This post originally appeared at https://www.badgerinstitute.org/the-cost-of-outlawing-fossil-fuel-heat-in-wisconsin/

Switching to heat pumps in a northern climate will prove much more expensive

What if Wisconsinites were told they couldn’t heat their houses by burning fossil fuels in a furnace, the way about 4 out of 5 Wisconsin homes do now? What would that cost us?

Quite a bit, it turns out.

While there’s been some research nationally about the potential costs of disconnecting homeowners from fossil fuels in favor of the likeliest all-electric alternative, the air source heat pump, we wanted to know the hard numbers for the harsh winters of Wisconsin.

Economists Andrew Hanson, a Badger Institute visiting fellow, and Zackary Hawley teamed up to build a cold-climate model appropriate to a state where winter temperatures routinely fall below the minimum at which a heat pump can extract warmth from outside air.

Their bottom line, summing up a future of annually higher operating costs as a single “net present value” estimate of the added costs borne by an average Wisconsin homeowner over the 15-year life of a heat pump: $19,976.14.

While operating a conventional gas furnace for 15 years will cost, in today’s “net present value” terms, just over $20,000, operating a heat pump will cost just over $40,000, according to Hanson and Hawley.

The figure would be still higher in northern Wisconsin, higher if electricity prices rise, higher if people keep their homes above 65 degrees. The results show why heat pumps, which work well in mild climates, have only 1% of the home heating market in Wisconsin.

But homeowners might not have a choice in the future. Already, at least 147 local governments nationwide have some kind of “decarbonization” ordinance or rule, as have six states. One state, New York, has banned outright any gas and oil hookups in new homes. Gas isn’t banned anywhere in Wisconsin now, but when the Legislature in 2023 passed bills prohibiting such restrictions on homeowners’ freedom, Gov. Tony Evers vetoed them, claiming that if the state or cities couldn’t ban natural gas heat, it would “diminish our collective ability to help combat climate change.”

Hanson and Hawley’s model of just such a ban — effectively, a mandate to use heat pumps instead — finds not only $232 million of higher annual operating costs statewide. The economists also find that a typical new homeowner would see a reduction in the value of her new house of $7,833.78, thanks to a heat pump mandate.

And because houses would cost more yet be worth less due to such a mandate, fewer homes would be built — about 4.7% fewer statewide, with harder reductions in northern markets, according to Hanson and Hawley.

Neither the economists nor the Badger Institute here are arguing against heat pumps, which warm as many as 40% of homes in states such as Alabama or the Carolinas. And the Badger Institute, as noted in our statement of guiding principles on energy research, acknowledges there is widespread agreement we should transition to new energy sources to address climate change. Solutions, however, must include consideration of all data and facts and technological advances and a pragmatic balancing of costs and benefits to the economy. Our aim here is to put a price tag on one aspect of a potential, mandated transition in Wisconsin. We hope you find it illuminating.

— Patrick McIlheran

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