Heat pumps are growing in popularity across the country, including in parts of Alaska. They’re more energy efficient than traditional heating methods – like boilers or furnaces because instead of generating heat, they move it from one place to another.
This technology is improving quickly, and heat pumps work well in places like Anchorage. But only a tiny number of residents in the city have one. That’s because of the cost, said Ian Mills, a research data manager for the University of Alaska Anchorage Center for Economic Development.
Mills is the lead author of a study published in June called “Heat Pump Deployment in Alaska: Analysis and Policy Brief,” that analyzed the potential for air source heat pumps to be used more widely in Anchorage.
The study showed heat pumps could extend Cook Inlet gas supplies, but they cost Anchorage residents an average of $2,300 more annually than natural gas heating.
“The fact that it is more expensive in the median case is probably why people aren't doing it,” he said. “If that difference was $500 I think people would be much more willing to say, ‘there's all these side benefits, and it's better for the environment, so I'll do it.’”
Heat pumps run on electricity. And although they’re more efficient than traditional heating methods, the report found steep electric prices in Anchorage essentially negate their efficiency advantage. The city’s natural gas prices are 26% below the national average but electricity prices are 27% higher.
Heat pumps in cold climates often rely on backup heat sources, such as electrical resistance heating. But even then you’re using less energy, Mills said.
“It's just because [Anchorage’s] electricity is relatively expensive, and the realities of generating electricity from natural gas. And because our natural gas is pretty cheap, this energy savings never translates into a meaningful dollar savings,” he said.
Widespread heat pump adoption in the state’s largest city would extend the life of natural gas supplies in Cook Inlet, the study showed, but it doesn't say for how long. Southcentral Alaska is forecast to start facing natural gas supply shortfalls as early as 2027.
UAA’s Center for Economic Development Director Jared Reynolds said a small number of people are switching to the technology because they provide something many homes in the city don’t have – air conditioning.
“Some people, even if it is a little more expensive, might adopt them, because you get AC,” he said.
There are barriers beyond cost. The study shows the state doesn’t have enough trained professionals to deploy heat pumps on a large-scale and offers recommendations such as investing in programs focused on cold-climate installation, developing rural training cohorts, and providing ongoing training for HVAC technicians to learn more about the technology.
In Anchorage, the report said that there’s no temperature where heat pumps are cheaper to operate than a furnace or boiler, but the study explored ways to make them more affordable.
One scenario is special rate structures for heat pump users in Anchorage.
Juneau’s Alaska Electric Light & Power has one – it lowers the cost of operating a heat pump during average usage on the utility grid but penalizes customers for peak usage. If Chugach adopted a similar structure, the study found it’d make the technology $1,570 cheaper annually, making it more realistic for homeowners.
That’s something Chugach Electric is considering, said Mark Henspeter, a business development analyst with the company. He said Chugach is discussing how to design rates that’ll support heat pump adoption.
“There's a lot of good programs that have been successfully implemented in other parts of the country that we're also looking at to try to see what really works,” Henspeter said. “There's, I think, certainly some good opportunities to have, whether it’s heat pump specific rates or just rates that support certain types of beneficial electrification.”
Those changes would have to be approved by the Regulatory Commission of Alaska. He said only several hundred of the utility’s over 90,000 customers currently have a heat pump, but he’s hearing increasing interest.
Henspeter is considering installing a heat pump in his home for supplemental heat and compares buying one to purchasing a new car. There are considerations beyond cost – like fuel economy, safety features, or the number of seats. It’s the same thing for heat pumps, he said.
“Maybe it is that reduced exposure to price volatility of natural gas. Maybe it's going to be a carbon reduction. Maybe it's just going to be a more consistent temperature,” Henspeter said.
The utility provides rebates of $900 for residential customers and $1,500 for commercial members who install heat pumps. The Energy Efficient Home Improvement Credit offers up to $2,000 in tax credits annually for homeowners installing electric or natural gas heat pumps and water heaters, along with biomass stoves and boilers.
Chugach is also rolling out a time of use pilot program soon that’ll lower electricity costs during non-peak hours – from 9 p.m. to 9 a.m. It’ll be open to 500 commercial and 500 residential customers.
Henspeter said he expects the number of heat pumps in the city to grow as more residents become aware of the technology. And if a quarter of locals switched by 2045, the study found it’d prevent as much CO2 from entering the atmosphere as all Anchorage cars produce in an entire year.
