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Working with a Contractor: Air Source Heat Pumps

October 8, 2024
Carmen Carruthers

Are you thinking about switching out your home heating and cooling system for an Air Source Heat Pump? Check out our step-by-step guide below for getting a heat pump installed in your home.

The guidance below is intended to help consumers identify potential incentives and to position themselves to make fully informed decisions about equipment options. In some cases, consumers may find themselves eligible for multiple incentives based on equipment recommendations that meet their heating and cooling needs and their budget constraints.  In other situations, a consumer may opt to install equipment that may not meet requirements for incentives, but still meet their heating and cooling needs within their budget goals.  Every situation will be different.  CUB’s goal is to help ensure consumers understand their options upfront, so they don’t inadvertently miss out on cost savings because they weren’t aware of an incentive requirement or didn’t know what questions to ask. 

Pre-Work

1) If you are seriously interested in purchasing and installing an air source heat pump, develop a general understanding of how your energy bills may shift.  Depending on your current primary fuel type, it may cost you less, more, or about the same amount of money to operate an air source heat pump.  

  • The Air Source Heat Pump Collaborative has developed a calculator that estimates example operational costs. Please note this can vary significantly based on a variety of factors including home’s level of efficiency and energy prices.   
  • In general, if you are currently using electric resistance heat, fuel oil, or propane you are likely to save money using an air source heat pump.  If you use natural gas, the price of natural gas and the switchover temperature for backup heating with natural will influence whether you spend more, less, or about the same. 
  • Research whether your electric utility provides discounted electric heating rates or dual fuel rates that save money on your heating costs.  
  • In Minnesota, primary heating fuels are tax exempt from November to April. If electricity is your primary heating source, you can request your utility to remove sales tax during this time period. You will likely need to fill out paperwork to confirm this.  If you have a different back up fuel, you may need to inform that provider and pay sales tax on those bills going forward instead.  
     

2) A heat pump will work best in a home that is well weatherized.  It will save you energy and money in the long run. If you haven’t already had an energy audit, consider this step to determine if weatherization improvements are needed. Homes built before 1980 are especially good candidates for a home energy audit. 

  • Some future incentives may require an audit. If possible, plan out weatherization improvements to happen before heat pump installation.  If this is not possible, discuss heating and cooling requirements with your contractor.   

3) Determine, potentially with your tax preparer, if you will have the tax liability necessary to take advantage of the IRA tax credits. The Clean Energy Resource Teams provides examples of claiming a tax credit. 
 

4) To proceed with an air source heat pump, identify potential contractors. Inquire with companies about their experience and understanding of air source heat pumps. It will be important to talk to contractors familiar with the technology.  

Working with a contractor

1) Talk to the contractors about which equipment options will best meet your needs.  This can include both addressing your heating/cooling needs and meeting your budget constraints.  

  • As desired and as is possible, ask for multiple equipment options that could vary in terms of costs, required prep-work, efficiency level, operational costs, etc. Some of these options may or may not be eligible for incentives.
     

2) Discuss back up heating options.  This may include:  

  • Using an existing furnace or boiler, electric resistance baseboard heat, or other existing options.  
    • If you are interested in using your existing furnace, ask if using an existing furnace system eliminates certain incentive eligible equipment. Determine which heat pump options are compatible with your existing furnace, as these options may likely differ from those compatible with a new furnace. 
  • Purchasing a new furnace that is heat pump compatible and can operate as a dual fuel system automatically switching based on outside temperature. Please note that if you have a boiler as a backup, you will purchase a ductless air source heat pump, often referred to as a mini-split.  Mini-splits operate independently of boiler systems so compatibility isn’t likely such a concern.  
     

3) Ask potential contractors about their awareness/knowledge of federal, state, local, and utility incentives. 

  • Does your utility have requirements to work with specific contractors to be eligible for their incentives?  Is your potential contractor on the list?  
  • Do they know which equipment options are eligible for which incentives? 
  • Will they help you will any of the paperwork?  
  • Will they provide detailed receipts that prove eligibility? 
     

4) Identify which incentives you are eligible for based on equipment.  

  • Here is a list of federal tax credit eligible equipment provided by the Consortium of Energy Efficiency, Inc. Refer to Air Source Heat Pumps (North).  
  • Wait for details on federal IRA Rebates that will be administered by the State of Minnesota Department of Commerce that are anticipated in late 2024/early 2025. 
  • Wait for details on the State of Minnesota Air Source Heat Pump incentives. You may need to use specific contractors to receive the rebate. 
  • Research your local utilities provider’s rebate offerings. Determine equipment requirements and whether you need to work with specific contractors to be eligible for rebates. 
  • Research whether your local government provides any additional incentives, including financing.
     

5) Compare cost proposals and calculate the total savings available via incentives for which each equipment package qualifies. 
 

6) Follow up with additional questions to prospective contractors.  Consider your timing needs, their availability and availability of preferred equipment.   

 

7) Sign contracts/agreements for heat pump installation.  

  • Make sure any necessary prep work has been completed based on the contractor’s recommendations.  For example: Have they verified that your electrical panel can manage the additional power demand?  
  • Understand who is responsible for securing and paying for any needed building permits 
  • Understand if you are or the contractor will be submitting paperwork for rebates 
  • Ensure you have the appropriate paperwork to use for taxes 

After Installation

1) Receive instructions from your contractor on how to operate your heat pump most effectively and efficiently.  For example, you will not adjust your thermostat throughout the day as you might with a forced air furnace. Discuss how to establish a switch over temperature and anything you need to know in terms of connecting with the backup heating system.

 

2) After installation, follow up with your electric utility to enroll in special electric heating rates, if they exist, and request removal of sales tax November to April if electricity has become your primary heat source. 

 

3) Finish filling out any paperwork for rebates and submit before deadlines. In the case of a tax credit, keep the necessary paperwork for filing your taxes. 

 

4) Talk to your contractor about when a tune-up should be scheduled.