So I’ve been fighting with a spreadsheet to try to understand the current incentives on home energy retrofits, and I’d like to share what I’ve figured out thus far. Maybe it’ll be helpful to someone.

1. The $10,000 many heat pump contractors are telling you about isn’t actually something you can get

Not unless you’re doing geothermal, at least, and NOBODY in Newfoundland and Labrador seems to want to install geothermal. So you’re capped at the $5,000 incentive from the Canada Greener Homes Grant, and that’s assuming you install 3 indoor heads all of which comply with the conditions of that program.

The other $5,000 is from the Oil to Electric program, which is only available if you remove your oil tank. More about that in a bit.

2. A heat pump can still make a dent in your heating costs

For anyone living in Canada, at least – they often have over 300% efficiency (COP 3+), after all – but every house still has challenges. In our case, getting that warm air to closed-off spaces – bedrooms, in particular – is difficult. We can’t leave just leave our doors open for various reasons.

One contractor suggested a low-static air handler, but aside from the cost (over $10,000!) our roof is too low to accommodate the necessary ducting. ALL of them suggested leaving doors open.

You know what nobody suggested, however? Simple through-wall ducts like those offered by Tamarack. Companies like Broan offer through-wall fans for more active air handling. A few hundred dollars goes a long way with these options, and the fans can even be set up with thermostat control.

I can’t say for sure why our contractors didn’t mention these options, but it’s disappointing. Air transfer vents are pretty standard on new construction in many places, even in homes that don’t use ducted heating systems. And even when sound infiltration is a concern, sound-dampened vents are a pretty common DIY project.

3. If you do commit to a heat pump installation

You’ll need to consider some specifics. There are heat pumps that function deep into the negatives, like the Mitsubishi Hyper Heat, and then there are units that barely function regardless – look for articles talking about best and worst heat pump brands for some guidance here. Some names show up again and again – Trane at the top, Lennox at the bottom – so you can at least avoid those. Ameristar, a common low-end brand included in one of our quotes, shows up a fair bit in the “bad” column, but it seems to always be about their lacklustre SEER, so if your installer offers a unit with, say, 18 SEER, they may be worth considering.

The “better” heat pump options do have a significantly higher cost. Pricing an 18,000 BTU Mitsubishi kit vs a comparable LG unit on Got Ductless is an object lesson here – the difference is just over $500 Canadian, but our installer’s quote of $18,000 for 3 Mitsubishi units versus $14,000 for LG includes a $4000 premium, more than double that price difference.

GD doesn’t have Ameristar heat pumps, but the cheaper Daikin on the site is in the range of $2000 per unit. Our quote for 3 Ameristar units is roughly $10,000. If I put that down as $4000 in installation costs plus $6000 in equipment, that feels reasonable. That would put the LG unit at $3300 each, and the Mitsubishi units at around $4650 each.

In that frame of reference, it seems like the LG units are actually a bit cheaper than I’d expect, which explains, at least in part, why the Mitsubishi units are so much more expensive. Maybe the LG units on offer are older/cheaper units than the ones I’ve used here as a comparison, or maybe we’re just getting a deal.

And it’s worth saying that no matter what brand you choose, you need to find an installer who has that brand in their catalog. Good installation is key in getting the most out of these systems.

4. About that other $5000

Air-source heat pumps require a backup system, so if you’re installing one and removing an oil furnace or boiler, you’re going to have to spend $10,000+ to put in an electric furnace or boiler or baseboards. So that extra $5,000 will be spent on the backup system, which has limited cost saving potential for two reasons – first, it’s not the primary system so the window for savings is small, but second it’s just not that cheap to run.

A recent Hydro Manitoba estimate puts electric central heating well below fuel oil (https://www.hydro.mb.ca/your_home/heating_and_cooling/space_heating_costs.pdf), so maybe it’s not completely wasted. By way of comparison, I paid $1.476/L for my most recent fuel oil top-up, and I paid $0.12381/kWh on my latest electricity bill, with a $15.81 connection fee on top of that. Both of those are pre-tax amounts, so they’re roughly comparable. By my calculations, I’d pay slightly less with an all-electric system at those prices.

As our electricity rises, and assuming fuel oil prices decline from their current highs, it’s likely that will change. It might still be worth it, as oil is going to rise for other reasons, but it’s a much harder sell.

I don’t mind doing the math, though. If I take this chart as a guide, I can calculate that a litre of oil is equivalent to about 10.7 kWh of electricity, assuming 100% efficiency. In practice, electricity is pretty near 100% but oil boilers are more commonly 80-95% efficient, so it’s closer to 9.5 kWh per litre. This means that the point where oil becomes more expensive than electricity is when 1 litre of oil is more than 9.5 times as much as one kilowatt-hour of electricity.

The negotiated post-Muskrat Falls rate for electricity is $0.147/kWh, with small, steady year-over-year increases thereafter. This means if oil is above $1.42/L, even with the relatively large jump from MF, electricity will be the cheaper way to heat your home. As noted above, oil is currently more expensive than that.

Historically, however, oil prices have been well below this level. StatsCan shows it bouncing around between $0.70 and $1.05 or so from 2019 thru mid 2021. Some of the factors that have lead to a large sustained rise in price are temporary. Others, however, are not. It remains to be seen what the long-term price forecast will look like. Depending on who you listen to, prices could remain in their current range, drop drastically, or rise steadily as carbon-curbing measures become a way of life.

It’s too early, unfortunately, to say what the right choice is on a purely economic basis. If you have access to a geothermal-to-water option like Nordic, which does not require a backup system, you may be better served to install that. But the price difference on those systems is very large, and in NL, at least, there aren’t really any contractors doing installations for those systems in the residential market.

5. A few other things to think about

Insurance is reportedly cheaper once you get rid of the oil tank, so that’s another few dollars a month in favour of the all-electric option. Supposedly the maintenance on electric systems is a bit lower as well.

Greenhouse gas footprints for electricity are very low in most Canadian jurisdictions, including NL, since we have so much hydro and other non-fossil-fuel “baseload” supply. From that point of view, it might be worth the switch.

Upgrading to a unit like the Hyper Heat may be worthwhile so that you can use the heat pump more during the coldest parts of the year and the effective coefficient of performance (COP) should be higher throughout the cold season. I haven’t done that math, but I suspect I’ll look at it.

On the other hand, if you’re going from getting the majority of your heat from an old, inefficient oil furnace to a new, highly efficient heat pump, it might not matter much what your backup option is. This is something I’m thinking about and talking over with LGW.

If you plan to take advantage of the Canada Greener Homes Loan, it’s also worth knowing that the higher-cost systems mentioned above are well above the maximum cost limits that program sets for its 3-head installations, and the loan cannot be applied to the electric furnace systems mentioned previously.

6. Where I’m at

I initially thought I’d go all-out with upgrades this year. The loan program has generous terms, and the grants are obviously very attractive.

But the loan program won’t cover installing a backup system – that would require applying for something like NL Hydro’s on-bill financing program. And the cost caps for the loan program mean the most efficient systems won’t fit.

At this point I’m looking at a much more limited upgrade, or maybe none at all. That’s disappointing to me, but I have to keep in mind that I’ve nearly bankrupted myself before in pursuit of making our home and rental property better.

So if you’re looking at these programs, I don’t have any advice, but I hope you’ve found something in this article that helps.

“Money House” by 401(K) 2013 is licensed under CC BY-SA 2.0.