Financing and incentives can allow heat pump installations to become more economical – lower upfront costs, shorter payback periods, and even the potential for an installation to be cash flow positive from the day your system is turned on.
Why finance a heat pump?
Paying out of pocket for a heat pump can be cost prohibitive for many households. Despite the investment paying for itself in many cases, the upfront costs prevent many from gaining access to these advantages. One answer to this is financing – by spreading out the cost of the upfront investment over the lifetime of the heat pump, the upfront cost issue is mitigated. In addition, because the interest and principal loan payments can be structured to be less than the cost savings, many financed heat pumps can be cash flow positive from the installation date.
These two graphs show these two situations. For the same house, one scenario is paying for a heat pump out of pocket and the other is financed. The high negative cost in year 0 on the first graph prevents many households from accessing the cost savings derived from heat pumps. On the left, households with attractive projected cost savings can finance the installation and save, on net, each year the heat pump operates. (Note: the positive upfront cost on the right graph represents the tax credit which is available to most households.)
Grants, Tax Credits and Other Incentives
| Name | Type | Terms | Guidance |
|---|---|---|---|
| Nonbusiness Energy Property Credit | Tax Credits | 10% of cost; up to $500 total | Applies towards the project costs of heat pumps and other energy efficiency measures. The air source heat pump credit of $300 expired 12.31.21. It is possible that Congress may revive this credit at some point in 2022, rumored to be $600. |
| Residential Energy-Efficient Property Credit | Tax Credits | 22% of cost | Applies towards the total project costs of ground source source heat pumps and other household energy technologies. |
| USDA Home Repair Grants | Grants | Up to $7500 | Available for income-qualifying households with a 62 or older resident. |
| Weatherization Assistance Program – Rural Cap | Grants | Up to $10,000 | Free home improvements. Available in Juneau. |
| Weatherization Assistance Program – Alaska CDC | Grants | Up to $10,000 | Free home improvements. Available in Gustavus, Haines, Hyder, Ketchikan, Pelican, Sitka, Skagway and Wrangell. |
| Weatherization Assistance Program – Tlingit-Haida RHA | Grants | Up to $10,000 | Free home improvements. Available in Angoon, Kake, Yakutat, Petersburg, Saxman, Craig, Klawock, Hydaburg, Kasaan, Coffman Cove, Dora Bay, Edna Bay, Hollis, Naukati, Point Baker, Port Protection, Thorne Bay and Whale Pass. |
| THRHA Heathly Homes Repair Program | Grants | N/A | Free Home Improvements. Available to tribal members in Angoon, Craig, Douglas, Juneau, Kake, Kasaan, Klawock, Petersburg, Saxman, Skagway, Wrangell, and Yakutat. |
Low Cost Financing Options
| Name | Type | Terms | Guidance |
|---|---|---|---|
| AHFC Energy Efficiency Interest Rate Reduction | Interest Rate Reduction | Up to -0.75% | Mortgage must be held by approved lender. Requires energy assessments before and after a home is renovated. Applies to the first $200k of mortgage balance. |
| USDA Home Repair Loans | Low Cost Loan | Up to $20,000 at 1% for up to 20 years | Available for low income-qualifying households, and can be used in combination with the grant program if a qualifying household. |
| USDA Small Business Grants and Loans | Low Cost Loans or Grnats | Terms are negotiated | Applications for grants of $20,000 or less and loan/grant of $20,000 or less combo |
Traditional Lenders
| Name | Website | Phone |
|---|---|---|
| Alaska USA FCU | alaskausa.org | (907) 563-4567 |
| Denali FCU | denalifcu.org | (907) 586-2370 |
| First Bank | firstbankak.com | (907) 586-8001 |
| First National Bank Alaska | fnbalaska.com | (907) 586-5400 |
| Northrim Bank | northrim.com | (907) 586-1010 |
| True North FCU | truenorthfcu.org | (907) 523-4700 |
| Wells Fargo | wellsfargo.com | (907) 586-2460 |