Effect of Expiring Tax Credits on Maine’s Heat Pump Costs?
TL/DR –
Federal tax incentives for clean energy upgrades are ending this year, causing potentially higher costs for homeowners installing upgrades like rooftop solar and heat pumps. However, Efficiency Maine Trust will continue offering heat pump rebates, including up to $9,000 for low-income customers, and Maine is participating in a five-state effort to boost heat pump adoption. Despite potential increase in costs, heat pumps have become a popular alternative due to their flexibility and potential for significant energy savings, with a Maine household being able to save an average of $700 annually after switching from fuel to a heat pump.
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Federal Clean Energy Tax Incentives to End Soon
Federal tax credits for clean energy improvements are set to expire at the end of this year, impacting potential savings on initiatives such as rooftop solar installations and heat pumps. Particularly, starting from 2026, homeowners who install a heat pump will find themselves unable to apply for federal tax credits that currently cover 30 percent of the installation or equipment costs.
Impact on Heat Pump Costs
In addition to the termination of the tax incentives, a pilot program by Central Maine Power that offers lower winter rates for customers with heat pumps is also due to expire. These changes may result in increased costs associated with both the installation and operational costs of heat pumps, especially given the rising electricity rates. A previous investigation by The Maine Monitor revealed that Maine had seen the third highest increase in average electricity prices in the country over the last ten years.
Changes in Federal Energy Efficiency Tax Credits
The early expiration of the federal energy efficiency tax credits, originally established under the Inflation Reduction Act by former President Joe Biden, is a result of adjustments made this summer under president Donald Trump’s One Big Beautiful Bill. However, federal home energy rebates for low- and moderate-income families will remain unaffected.
Maintaining Incentives at State Level
Efficiency Maine Trust, a quasi-state agency overseeing energy programs, intends to continue offering a range of heat pump rebates, including up to $9,000 for low-income customers and up to $3,000 for individuals of any income level. According to Executive Director Michael Stoddard, no changes are planned to the organization’s heat pump incentives following the expiration of the federal tax credits.
New England’s Heat Pump Accelerator
Maine is a participant in a five-state coalition called the New England Heat Pump Accelerator, a $450 million initiative launched last month to promote the installation of heat pumps through financial incentives, new pilot programs, workforce development efforts, and improved educational outreach.
Maine’s Progress in Heat Pump Installation
Maine has already surpassed Governor Janet Mills’s goal to install 100,000 heat pumps by 2025. The current state objective is to install 275,000 heat pump units by 2027.
The Benefits of Heat Pumps
With 143,000 heat pumps installed by the end of 2024, rebates and energy bill savings have made heat pumps an attractive alternative to heating systems that use oil, gas, or propane. As per Shawn LaPlante, co-owner of LaPlante Home Services in Scarborough, heat pumps offer the advantage of adjustable electricity usage based on need.
Cost Savings with Heat Pumps
Beyond reducing carbon emissions, cost savings with heat pumps form a major part of their appeal. The clean energy think tank RMI calculated that a household in Maine could expect an average of $700 in annual energy bill savings after switching from delivered fuel to a heat pump. These calculations were made using RMI’s Green Upgrade Calculator, a tool that takes into account details about the home, energy rates, the heat pump type, and climate.
Heat Pump Installations After Federal Tax Credits Change
According to LaPlante, most customers can expect to recoup their initial investment in five to eight years, depending on their circumstances. Since the announcement of the federal tax credits change, there has been a slight increase in customers looking to install heat pumps. “This just gave them a little push to say, well, why not, because I can get the federal tax credit,” said LaPlante.
This information was originally published by the The Maine Monitor, a nonprofit and nonpartisan news organization. For more coverage from The Monitor, sign up for a free Monitor newsletter here.
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