and planned to claim it when he filed his taxes. But his dealership never reported the sale to the Internal Revenue Service, and at the time, Walker had no idea this was required. When he went to submit his tax return recently, it was rejected. Now, it may be too late.
Walker is not alone. Dozens of users on Reddit have been sharing near-identical stories as tax season has gotten underway — and it’s only early February. It is unclear exactly how many EV buyers are affected. What we do know is that it will be up to the Trump administration’s Treasury Department to decide whether any of them will get the refund they were counting on — the same administration that wants to kill the tax credit altogether.
The problem dates back to a change in the process for claiming the tax credit. For the 2023 tax year, dealers had until January 15, 2024 to report eligible EV sales to the IRS. For 2024, however, the IRS introduced a new, digital reporting system and new deadlines. Starting in January 2024, if a customer bought an eligible vehicle and wanted to claim the tax credit, dealerships were required to file a report within three days of the time of sale to the IRS through a web portal called Energy Credits Online.
This change coincided with another: Buyers now had the option to transfer the credit to their dealership instead of claiming it themselves. The dealer could then take the value of the credit off the price of the car and get reimbursed by the IRS. This was voluntary on the dealerships’ part, and many opted in. By October, more than 300,000 EV sales had used this transfer option, according to the Treasury Department. But apparently there were also many dealers who didn’t want to bother with it. And at least some of them never bothered to learn about the online portal at all.
Charlie Gerk, an engineer living in the suburbs of Minneapolis, bought a Chrysler Pacifica plug-in electric hybrid in February after his wife had twins. Unlike Walker, Gerk knew all about the workings of the tax credit, and he wanted to get his discount up front. But the dealership he was working with — a smaller, family-run business — had not gotten set up to do it. “He’s like, ‘We sell six EVs a year, we’re not going to take the time to sign up for that program,’” Gerk recalled the salesman saying. Gerk decided to claim the tax credit himself, and the dealership even gave him a few hundred bucks off the car since he’d have to wait a year to see the refund. He then emailed the dealership instructions from the IRS for reporting the sale through the online portal, and the dealership assured him it would submit the information. It sent Gerk a copy of form 15400, an IRS “Clean Vehicle Seller Report,” for him to keep for his records — except that the form was dated 2023. When Gerk inquired about it, the finance manager told him it was just because it was still so early in the year, and that they would make sure it got filed appropriately online.
Fast forward to one year later, and Gerk came across a post in the Pacifica Reddit forum from someone whose claim was rejected by the IRS because their dealer failed to report the sale. “I logged into my online dashboard for the IRS, and sure enough, the vehicle’s not there,” Gerk told me. “If it was filed appropriately, it would have shown on my online dashboard that I had an EV clean vehicle credit for 2024, and it’s not there.”
Gerk spoke to his dealership, which said it would look into the situation. He forwarded me an email exchange between the IRS and his dealership in which a representative from the IRS’ Clean Vehicle Team said it was probably too late to fix. “The open period for any unsubmitted time of sale reports is closed,” the staffer wrote. “We are expecting some Energy Credit Online (ECO) updates so contact us via secure messaging in the Spring for additional information.”
Some users on Reddit who, like Gerk, were aware of the reporting requirements when they bought their EVs, have shared stories about visiting more than a dozen dealerships before finding one that was registered with ECO and willing to file the paperwork. Others who didn't know about the rules have recalled inquiring about the tax credit at their dealership and being told they could simply claim it on their taxes. They only found out when they tried to submit their tax paperwork on TurboTax or another e-filing system and received an error message informing them that their vehicle is not registered in the IRS database.
Some blame the dealerships for misleading them and are wondering if they have grounds to sue. Others blame the IRS for not adequately informing customers or dealers about the rules.
“My frustration lies with the fact the IRS would even allow this to be an option,” Gerk told me. “If you’re going to allow the credit to be taken by me, I have to be dependent on my dealer doing the right thing?” (Gerk asked that we not share the name of his dealership.)
I spoke with a former Treasury staffer who worked on the program, who told me that the agency went to great lengths to educate dealerships about the new online portal and filing requirements, including hosting webinars that reached more than 10,000 dealerships and a presentation at the National Automobile Dealership Association’s annual convention in Las Vegas. The agency put up pages of fact sheets, checklists, and other materials for dealers and consumers on the IRS website, they said. But the IRS doesn’t have a marketing budget, and also relied heavily on NADA, the Dealership Association, for help getting the word out.
NADA did not respond to multiple emails and phone calls asking for comment. I also contacted several of the dealerships who sold EVs to buyers who are now having their tax credit claims rejected, none of which got back to me.
Many of the affected buyers are trying to get their dealerships to contact the IRS and see if they can retroactively report the sales, as Gerk did. Some are having more luck than others. When Walker contacted his dealership in Cleveland, Ohio, to see if there was anything it could do to help him, it still seemed to have no idea what he was talking about. Walker forwarded me a response from his dealership asking him if he had spoken to his accountant. “My sales desk is pretty insistent on that this is something your accountant would handle,” it said. (Walker did not want to disclose the name of his dealership as he is still trying to work with them on a solution.)
I reached out to the Treasury Department with a list of questions, including whether this issue was on its radar and what consumers who find themselves in this situation should do. The agency confirmed receipt of the request, but had not gotten back to me by press time. We will update this story if they do. There are reports on Reddit of EV buyers having a similar issue claiming the tax credit in 2024 for purchases made in 2023. Some filed their taxes without the EV credit and then submitted appeals to the IRS after the fact, with seemingly some success.
Buyers stuck in this situation have few other places to turn. Some Reddit users have posted about reaching out to their representatives, who offered to contact the IRS on their behalf. One challenge, as noted by the former Treasury staffer I spoke with, is that unlike the dealers, who have NADA, there is no consumer advocacy group for electric vehicle buyers who can engage with lawmakers and the Treasury and request a solution.
“I don’t necessarily need the money,” Walker told me. “It was just gonna go towards some more student loans — I’m just trying to pay down all of my debt as soon as possible. So I didn’t need it. But it would have been certainly something nice to have.”
For now, at least, the math simply doesn’t work. Enter the EREV.
American EVs are caught in a size conundrum.
Over the past three decades, U.S. drivers decided they want tall, roomy crossovers and pickup trucks rather than coupes and sedans. These popular big vehicles looked like the obvious place to electrify as the car companies made their uneasy first moves away from combustion. But hefty vehicles and batteries don’t mix: It takes much, much larger batteries to push long, heavy, aerodynamically unfriendly SUVs and trucks down the road, which can make the prices of the EV versions spiral out of control.
Now, as the car industry confronts a confusing new era under Trump, signals of change are afoot. Although a typical EV that uses only a rechargeable battery for its power makes sense for smaller, more efficient cars with lower energy demands, that might not be the way the industry tries to electrify its biggest models anymore.
The predicament at Ford is particularly telling. The Detroit giant was an early EV adopter compared to its rivals, rolling out the Mustang Mach-E at the end of 2020 and the Ford F-150 Lightning, an electrified version of the best-selling vehicle in America, in 2022. These vehicles sell: Mustang Mach-E was the No. 3 EV in the United States in 2024, trailing only Tesla’s big two. The Lightning pickup came in No. 6.
Yet Ford is in an EV crisis. The 33,510 Lightning trucks it sold last year amount to less than 5% of the 730,000-plus tally for the ordinary F-150. With those sales stacked up against enormous costs needed to invest in EV and battery manufacturing, the brand’s EV division has been losing billions of dollars per year. Amid this struggle, Ford continues to shift its EV plans and hasn’t introduced a new EV to the market in three years. During this time, rival GM has begun to crank out Blazer and Equinox EVs, and now says its EV group is profitable, at least on a heavily qualified basis.
As CEO Jim Farley admitted during an earnings call on Wednesday, Ford simply can’t make the math work out when it comes to big EVs. The F-150 Lightning starts at $63,000 thanks in large part to the enormous battery it requires. Even then, the base version gets just 230 miles of range — a figure that, like with all EVs, drops quickly in extreme weather, when going uphill, or when towing. Combine those technical problems and high prices with the cultural resistance to EVs among many pickup drivers and the result is the continually rough state of the EV truck market.
It sounds like Ford no longer believes pure electric is the answer for its biggest vehicles. Instead, Farley announced a plan to pivot to extended-range electric vehicle (or EREV) versions of its pickup trucks and large SUVs later in the decade.
EREVs are having a moment. These vehicles use a large battery to power the electric motors that push the wheels, just like an EV does. They also carry an onboard gas engine that acts as a generator, recharging the battery when it gets low and greatly increasing the vehicle’s range between refueling stops. EREVs are big in China. They got a burst of hype in America when Ram promised its upcoming Ramcharger EREV pickup truck would achieve nearly 700 miles of combined range. Scout Motors, the brand behind the boxy International Scout icon of the 1960s and 70s, is returning to the U.S. under Volkswagen ownership and finding a groundswell of enthusiasm for its promised EREV SUV.
The EREV setup makes a lot of sense for heavy-duty rides. Ramcharger, for example, will come with a 92 kilowatt-hour battery that can charge via plug and should deliver around 145 miles of electric range. The size of the pickup truck means it can also accommodate a V6 engine and a gas tank large enough to stretch the Ramcharger’s overall range to 690 miles. It is, effectively, a plug-in hybrid on steroids, with a battery big enough to accomplish nearly any daily driving on electricity and enough backup gasoline to tow anything and go anywhere.
Using that trusty V6 to generate electricity isn’t nearly as energy-efficient as charging and discharging a battery. But as a backup that kicks in only after 100-plus miles of electric driving, it’s certainly a better climate option than a gas-only pickup or a traditional hybrid. The setup is also ideally suited for what drivers of heavy duty vehicles need (or, at least, what they think they need): efficient local driving with no range anxiety. And it’s similar enough to the comfortable plug-and-go paradigm that an extended-range EV should seem less alien to the pickup owner.
Ford’s big pivot looks like a sign of the times. The brand still plans to build EVs at the smaller end of its range; its skunkwords experimental team is hard at work on Ford’s long-running attempt to build an electric vehicle in the $30,000 range. If Ford could make EVs at a price at least reasonably competitive with entry-level combustion cars, then many buyers might go electric for pure pragmatic terms, seeing the EV as a better economic bet in the long run. Electric-only makes sense here.
But at the big end, that’s not the case. As Bloombergreports on Ford’s EV trouble, most buyers in the U.S. show “no willingness to pay a premium” for an electric vehicle over a gas one or a hybrid. Facing the prospect of the $7,500 EV tax credit disappearing under Trump, plus the specter of tariffs driving up auto production costs, and the task of selling Americans an expensive electric-only pickup truck or giant SUV goes from fraught to extremely difficult.
As much as the industry has coalesced around the pure EV as the best way to green the car industry, this sort of bifurcation — EV for smaller vehicles, EREV for big ones — could be the best way forward. Especially if the Ramcharger or EREV Ford F-150 is what it takes to convince a quorum of pickup truck drivers to ditch their gas-only trucks.
Current conditions: People in Sydney, Australia, were told to stay inside after an intense rainstorm caused major flooding • Temperatures today will be between 25 and 40 degrees Fahrenheit below average across the northern Rockies and High Plains • It’s drizzly in Paris, where world leaders are gathering to discuss artificial intelligence policy.
Well, today was supposed to be the deadline for new and improved climate plans to be submitted by countries committed to the Paris Agreement. These plans – known as nationally determined contributions – outline emissions targets through 2030 and explain how countries plan to reach those targets. Everyone has known about the looming deadline for two years, yet Carbon Briefreports that just 10 of the 195 members of the Paris Agreement have submitted their NDCs. “Countries missing the deadline represent 83% of global emissions and nearly 80% of the world’s economy,” according to Carbon Brief. Last week UN climate chief Simon Stiell struck a lenient tone, saying the plans need to be in by September “at the latest,” which would be ahead of COP30 in November. The U.S. submitted its new NDC well ahead of the deadline, but this was before President Trump took office, and has more or less been disregarded.
Many of the country’s largest pension funds are falling short of their obligations to protect members’ investments by failing to address climate change risks in their proxy voting. That’s according to new analysis from the Sierra Club, which analyzed 32 of the largest and most influential state and local pension systems in the U.S. Collectively, these funds have more than $3.8 trillion in assets under management. Proxy voting is when pensions vote on behalf of shareholders at companies’ annual meetings, weighing in on various corporate policies and initiatives. In the case of climate change, this might be things like nudging a company to disclose greenhouse gas emissions, or better yet, reduce emissions by creating transition plans.
This report looked at funds’ recent proxy voting records and voting guidelines, which pension staff use to guide their voting decisions. The funds were then graded from A (“industry leaders”) to F (“industry laggards”). Just one fund, the Massachusetts Pension Reserves Investment Management (MassPRIM), received an “A” grade; the majority received either “D” or “F” grades. Others didn’t disclose their voting records at all. “To ensure they can meet their obligations to protect retirees’ hard-earned money for decades to come, pensions must strengthen their proxy voting strategies to hold corporate polluters accountable and support climate progress,” said Allie Lindstrom, a senior strategist with the Sierra Club.
Football fans in Los Angeles watching last night’s Super Bowl may have seen an ad warning about the growing climate crisis. The regional spot was made by Science Moms, a nonpartisan group of climate scientists who are also mothers. The “By the Time” ad shows a montage of young girls growing into adults, and warns that climate change is rapidly altering the world today’s children will inherit. “Our window to act on climate change is like watching them grow up,” the voiceover says. “We blink, and we miss it.” It also encourages viewers to donate to LA wildfire victims. A Science Moms spokesperson toldADWEEK they expected some 11 million people to see the ad, and that focus group testing showed a 25% increase in support for climate action among viewers. The New York Timesincluded the ad in its lineup of best Super Bowl commercials, saying it was “a little clunky and sanctimonious in its execution but unimpeachable in its sentiments.”
General Motors will reportedly stop selling the gas-powered Chevy Blazer in North America after this year because the company wants its plant in Ramos Arizpe, Mexico, to produce only electric vehicles. The move, first reported by GM Authority, means “GM will no longer offer an internal combustion two-row midsize crossover in North America.” If you have your heart set on a Blazer, you can always get the electric version.
In case you missed it: Airbus has delayed its big plan to unveil a hydrogen-powered aircraft by 2035, citing the challenges of “developing a hydrogen ecosystem — including infrastructure, production, distribution and regulatory frameworks.” The company has been trying to develop a short-range hydrogen plane since 2020, and has touted hydrogen as key to helping curb the aviation industry’s emissions. It didn’t give an updated timeline for the project.
“If Michael Pollan’s basic dietary guidance is ‘eat food, not too much, mostly plants,’ then the Burgum-Wright energy policy might be, ‘produce energy, as much as you can, mostly fossil fuels.’”
–Heatmap’s Matthew Zeitlin on the new era of Trump’s energy czars