The Sconi

Wisconsin will be the first state to distribute federally funded rebates to homeowners for energy-related home alterations, including heat pumps that are projected to significantly increase heating costs for homeowners.

Governor Tony Evers' office announced last week $149 million in federal subsidies for homeowners and landlords who undertake projects such as adding insulation, rewiring, or replacing gas appliances. Among the largest rebates will be up to $8,000 for replacing an existing furnace with an electric heat pump.

While heat pumps can be less expensive than gas-powered furnaces, they add an average of more than $2,000 a year to a new Wisconsin home’s heating bill, according to a recent Badger Institute study. Heat pumps transfer heat from outside air into a home's interior but lose efficiency in freezing temperatures. They are commonly used in warmer states and places where regulators have limited or banned combustion furnaces. No such restrictions currently exist in Wisconsin; however, Governor Evers vetoed a measure last year that would have prohibited such bans, and his 2022 energy plan called for ending natural gas as a heating fuel.

The transition could impose significant costs on Wisconsinites. Economists Andrew Hanson and Zackary Hawley concluded in their research for the Badger Institute this spring that the high electricity costs of operating a heat pump in Wisconsin's cold climate would result in just under $20,000 per new house over the 15-year life of a heat pump. The cost would be lower in Milwaukee but could reach $29,900 in Superior.

Hanson and Hawley found that banning natural gas furnaces would not only increase monthly costs but also reduce home values by approximately $7,800 per new home.

Patrick McIlheran is the Director of Policy at the Badger Institute. Permission to reprint is granted provided that both the author and Badger Institute are properly cited.