Electrifying buildings with heat pumps (HP) is an important pillar of decarbonization. The U.S. Inflation Reduction Act (IRA) of 2022 provides households with unprecedented cash incentives. However, little is known about people's preferences or constraints, and therefore little about the effectiveness of these incentives.
We developed a residential heating equipment selection model that uses structural estimation methods and data from the American Housing Survey (AHS) to identify sociodemographic, contextual, and economic determinants of adoption. We found that in warmer urban areas, younger heads of households, larger households, better insulation, and more likely to adopt HP. In the case of New York State, we predict the willingness to pay and adopt HP under IRA incentives (WTP). We estimate that by 2030, half of New York households will be willing to adopt HP, leaving aside other market barriers that could hinder actual adoption. The total subsidy is nearly four times the amount originally allocated by the Inflation Reduction Act of $9 billion for home improvements throughout the United States. By 2030, the subsidized cost of replacing 70% of the heating equipment inventory could be one-third higher. Compiled by Chen Jiaoyun
However, this cost could be reduced by 15% if the subsidy was more for high-income households, implying a modest trade-off between equity and cost efficiency. These findings underscore the importance of a better understanding of the heterogeneous families and household conditions that influence HP adoption. Funding for building electrification must be significantly increased to achieve high adoption.
