BLAINE, Minn. - May 23, 2026 - Despite the fact that there are federal subsidies worth up to $2000 provided under the Inflation Reduction Act and a doubling in utility rebates for air source heat pumps throughout the entire state of Minnesota, the use of this technology by consumers continues to vary significantly — based far less upon incentives to encourage the use of this type of technology than on whether or not a contractor recommended it on the day that a consumer’s cooling system failed. This is the conclusion that can be drawn from data related to installations compiled by Twin City Heating, Air & Electric, a Blaine-based HVAC contracting firm that has been monitoring the increasing disparity between energy-related policies implemented at the federal level and how those policies are being received at the grassroots consumer level.
The POLICY environment
The IRA was passed into law in late August 2022. As part of a larger climate and energy investment package totaling $369 billion, the IRA also created a federal tax credit of up to $2,000 for the installation of residential heat pumps. Utility companies throughout Minnesota have amplified the signal sent by the IRA. According to data provided by the Energy Trust of America and the Minnesota Center for Energy and Environment (MNCEE), applications for statewide utility rebates for air source heat pumps have increased dramatically over the past few years, exceeding 4,600 rebate transactions per year.
Despite all of these POLICY initiatives and growing incentive levels, however, the residential heating and cooling Market in Minnesota has not seen a corresponding increase in growth. Approximately 66% of single family homes in the state continue to utilize traditional gas furnaces as their primary heating source. While this percentage has decreased only slightly over the past several years, it has done so slowly due to continued resistance from the marketplace as evidenced by mncee’s air source heat pump state of the Market report.
Contractors and heat pump adoption
Data collected from within the industry indicates that a seemingly contradictory factor contributing to heat pump adoption rates among consumers is the HVAC technician who sits in a customer’s living room while assessing his or her heating needs. Nearly 40% of homebuyers acquired heat pumps without having specifically sought out this type of product prior to making their purchase decision. Instead, they purchased heat pumps after a contractor recommended them as a viable option. These figures suggest that the contractor channel may represent the most significant — and yet underutilized — lever available to policymakers as they seek to promote increased consumption of heat pumps in the state.
Attitudes regarding heat pumps held by contractors have become increasingly positive. Currently, 70% of HVAC contractors express support for using heat pumps, a significant shift compared to attitudes expressed by installers at the beginning of the last decade. Prior to then, many installers had reservations about recommending heat pumps in Minnesota’s cold climates. Those reservations were largely based on concerns associated with the performance of heat pumps during extremely cold weather conditions. However, advancements in cold-climate rated heat pump technologies have eliminated much of that concern. Today’s cold-climate rated systems are designed to function effectively even at temperatures as low as -13 degrees Fahrenheit.
What is holding back widespread Heat Pump use?
Analysts indicate that the major obstacle hindering broader adoption of heat pumps among Minnesota residents is not primarily related to either technology or cost factors — rather it is primarily centered around lack of awareness. More than Three-quarters of Minnesota residents without heat pumps report that they know very little or absolutely nothing about heat pumps. This represents a considerable amount of potential demand for various forms of communication — including utility-based messaging, contractor-based education programs and point-of-sale information — targeted towards informing customers about heat pumps at precisely the moment that their current legacy systems fail.
This lack of awareness creates additional urgency surrounding replacement cycles. Many types of residential ac/heating units have a useful lifespan ranging from approximately 15 to 20 years. Often times when a homeowner replaces an aging unit, he/she does so quickly as a result of failing equipment — and at times when the failure occurs during extreme summer weather conditions. Therefore, if homeowners replace their units rapidly under emergency circumstances — with minimal opportunity to consider alternative options — recommendations provided by their HVAC contractors will play an important role in determining which type of new equipment they ultimately select.
Executive PERSPECTIVE
"While federal tax credits and utility rebates do provide a compelling financial argument for heat pumps — most homeowners don’t experience that argument until it is too late. At that time, they are communicating directly with their HVAC contractor. For widespread adoption of heat pumps to occur, therefore, the POLICY environment needs to meet the realities experienced by consumers at the grass roots level. And that connection should take place before the homeowner’s current heating/cooling equipment fails — not while he/she is experiencing an emergency service call.” — Dan Wong — Spokesperson for Twin City Heating, Air & Electric — Blaine
“The findings indicated by mncee tell us that this Market is not opposed to installing heat pumps — it simply lacks knowledge regarding their operation. That is an easily correctible issue. Additionally, when a contractor recommends a particular solution — nearly four in ten buyers choose to implement that recommendation. Therefore, despite previous skepticism regarding the ability of heat pumps to perform well during extremely cold temperatures — they clearly can perform well in Minnesota winters. The sole remaining barrier to implementation is providing large-scale education regarding these products through the trade channel.” — Dan Wong — Spokesperson for Twin City Heating, Air & Electric — Blaine
Background and industry data relating to air source heat pumps
Since 2022, the u.s. Domestic Market for air source heat pumps has expanded dramatically. Data illustrating trends in shipments relating to air source heat pumps in 2023 shows for the first time ever — air source heat pumps outsold gas furnaces nationally. The overall trend driving increased sales of air source heat pumps includes the combination of federal incentives, expanding utility rebates and enhanced cold-climate ratings associated with new generation air source heat pump models.
Minnesota provides a unique case study for examining why this trend is occurring — and how it relates to specific regional characteristics. Specifically, Minnesota’s heating-dominant climate historically placed Minnesota at a disadvantage relative to other states located in warmer regions — where the majority of both summer heating and cooling load occurred simultaneously. The emergence of variable speed compressor technologies along with enhanced cold-climate rating specifications for new-generation air source heat pumps — which were developed and promoted through programs such as NEEP’s cold climate specification — have removed much of that historical disadvantage.
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