Lower Bills, Cleaner Air: Heat Pump Benefits for Homes Relying on Delivered Fuels - RMI

Flip through 100-year-old photos, and you’ll likely spot rotary phones, oil lamps, and oil or propane boilers. Today, we’ve upgraded to smartphones and LEDs — but more than 10 million US homes still rely on delivered fuels like oil and propane from that bygone era to heat their homes or water. These heating fuels aren’t just outdated, they’re expensive, polluting, and harmful to both household budgets and health.

Thankfully, a modern alternative already exists that’s gaining traction across the United States. Electric heat pumps provide households with high-performance heating, cooling, and water heating, helping many households lower energy bills, improve air quality, and cut pollution.

This article provides four key findings that show why switching from delivered fuels to heat pumps is a win-win for households and the climate:

Today, over 10 million single-family and manufactured homes heat their water or home with delivered fuels like oil and propane. Two-thirds of these homes are in the Northeast and upper Midwest.

Homes using delivered fuels are disproportionately single-family, rural, and older. Understanding these demographics is important for designing heat pump programs that reach and serve these households.

Given the higher efficiency of air-source heat pumps (ASHPs) and heat pump water heaters (HPWHs) — which use about one-fourth the energy of traditional delivered fuel systems — they can significantly reduce energy bills for delivered fuel customers.

Using RMI’s Green Upgrade Calculator, we found that delivered fuel households in the United States could save an average of $970 per year — and nearly $15,000 over the equipment’s lifetime — by upgrading to heat pumps. The highest energy bill savings are in the Southeast given the region’s low electricity prices.

If all delivered fuel customers switched to heat pumps, US customers would save nearly $8 billion annually in energy bills.

Homes that rely on oil or propane for heating release hazardous pollutants that worsen outdoor air quality and in some cases degrade indoor air quality, posing serious health risks for residents.

Electric heat pumps, conversely, produce no direct outdoor or indoor air pollution. They also filter and control humidity of indoor air, improving the health of residents who upgrade to these systems. In addition, heat pumps significantly reduce carbon pollution. We used RMI’s Green Upgrade Calculator to quantify the outdoor carbon pollution reduction benefits of ASHPs and HPWHs in every state.

Without supportive policies and funding, it will be difficult for the millions of households that rely on delivered fuels to upgrade to heat pumps. The following state policies can unlock funding and create clear pathways to modernizing homes that rely on delivered fuels.

Clean Heat Standards in Action

New York City took an innovative approach similar to a clean heat standard by phasing out the sale of specific fuel oil blends over time, reducing related emissions by as much as 65%.

In addition to state policies, electric utilities and regulators can further heat pump deployment by developing electric rates designed for heat pump users. By better reflecting the actual cost to serve heat pump users, these rates can further increase the energy bill savings for delivered fuel customers that switch to heat pumps.

States, utilities, and localities can design heat pump programs to make it easier for delivered fuel customers to upgrade by removing cost and access barriers.

Successful Programs Can Unlock Bill Savings

Seattle’s Clean Heat Program offers up to $8,000 to replace an oil furnace with an electric heat pump. These incentives can be paired with financing offerings to keep costs low. As of September 2024, the program had retrofitted just short of 2,000 homes, and aims to electrify all 10,000 remaining oil homes in Seattle by 2030.

Heat Pump Training and Opportunities for Delivered Fuel Installers

In states like Maine, success has come from cross-training oil furnace installers to also install heat pumps, driven by growing customer demand for state incentives and utility savings. Efficiency Maine offers statewide heat pump training and collaborates with oil dealers, installers, and manufacturers to boost contractor confidence in the technology.

With the right mix of policies and programs, we can help millions of households still using delivered fuels upgrade to heat pumps — unlocking thousands in energy bill savings, reducing harmful air pollution, and improving health and comfort across the country.

To see the assumptions we used in our analysis click here.