Heat Pumps

Heat Pumps

An Energy-Efficient HVAC Alternative

On average, about half of the energy you use goes to heating and cooling your home1. That’s why it’s important to choose an HVAC system that will save energy, save money, and keep you and your family comfortable for years to come.

Heat pump technology is a leading-edge solution for high-efficiency heating and cooling. A heat pump system can be a great alternative to a traditional furnace or other heating equipment, and also provides a simple way to introduce central air conditioning to your home.

Did you know you already have a heat pump in your home?

Though heat pumps are rapidly gaining recognition across the United States as a smart solution for residential HVAC, basic heat pump technology has been around since the 1850s. You may not realize that refrigerators, freezers, and air conditioning units are heat pumps, which use a substance called refrigerant to move heat energy from one place to another. The technology is also used in high-efficiency electric water heaters.

How does a heat pump work?

Unlike a gas furnace or wood burning stove, heat pumps don’t create heat; instead, they move heat from one place to another. This is possible because heat is naturally present in the earth and air, even when it is cold outside. Essentially, a heat pump functions as an air conditioner that can also work in reverse. In the summer, the equipment moves heat from inside to outside the home; and in the winter, heat is transferred from outside to inside the home.

Cooling Season


Heating Season

Advantages of a heat pump system

Efficiency. Heat pumps use considerably less energy to heat and cool your home, all year long.

Convenience. Since a heat pump system is powered by electricity, you won’t spend time filling tanks, cutting or hauling wood, or dealing with the risk of fuel shortages or seasonal price fluctuations.

Comfort. With heat pumps, you have more control of your comfort. And, thanks to modern features, you can enjoy consistent heating and cooling with quiet equipment operation.

Health. Heat pumps have an air filter that removes harmful particles from indoor air. Many models also provide dehumidification, reducing the likelihood of mold and mildew.

Safety. Since a basic heat pump is not powered by natural gas or propane, you have less risk of leaks, fires, and carbon monoxide poisoning.

Cleaner environment. Electric-powered heat pumps are designed to produce zero emissions on-site, and can utilize renewable energy sources like wind and solar—thereby reducing your environmental impact.

Is a heat pump right for MY home?

Just about any home can benefit from a heat pump system, though it is imperative that your home is well insulated and air-tight prior to installation to maximize energy savings. Generally, the following are some of the best candidates:

  • Heated by electric furnace or electric baseboards
  • Heated by propane, wood, or fuel oil
  • Looking to add air conditioning
  • New construction or new room additions
  • Manufactured homes

It’s all about efficiency

When considering a heat pump system, it is imperative to purchase the most efficient model you can afford. While higher-efficiency heat pumps cost more upfront, the initial investment will pay off in lower operating costs and better comfort for years to come.

To assist with your heat pump purchase, the Energy Optimization program provides cash incentives for heat pumps that meet minimum energy efficiency ratings.

Understanding efficiency ratings

All heat pumps include efficiency ratings based on manufacturer testing to help consumers anticipate how well the heat pump will perform. Developed by the Air-Conditioning, Heating, and Refrigeration Institute (AHRI)—and used by the U.S. Department of Energy (DOE)—the ratings listed below are important for you to consider when gauging efficiency levels/operating costs and ensuring the heat pump you select qualifies for Energy Optimization program rebates.

  • SEER: Seasonal Energy Efficiency Ratio
  • HSPF: Heating Season Performance Factor
  • EER: Energy Efficiency Ratio

Generally, for each of the above ratings, higher value = more efficient.

Cash incentives

The Energy Optimization program provides cash incentives for both air-source and ground-source heat pumps—as long as the equipment you purchase meets minimum efficiency standards. Visit the Efficient HVAC webpage for your utility to view minimum ratings and incentive amounts.

Affordable financing for energy efficiency improvements is also available from Michigan Saves.

Learn more about the different types of heat pumps below.


Air source heat pumps

The most common type of heat pump is an air-source heat pump. This type of system absorbs heat energy from the air and transfers it through refrigerant lines. At moderate temperatures, air-source heat pumps can operate at up to 400 percent efficiency, delivering four times more heat than the electrical energy they consume.

Breakthrough technology

Historically, residential air-source heat pumps were primarily used in areas where air temperatures did not drop below 40°F. However, tremendous improvements in technology—such as inverter-driven compressors—have rendered a new generation of air-source heat pumps that can operate reliably at much lower temperatures:

  • Inverter-driven ductless systems: As low as -15°F2
  • Inverter-driven ducted systems: As low as 5°F3

Whether you choose a ductless or ducted system, inverter-driven heat pumps are the quietest and most advanced models on the market. Unlike other air-source heat pumps, these systems provide consistent temperatures and the greatest electric savings by self-adjusting their speed and capacity for heating (and cooling), depending on the outdoor temperature.

For a colder climate like Michigan, inverter-driven heat pumps are the best available option.

Ductless air-source heat pump systems

One configuration for an air-source heat pump is a ductless system. Ductless heat pumps are inverter-driven, and include three main components:

  • Outdoor unit that typically sits elevated off the ground or mounted on an exterior wall—smaller than a standard central air conditioner
  • Indoor wall or ceiling-mounted unit(s)
  • Remote control thermostat

Ductless systems with more than one indoor unit allow for different temperature settings throughout different parts of the home (zones)—providing optimum comfort for your entire family.

Ductless Heat Pumps

A ductless system is ideal for:

  • Homes utilizing electric baseboard heat, steam or hot water heat, wood-burning stoves, or wall heaters
  • Homes without ductwork
  • Homes with open floor plans
  • Rooms with poor air distribution/uneven temperatures
  • New construction or new room additions
  • Manufactured homes
  • Reducing reliance on propane or fuel oil

Installing a ductless heat pump system is easy, non-intrusive, and quick: A professional contractor can complete installation in less than one day. Only a small three-inch hole in an exterior wall is needed to connect the refrigerant line from the outdoor unit to the indoor unit.

Ductless air-source heat pump systems can be 15-20 percent more efficient than ducted systems because a blower motor is not needed to blow conditioned air throughout the home, and risk of air leakage in the ductwork is eliminated.

View cash incentives for efficient equipment

Ducted air-source heat pump systems

If your home already has an air distribution (ductwork) system, you may consider a ducted heat pump. Ducted heat pumps include four main components:

  • Outdoor unit that resembles a standard central air conditioner
  • Indoor unit, typically placed in the basement or where your furnace is located
  • Ductwork
  • Advanced thermostat

In this application, conditioned air travels through your home's existing ductwork. In many cases, a heat pump can be added on to a home's existing furnace. When the heat pump is being used, the furnace functions simply as an air handler (to move air through the ductwork).

Ducted Heat Pumps


A ducted system is ideal for:

  • Homes with existing ductwork
  • Introducing central air conditioning
  • Replacing a central air conditioner and/or furnace
  • Reducing reliance on propane or fuel oil

Installing a ducted heat pump is similar to installing a central air conditioner, and can be completed in one day. Work with your contactor to ensure all required components are compatible.

View cash incentives for efficient equipment

Supplemental heating for heat pumps

Since heat pumps draw renewable heat energy from the outdoor air, they must work harder as temperatures fall—impacting efficiency. For example, while the most efficient air-source heat pumps can operate at up to 400 percent efficiency in moderate temperatures, the same models may achieve an average heating season efficiency of about 250 percent—which is still excellent, considering conventional heating sources cannot exceed 100 percent efficiency.

While heat pump technology is advanced enough to function in below freezing temperatures, many Michigan homes with air-source heat pumps will need supplementary heat for the coldest days and nights of winter. During these times, the heat pump will not run as efficiently, and may not provide as much heat as you need.

Supplemental heat can come from a variety of sources, such as an existing furnace or boiler, electric baseboards, wood burning stoves, or even space heaters in the areas of your home you most frequently occupy. Conveniently, ducted heat pump systems can easily integrate with most newer gas furnaces, just like a central air conditioner would.

Note that extremely well-insulated and air-tight homes with inverter-driven ductless heat pumps may not need a backup heating source.

All-electric ducted heat pump systems

All-electric ducted heat pumps contain built-in electric resistance coil heaters that can operate simultaneously with the heat pump, to provide 100 percent of your home’s heating needs on the coldest days. If your goal is to eliminate gas entirely, this is a good option. An existing gas furnace would be completely replaced with the new heat pump and air handler.

All Electric System

Dual-fuel ducted heat pump systems

A system with backup natural gas or propane is another option for providing supplemental heating. Like a central air conditioner, in this configuration, the heat pump is often attached to the top of the gas furnace.

In the winter, when the outdoor air cools to a predetermined temperature, the electric heat pump shuts off and the gas furnace takes over—supplying heat as the conventional furnace you’re used to. You can also manually control which heating source is used to minimize your heating costs.

Dual-Fuel System

To decide whether an all-electric or dual-fuel ducted heat pump is right for your home, consult with your HVAC contractor. In either case, be sure to purchase an inverter-driven heat pump to maximize the time the system operates in heat pump mode—which will provide the greatest energy and cost savings.

Ground source heat pumps

Another type of heat pump is a ground-source (or geothermal) heat pump. Instead of drawing heat from the outdoor air, heat is absorbed from the earth (or ground water).

Ground-source heat pumps can provide both heating and cooling for the home and, in some instances, supply domestic hot water and dehumidification. They can operate at up to 500 percent efficiency, delivering five times more heat than the electrical energy they consume.

Ground-source heat pumps feature four main components:

  • Underground heat exchanger (ground loop) or groundwater source
  • Indoor unit, typically placed in the basement or where your furnace is located
  • Ductwork or hydronic (hot water) heating system
  • Thermostat

Generally, there are two different types of ground source heat pumps: Open loop (which use an existing or new water well) and closed loop (a loop of pipes in the ground or body of water, placed below frost level).

Open Loop

*In open-loop systems, water exiting the heat pump can be drained into the ground, a well, pond, etc. (in compliance with local codes).

Closed Loop

 A ground-source heat pump system is ideal for:

  • Homes with a pond, well, or land available for excavating or drilling
  • Homes with existing ductwork or a hydronic heating system
  • Introducing central air conditioning
  • Replacing a central air conditioner and/or furnace
  • Reducing or eliminating reliance on propane or fuel oil

Despite fluctuations in seasonal air temperatures, the soil and water just a few feet below the Earth’s surface remains at a relatively constant temperature. This enables ground-source heat pumps to deliver sufficient heat on the coldest winter days, and to operate at higher efficiencies than air-source heat pumps.

While ground-source heat pumps are more efficient and typically do not require a backup heating system, they do cost more upfront and may require excavation. There are pros and cons to each type of heat pump, and many factors—such as your budget, current heating system, and the characteristics of your property—will determine which option is best for your home.

Keep in mind that in addition to Energy Optimization program incentives, there is a 30 percent federal tax credit available for ground-source heat pumps through December 31, 2019!

View cash incentives for efficient equipment

Heat Pump FAQs

How will a heat pump affect my annual heating costs?
This will be different in every home. A home’s savings will depend on the current source of heating fuel. If you heat with electric resistance, you can see savings as high as 70%. If you don’t heat with electric resistance, your electric bill will go up, but other heating fuel costs will go down. Overall, oil or propane users can see up to 40% net savings on their average yearly heating costs.

What do HSPF, COP, and SEER Mean?
HSPF = Heating Season Performance Factor. This is a measure of a heat pump's efficiency over an average heating season, using heating output in BTUs compared to electricity consumed in watt-hours.

SEER = Seasonal Energy Efficiency Ratio. This is a measure of a heat pump's efficiency over an average cooling season, using cooling output in BTUs compared to electricity consumed in watt-hours.

COP = Coefficient of Performance. This is the ratio of cooling or heating output to energy consumed at a specific temperature. This ratio converts both output and consumption to a common unit, making this different than HSPF or SEER which use a ratio of BTUs to watt-hours. The higher the COP, the better.

The higher the rating, the more efficient the unit.

Do heat pumps produce enough heat for an entire home or business?
Yes. All homes and businesses are capable of being heated and cooled entirely with heat pumps. There are a number of variables your local contractor will take into consideration to recommend the best heat pump option for your home or business. If you’re looking for a whole-home or whole-business heating solution, be sure to let your installer know.

What size heat pump do I need?
Heat pumps will typically be sized larger than standard air conditioners since homes in Michigan have more heating needs than cooling needs. Heat pump sizing varies by home based on square feet of the home, floorplan, insulation levels, air-tightness, etc. Talk to your contractor to make sure your heat pump is sized according to your heating and cooling needs.

Do heat pumps work in cold weather?
Yes. The high efficiency units that qualify for Energy Optimization program rebates work well in cold weather. Many cold climate ductless systems are designed to work down to -15 degrees Fahrenheit. Some ducted systems can work down to as low as 5 degrees Fahrenheit. Ground source heat pumps can be an effective solution at any temperature. Discuss options for models specifically designed to perform to low temperatures with your contractor.

Is there a temperature below which a conventional heating system is cheaper to run than a heat pump?
As outdoor temperatures get colder and colder, it gets increasingly difficult for a heat pump to absorb heat from the air and the efficiency of the system goes down. On the coldest of days it will typically be cheaper to run a conventional heating system. The exact transition temperature will depend on the heat pump model, electricity and backup fuel prices, and whether the heat pump is sized for heating.

Do I need to replace my current heating system if I want to use a heat pump?
No. Though high-efficiency heat pumps may be configured to work as the sole heating system, they are often used to supplement an existing system.

What else can heat pumps do beyond heating?
High-efficiency heat pumps perform the same functions as five different appliances: heaters, air conditioners, dehumidifiers, ceiling fans, and room air filter.

Do heat pumps bring in fresh air?
No. Heat pumps move heat, not air. If a fresh-air intake is something you are interested in, discuss options with your contractor.

What is the average life-span of a heat pump?
It can vary, depending on how much the system is used and how regularly it is checked or serviced. Generally, the average life-span of units is 15-20 years, but individual units may vary and last longer depending on the use and how well they are maintained.

How loud are heat pumps?
Most heat pumps run at approximately 45 decibels, equivalent to a person’s whisper. You will likely not notice your heat pump any more than you would your refrigerator when it cycles.

Why do some heat pump systems qualify for incentives and others do not?
High efficiency units have lower operating costs, provide better cooling and dehumidification and may provide more heat at lower temperatures. Be sure to tell your contractor how you would like to use these systems to ensure they are sized properly.

Residential Case Studies

Several Michigan residents are already enjoying the benefits of having a heat pump system in their home. Learn from their experiences by reading these case studies.


1. https://www.energy.gov/heating-cooling

2. https://www.efficiencymaine.com/heat-pumps/

Heat Pump Water Heaters

Save energy and money on home water heating

Second only to space heating and cooling, water heating is the next largest source of energy consumption in U.S. homes. We use hot water every day for showering, doing dishes, washing clothes, and a multitude of other tasks—and the cost to heat that water adds up, especially if you have a standard electric or propane water heater.

While standard electric resistance water heaters are relatively inexpensive to purchase, they are costly to operate. On the other hand, heat pump water heaters cost more upfront, but provide significant savings over time. Advanced heat pump technology can slash electricity consumption by up to 70 percent1.

What is a heat pump water heater?

Heat pumps are highly efficient because they operate by moving heat instead of creating heat—basically working like a refrigerator in reverse.

Heat pump water heaters function essentially the same as a home air source heat pump system. A fan in the top section of the water heater draws surrounding ambient air into the heat pump. Heat energy is extracted from the air, which is transferred to a fluid called refrigerant. The refrigerant is compressed, becomes hot, and passes through the condenser coils—heating the water in the tank. Cooled, dehumidified air exits the heat pump, and a very small amount of distilled water leaves the unit through a condensate drain.

Why switch to a heat pump water heater?

Heat pump water heaters are up to 3.7 times more efficient2 than a standard electric water heater. While they do use electricity—to run the fan, compressor, and back-up electric resistance heating elements—they use a fraction of the energy consumed by a standard electric water heater.

Additionally, heat pump water heaters provide:

  • Quick payback compared to standard electric (recoup upfront cost within 2-3 years)3
  • Electricity cost savings of 50 percent or more (compared to standard electric models)
  • Reliable hot water
  • Dehumidification of surrounding air
  • Flexible modes of operation to manage energy use and hot water output
  • Quiet operation
  • Wi-Fi controls (certain models) for remote adjustments and alerts

$700 cash incentives now available!

Whether you’re building a new home or replacing an existing water heater, a heat pump water heater is a smart investment. Purchasing a new heat pump water heater is even more affordable now with a $700 cash incentive from the Energy Optimization program! Consult your contractor to decide which model is right for you, and to ensure it qualifies for the incentive.


1. https://hotwatersolutionsnw.org/assets/documents/uploads/manufacturer-specific-installer-flyers-2018.pdf

2. https://www.rheem.com/product/professional-prestige-hybrid-electric-65-gallon-electric-econet-enabled-hybrid-electric-water-heater-with-10-year-limited-warranty-proph65-t2-rh350-d/

3. Source: energystar.gov https://www.energystar.gov/sites/default/files/asset/document/HPWHs_FactSheet_021518.pdf