If you're looking to get a heat pump in Maine installed, don't go with the lowest cost ductless heat pump. If you go with the lowest cost provider, you're likely not getting a good deal but you're getting a bad performing system. The reason for this is simple. While you can understand who makes the best heat pump, the installation can have a large impact on performance than a specific manufacturer. 

In this article, we'll discuss the things you need to ask any contractor that is installing a new heat pump system in your home to give you the best chance of getting a high quality installation. There are a few issues that will impact the system right away and these are easier to catch. There are a few common issues that will only impact the performance and durability of the equipment years after it is installed. These are harder to catch. For each issue, we'll provide a "fix", which are questions to ask your installer before the installation is made. 

In the past, we discussed the cost of a ductless heat pump in Maine for a contractor to install a unit. This analysis included equipment costs, labor amount and costs, contractor profit, and overhead. Here's the thing, if a contractor goes below this amount, it's not because they're awesome, it's because they're cutting corners or they're not making an acceptable gross margin. Both are indications of a poorly managed firm that is not organized, not a firm that's giving you a great deal. 

In case it's not obvious, you don't want to work with a poorly managed firm. 

I have this conversation with Vaughan Woodruff from Insource Renewables. Vaughan has inspected hundreds of systems across Maine and I respect his opinion on this. 

We talk about items that most commonly go wrong with a heat pump installation and what you need to ask from your installer before the installation so vet them correctly. This article is part of our free cold climate heat pump buyers guide that you can download. 

The key is getting a system that will operate really well for the next 15 years. Make sure you read this and double check your installation to see that these are done correctly. 

Visible Problems that Can Go Wrong

Issue One - Wall Mounting and Unit Placement Within the Home

There are two ways that the units create noise, both of which need to managed correctly. The first is that the fan makes noise. The units make a little less noise than a normal window hung A/C unit. This cannot be eliminated, so it's important to consider this when placing the unit. 

The second way that a unit can make noise is bad installation of hanging the unit on the wall. Sometimes installers will not hang the inside unit on the studs within a wall, but simply attach it to the sheathing. This is bad!

THE FIX: Make sure you place the unit in a room where it's okay to have a small amount of noise. This depends on your noise preferences, but it's important to consider. 

Also, make sure the unit is being mounted to the structure of the home and not just the sheathing. It needs to hit a minimum of two studs. 

Issue Two - Outside Compressor Performance

The second issue that needs to be dealt with is dealing with water, snow, and ice on the outside compressor.

Placement of the compressor is an extremely important aspect of a good performing system. The worst that can happen if a compressor is placed incorrectly is that water gets in, freezes, and destroys "the coil". When this happens, it won't work any longer. The least bad thing that can happen is that snow and ice surround the unit and the performance of the units declines, which stops you from saving money.

You need to make sure that the compressor is installed in a place where it can never have snow around it or where liquid water can get into it. This water will eventually freeze, and this is really bad. 

THE FIX: Make sure the outside unit is placed under an eave of the house and/or is installed with a rain cap. This will ensure that a large amount of water can get into the unit. 

Second, unless the unit is installed under a porch, make sure it's installed with brackets a few feet above the ground. This will ensure it never is surrounded by snow. Using brackets is more expensive, but it guarantees that the unit will never be surrounded by snow. It's cheap insurance. 


Issue 3 - Installing Electric Coil Base-pan Heaters

As a means to reduce ice damage some installers will instal electric coils in the base-pans of the heat pumps. This does provide safety against ice build up but it substantially reduces the operating efficiency of the home. If you install an electric coil in the base-pan your unit WILL NOT be efficient enough to get an Efficiency Maine rebate. 

If you're using the heat pump as a supplemental heater (you still will use your existing oil, propane, wood system) don't install an electric coil. 

If you're using a heat pump as a primary heating source with no back-up heat (this is most common in net zero or passive house applications) it does make sense to install an electric coil for insurance. 

THE FIX: Don't allow a contractor to install an electric coil if you're just installing a heat pump as a supplemental heater. 

Issue 4 - Outdoor Unit is Considered a Source of Ignitiion. 

This is a small but important point, but given how many people cook with gas, it's important. The outside unit is considered a point of ignition so it cannot be installed within a 10 feet of a propane tank. 

THE FIX: Verify the unit is not within 10 feet of a propane tank.  

Non-visible items. Doesn't show up 5 days of an installation but might show up after a year. 

These items are difficult to screen for because you won't be there when the installation is happening. If something does go wrong in these instances, it's hard to figure out who was actually responsible (the manufacturer or installers) so you'll end up paying for it. 

Most of this items have to do with commissioning the system correctly. 

Issue 5 - Integrity of the Refrigeration Line Set 

In a previous article, we explained how cold climate heat pumps work by manipulating a refrigerant to move heat from conditioned spaces (like inside a home) to the outside and vice versa. In order to move refrigerant correctly, the refrigeration line needs to be 100% air tight. If they have any leak at all, the system performance and efficiency will decline over time. You won't notice it right away, but it will happen. 

There two critical items to correct installation. 

First, with ductless heat pumps, only flare fitting should be use in the installation. No brazing. Brazing is a common way of connecting copper together. It's like welding, but for copper. 

THE FIX: Verify with the installer that only flare fittings will be used. 

Second, an integrating test of the refrigeration line set is key. After a system is installed, it should get a pressure test with nitrogen of at least 400 PSI. Second, an evacuation of the system needs to be done. This creates a vacuum in the line set and removes any moisture. The system should have a vacuum of at least 250 microns and then have a standard vacuum test done by shutting off the value between the pump and unit to see if the vacuum holds. 

THE FIX: Ask the installer how they pressure test the system. You want to ask them, after they've connected the refrigeration line, what do they do BEFORE they put refrigerant into the system. If they dont' have a very specific answer, BE AWARE. This will scare off the bad contractors. 


Issue 6 - Very Optimistic Savings Numbers

It's very likely the heat pumps will save you money on your heating bill. However, you should be skeptical of contractors that over promise how they performance. The contractor should give you a range of expected savings and not one specific number. 

The reason for this is that when estimating savings with HVAC systems, there are many variables that change on a yearly basis that makes it impossible to give a very specific number. 

If a contractor provides a range of $500 to $800 per year, this is reason. 

If a contractor guarantees that it will save $1,000 per year, but skeptical. You want to work with honest people and there's no way that they can guarantee it will save you that much. However, if they guarantee a much lower number, this could be acceptable. 

In order for a supplemental heat pump to get maximum savings, here's the criteria. 

1. It needs to be offsetting oil, propane, or electric resistance heating. You won't get much savings if it's replacing natural gas or wood at today's prices. 
2. In needs to be placed in central place in the home that is also heavily used! If the unit is placed in a bedroom that is rarely used, you won't get the savings. 
3. The homeowner must use the heat pump whenever heating is required. Sometimes people install a heat pump and forget to set the controls properly or use it, if you don't use it, you won't save. 

THE FIX: Ask the contractor how much he expect it to save you. If he provides a range of savings but doesn't guarantee anything, this is a good sign! If they guarantee a high amount of savings, it's a bad sign. 


Issue 7 - Proper Credentials

This isn't an issue around the direct installation per se, but it should be looked it. You want to make sure that you're working with an amazing contractor. In order to do this, there's two things you should do. 

The FIX: 

1. Check references. Ask for 2 to 3 prior people to speak with. For one, ask the contractor to refer you to someone where the installation didn't go perfectly, so you can learn about how they handled it. 

2. Check their certifications. Industry certification verify the the contractors is investing in the proper information to do the job well. There are three certifications to look at

• Manufacture certification. In order to get a manufacturer's warranty, the unit must be installed by an approved contractor. Verify they have this information. 
• EPA Refrigeration handling license. In order to handle refrigerant, they need a specific license. Very, they have a EPA refrigeration handling license. 
• Electricians license. The electrical side of a heat pump is a huge part of the installation. Verify that there's a licensed electrician working on the job. 

If you have any questions, please put them in the comment!

We'll explain the above diagram in the article below. 

This article will explain with line by line detail how much it costs to install a single ductless heat pump in Maine. If you need curious about how the technology works or how much it can save, download our free Cold Climate Heat Pump Buyers Guide or read the following free articles

1. Heat pumps in Maine: How Much Do they Save?
2. How do Cold Climate Heat Pumps Work?
3. Cold Climate Heat Pump Review

With this article, you should be able to understand heat pump prices and how why some heat pump jobs are more expensive than the average price of a heat pump. It should also provide a heat pump pricing guide so you can understand proposals that different contractors provide. 

We'll focus on the costs for a 15,000 BTU cold climate heat pump for a tier one manufacturer. If you want to buy a heat pump no eBay and put it in, please stop reading ;)

Being a contractor is a tough job, especially an HVAC contractor. Not to be too harsh on you the reader (who is likely a homeowner) but you're really hard to deal with. Most homeowners feel that contractors are either completely incompetent, ripping them off, or making tons of money for not doing a lot of work. Or, in most cases, a combination of both. 

Once I had someone ask me, "I can get a heat pump on eBay for $700, why does it cost so much to get it installed by a contractor?" To answer of course, is that this particular homeowners is, shall we say, not educated on high quality work and doesn't understand all of the costs of putting in a heat pump that will work for 15+ years. 

But it brings up a valid point. People are willing to pay good money for quality work, if they know what the work is and how much it costs. 

My solution for this is very simple, let's just tell people exactly what we're doing and how much it costs. 

Our goal is to educate Mainers to provide them the best information so that we can eliminate oil use from the state. It's going to take 10 to 20 years, but we finally have the technology and financing to do it, we just need to start. 

One of the articles that makes it really difficult for the contractors to sell is that they're not open and transparent about their costs. This decreases the trust of homeowners. By increasing trust, it becomes less risk for a homeowner to invest in the technology, which means more will invest in the technologies. 

Heat Pump Pricing Guide

Here are the variables that go into pricing a job. For this, I'm focusing on 15,000 BTU tier 1 manufacturer units. These are ductless units installed as a supplemental heater. 

• Heat pump
• Heat pump brackets
• Heat pump coil
• Heat pump accessories
• HVAC labor
• Electrical equipment
• Electrical labor
• Total job costs

Those are the variables that go into a project, here are the other business items that the good contractors keep in mind for every job. 

• Gross Profit
• Business overheard
• Pre-tax profit
• Tax
• Post-tax profit

While it doesn't seem like a customer should care about the profitability of the company doing the installation work, there a few reasons you should care. 

1. Maintenance. It's best if you get a system installed from a business that will be around for any maintenance issues that come up. 
2. Organization is a part of the culture of a business. If organization is present in a aspect of a business, it tends to be present in all aspects. This means that well run and profitable businesses tend to hire the best technicians, have better customer service, respond to the customer faster, etc. 
3. Spot shady characters. If you find a contractor that is quoting well above or well below the average, be afraid because they are cutting some corners. I've heard in Northern Maine people installing equipment for $2,200 before the rebate. This means they're cutting corners because the equipment itself costs $2,200. 

Here are all of the variables explained with ranges for what the price will be for a single job. 

• Heat pump. A heat pump from a tier 1 manufactures (Mitsubishi, Fujitsu, Daikin, Sanyo) will cost around $1,500 to $1,700. This is assuming the contractor simply calls the distributor, buys a single unit, and picks it up the morning or day before the job. We'll talk about why this is really inefficient below when we talk about the value of group buying. 
• Heat pump brackets - $100 In Maine, a high quality installation will be installed on a bracket on the side of the house. This is for two reasons. First, it guarantees that snow will not build up around the unit and decrease airflow during the winter. Second, during the winter the unit runs in defrost cycle and some of the ice on the coil is turned into water. By elevating the heat pump, the water will run away from the unit. If the water stays around the. 
• Heat pump coil - $100. In the bottom pan of the condenser, it makes sense to install an electrical coil. This coil melts any ice that could build up in the condenser. This eliminates the risk of damaging the equipment. 
• Heat pump line-set and accessories - $100. To install a heat pump you need to connect the inside and outside unit and this requires a "line-set", plus a line-set cover and a few other odds and ends. 
• HVAC labor cost - $160 A well trained individual will be able to install a ductless mini-split in 4 hours. A newer person will work for 8 hours. If we assume the full burdened cost of HVAC labor in Maine is $40 dollars per hour, 4 hours cost $160 dollars. 
• Electrical equipment - $150. In order to install a heat pump, an electrician needs a disconnect, 30 to 50 feet of conduit (depending on how far the outside unit is from the electrical service), a breaker and wire. The longer the run, the most expensive, but it averages out to about $150 per job. 
• Electrical labor - $160. A good electrician will be able to wire up an heat pump in 4 hours or less. An electrician makes around $40 per hour in Maine. 
• Miles to the job - $40. Driving costs money. The IRS costs driving time at around $.50 per mile. This means driving to the job and back costs about $40 on average, 80 miles each way. 
• Total direct job costs. $2,300. That's the amount of total direct costs for a single job, on average. 

What Will Make a Job More Expensive?

$3,200 is the average price, but not all jobs are this low. Here are a few factors that will make your job more expensive. 

• Higher capacity equipment, multi-head equipment or ducted equipment. Heat pumps cost more the larger the units. An 18k or 24k BTU costs more than a 15k unit. The size unit that you need depends on another topic. Also, if you want to get a multi-head unit, one with one outside and many inside units, it will be more expensive. Read the Heat Pump Buyers Guide to learn more about this. 
• Longer and/or more difficult runs. This is true for both the connection between the heat pumps and the electrical equipment
• Service upgrade. If you're electrical service is not large enough to handle a heat pump, you'll need a new electrical service. This can cost between $2,000 and $4,000 and might not be worth it, unless you were planning on getting a new service anyway. 
• Inexperience crew. If the crew is new, it will take them a longer time to install the equipment. This cost might be passed on to you. 
• Long travel times. If your house is far from the crew, it might cost a little more simple due to longer travel times. 

Now, let's get into the business numbers


Back to our original example, let's get into the business numbers. 

• Gross Profit. Most companies will mark-up their job related costs by 30% to 33%. Let's assume they mark up the job by $1,000. The final price comes to $3,300. 
• Business overheard. Overheard typically makes up 10% of one third of a their gross margin. Calculating overhear is an article by itself, but I can sum it up like this. All of the costs of running a business that are not associated with a specific job; insurance, software, computers, legal fees, marketing, etc tend to cost about $333 per job. 
• Pre-tax profit. This leads a pre-tax profit of $666 per job. 
• Taxes. $133. If we assume our business is an LLC, so the profits of the business flow through to the owners, who pay tax on a personal basis. We can assume the tax rate is 20%. $666 times 20% is $133. 
• Post-tax profit. This means that for a single job, the business only mades $553, or 16% of the total job cost. 

A few points to add. 

Is the gross margin high? No. 


Some people will look at the gross margin and say, "wow $1,000 of a $3,200 job is a lot". The answer is because the volume of projects is so low, the gross margins have to be high. This is simply because the volume of projects that any one contractor does is still low. 

Most contractors only get jobs when people call them and ask them to bid on projects, they're not actively marketing and selling projects. 

While the gross margin looks high, you have to look at the net profit of a single job. A single job only produces around $553 dollars of project, for an extremely efficient crew. Crews that take 6 to 8 hours of time make far less money. 

What happens if volume increases? Equipment costs are already as low as possible, only labor and margins can be reduced. 

One of the things that's interesting is that the heat pump cost is the single most expensive part of the installation. While you'd think that increasing volume could decrease the equipment cost, it doesn't. The reason is that distributors are selling the equipment in massive volume already (because they're selling the equipment to all of the installers) and they make a very low margin on the product. 

What this means is that volume in the number of project sold could decrease labor costs and gross margin but the equipment costs themselves are already the bare minimum. 


What is the impact of group buying on price?

Large volume means that we can purchase labor in bulk and get jobs with a slightly lower margin. 
A contractor needs to make a 33% margin on a product that takes a single day and is not steady work. They're willing to accept a lower margin for 30 projects, because if two projects can be completed in a single day, then it's 15 days of full works. In Maine, that's a lot of work. 


Questions?


The goal of this article was to address the most common pricing and cost questions that I get every day. 

This article is part of a free 10 page Cold Climate Heat Pump Buyers Guide. You can download the cold climate heat pump buyers guide here. The guide is based on all of the conversations that we have with everyday homeowners that want to use this technology to lower their oil bill. Most of the literature on the subject is written for technical people in the industry, our guide is written explicitly for homeowners. 

In this last article, we discussed how heat pumps work and went into how cold climate heat pumps work. Cold climate heat pumps are heat pumps that can heat in very cold climate climates, like Maine. If you're curious about the performance and ability of heat pumps to heat in Maine, read those articles. 

Get Instant Online Heat Pump Cost and Savings Quote


If you live in Maine and would like to get an instant online heat pump quote (including a savings report) for your home, click here to get a heat pump quote. 


Cold Climate Heat Pump Review Introduction

In this article, our goal is to share with you how we've identified the best rated heat pump systems for heating Maine. We will provide a deeper dive into the key characteristics that determine the best rated cold climate heat pump systems for use in heating in Maine. 

Here's what we'll cover. 

1. A review of the Heating Seasonal Performance Factor (HSPF) and why this is critical to understand when thinking about heat pumps. We'll the definition of HSPF  and explain how it impacts how much electricity is used to deliver heat. The most efficient heat pumps use the lease amount of electricity to deliver the most amount of heat. 
2. The top 5 manufactures that are producing cold climate heat pumps. We'll focus on the fujitsu mini split, the daikin heat pump and the mitsubishi heat pump. We'll provide a table that coveres a heat pump rating review and the rating that are used to measure heat pump efficiency. 
   
3. Other heat pump considerations. We'll discuss other typical heat pump considerations that homeowners ask about like ducted heat pumps; split systems, and larger units. 
4. Warranty information details. 
5. Heat Pump aesethics and size. This is simply a review of what different systems look like on the inside and outside of the building
6. Heat pump coverage. How much can a single unit heat?

This is going to be fun. Let's dive in. 

If you have any questions about any of this material, please ask it in the comment section!

Heating Seasonal Performance Factor. How to Measure Heat Pump Efficiency

Before we discuss the manufactures of heat pumps and compare specific units, we need to understand how heat pumps are compared from an efficiency perspective. 

Heat pumps are rated by Heating Seasonal Performance Factor or HSPF. 

HSPF is very simple metric. It is a ratio of the number of BTUs delivered and the amount of watt-hours is required to deliver those BTUs. BTUs are a measure of heat, more more about that here. This number is calculated by running a heat pump over a specific amount of time and considering the amount of electricity that is required to deliver a specific amount of heat over a range of outside air temperatures. 

To provide a very specific example, a heat pump that can provide 100 BTUs while using 100 watts would be twice as efficient as a heat pump that provides 50 BTUs using 100 watts. 

There are other considerations when selecting a heat pump, but most of the time, we want to use heat pumps that have the highest HSPF rating because these units provide the most amount of heat using the least electricity. 

To review, here's the equation to calculate HSPF over a period of time: 

• HSPF = BTUs delivered / watt-hours consumed.  

Here's a more real example. 

• A heat pump with a HSPF of 10 can provide 40,000,000 BTUs (40 million BTUs) by consuming 4,000 kWhs (4 million watt-hours) of electricity. 
  
• Here's the equation. 10 = 40,000,000 BTUs / 4,000,000 watt-hours

Top 5 Heat Pump Manufactures and Heat Pump Rating Review

There are a growing number of manufactures that manufactures cold climate heat pumps. We've narrowed our cold climate heat pump reviews to 5 major manufactures. There are some knock off units but we wanted to focus on the best. 

We made this decision based on a few factors

1. The length of time manufacturing cold climate heat pumps. We want to focus on the manufactures that have been doing this the longest. 
2. Size and name recognition of the business. We wanted to focus on name brand businesses with large balance sheets. We can trust that these businesses will be around in 20 years to maintain their warranties. 
3. Energy star rated. 

The manufactures that we reviewed include. 

1. Fujitus mini splits
2. Mitsubishi heat pumps
3. Daikin heat pumps
4. LG heat pumps
5. Sanyo heat pumps. 

Here are the HSPF rating for each manufacture. We focused on the smallest ductless mini-split system units. These are the most efficient, and we'll explain that in the "other configurations" section below. 

Here are the results. 

Here are citations for where I found the information for each of the manufactures efficiency ratings. Feel free to do the research yourself. If you have any questions, please leave them in the comment section. 

• Fujitsu Ductless Heat Pumps
• Mitsubishi Minisplit Product Catalog
• LG Single Zone Ductless Heat Pumps
• Sanyo Heat Pumps
• Daikin Heat Pump Product Literature. 

How do they system efficiencies translate into different amounts of electricity used to provide a specific amount of heat?

Let's assume we're trying to deliver 30,000,000 BTUs to a homeowner over an annual period. Here's the difference in electricity it would take for each unit to deliver this amount of heating capacity. 

Let's look at the cost. If we assume electricity costs $.17kWh, you can see the cost difference below. 

This is why in our no money down heat pump program, we almost exclusivity use Fujitsu units, because they provide the most amount of heat for the least cost. This saves homeowners the most money. 

Other System Configurations? 

We often get questions about other configurations of cold climate heat pumps. There are many other figurations of heat pumps on the market. 

The reason we stay away from other configurations, is that the other configurations have a much lower operating HSPF compared to single ductless heat pump systems. 

Here are the other system considerations. 

1. Systems with large nominal output. You'll notice in the above table that as the size of the heat pump increases, it's efficiency decreases. For this reason, we stick with smaller units. 
2. Ducted systems. In ducted systems, duct is installed to distribute the heat from a central unit around the home. The problem with ducted systems is that a significant amount of energy is lost in duct. The US DOE reports that on average, 20% to 30% of the air is lost while moving through ducts. We need to eliminate in-efficient systems to lower heating costs, so we stay away from ducted systems. The other problem with ducted systems is integrating with existing heating systems. Installing duct takes time. 
3. Many outdoor units with single indoor unit. While we don't like duct, it's possible to install multiple indoor units. You can see below that it's possible to have a single outside unit (the compressor on the left in both images) connected with a single indoor unit or multiple indoor units. The issue is that when there are many inside units connected with a single outdoor compressor, the HSPF efficiency drops below 10. We don't like units with low efficiencies for residential applications, so we stay away from this. 

This article is part of a free 10 page buyers guide to cold climate heat pumps. Download the full guide here. 

This article will address many of the questions we get from homeowners about how heat pumps works, what a ductless heat pump is and some of the pros and cons of these units from a technical perspective. 

There's been a lot of press about heat pumps in Maine lately, from the governor's love of the technology, to new legislation that will increase adoption of the technology, but there's still confusion about how they work. 

Most of the information written about this technology is written by engineers and contractors for each other. While this information is amazing, we've found it's not written in a way that's useful to homeowners that want to utilize the technology to lower their heating bills. 

This article was written for homeowners that are researching heat pumps as a way to provide very low cost heat to their homes. 

By the end of this article, you will learn: 

1. What a heat pump is
2. What a ductless heat pump is
3. The pros and cons of a ductless heat pump
4. How a heat pump moves heat between places
5. What a cold climate heat pump is and how it's different than a normal heat pump
6. Heat pump reviews. The manufactures that make the highest quality cold climate heat pumps
7. How effective air source heat pumps are at heating in cold Maine winters

If you have any questions about the content please put it in the comments and we'll respond with an answer very quickly. 

Let's get started. 

What is a heat pump?

A heat pump uses electricity and a refrigerant to move heat between two places. Most often, this is between a the inside of a building to the outside of a building and vice versa. A heat pump does this by manipulating pressure and temperature of the refrigerant between two places. The most common forms of heat pumps in every day life are freezers, refrigerators, and air conditioning in your car or home. In all of these examples, heat is being removed from one place (the inside of your car or fridge) and put into another place. 

While both air conditioning and heat pumps both use the same principles, the difference between air conditioning and a heat pump is just one thing, a heat pump can work in both directions. If your refrigerator could also heat the inside of itself, it would be a heat pump. 

In the picture at the top of the article, a condenser is installed outside and an evaporator is installed inside. The condenser extracts heat from the outside air and transfers it to the inside of the room. It's important to note that in this picture, it's showing the heat pump in cooling mode. Cold climate heat pumps can also run in heating mode, where they're extracting heat from the outside of the building and putting it into the inside of the building. 

What is a ductless heat pump?

A ductless heat pump, or a mini-split heat pump, is simply a heat pump that doesn't use any duct to distribute the conditioned air inside of the home. In a ductless system, the outside unit is connected to the inside unit only with refrigerant lines. These lines are connected through a 3 inch whole. 

This contrasts with a ducted heat pump system that uses duct to distribute air around a conditioned space. 

There are many benefits of a ductless heating system from a technical, economics, comfort, and aesthetic perspective. 

1. It can integrated with any existing heating system in any home. This is particularly amazing for Maine, which tends to have many types of old heating systems that would be impossible to integrate with for other types of heating system. This is because the set point of the heat pump is independent of other heating controls. This gives you the flexibility to set it to the temperature that you want on the unit itself. 
2. The installation is fast. This means less construction and and less time spent for homeowners dealing with installation crews. Also, because there is no complex duct work, it's a very simple installation with no evasive construction. 
3. High efficiency. Duct can be used to distribute heat to more places, but there's a lot energy loss in the fans it takes to move the air and within the duct itself. Eliminating the ducts means that more heat is delivered for a lower cost. 
4. More even heat in areas with a ductless system. Ductless systems perform better in distributing warm or cool air to a home, making living areas more comfortable. A single indoor unit can heat and cool a large living space, making these systems especially well suited to homes with open floor plans.
5. Year round comfort. By installing a ductless system, you can enjoy year round comfort. Ductless systems come standard with air conditioning, offering you an energy efficient cooling solution.
   

Everyone long once and a while, I'll get an email or phone call from people that ask me, "is this a scam?"

They'll continue to say something like: 

• Why would I want to rent this heat pump equipment and not just buy it? 
• It seams too good to be true. I don't have to pay anything and I just save money?
  
• If heat pumps in Maine have such great economics, why wouldn't I buy it?

I'm from Maine so I understand the skepticism and thinking that things can be too good to be true. Maine has suffered from wasting money on oil for so long, it seems strange there is suddenly an alternative. Thank you technology :)

The reason why people ask this is simply because they are not aware of the the amount of leasing that happens in our economy, and particularly in the renewable energy industry.  

In this article, I want to explain the basic economics of financing renewable energy and energy efficiency programs and provide examples of where this is happening throughout the entire renewable and energy efficiency space. 

Leasing highly efficient, but more expensive, energy equipment is not a scam. It's just the signal that a new technology has come along that costs more upfront, but provides long term, low risk returns. 

Here is the simple explanation why leasing is used in energy, it has to do with the cash flows outlays of new energy technologies. 

When dealing with new and super efficient energy technologies they require a large cash investment upfront to install the equipment. This investment provides long term, stable returns by low operating costs. 

In these scenarios, there are two things important to note. 

1. First, the savings once the technology is installed is very high. This is true in solar, LED lighting, and biomass heating, and heat pumps. 
2. Second, the installation cost for the technology is also extremely high. This is great for property owners that have the cash on hand to purchase the equipment and realize the returns over 20 years. 

If you can invest the cash, in all of these examples, you should buy it in cash. 

Here's the problem, the number of homeowners and business that don't have the cash, or need to keep it for other reasons, is the majority of the market. Even though they don't have the cash, they will want to figure out how save on heating costs. 

Here's a simple cash versus leasing example with a commercial biomass heating system in Maine. 

• Let's say that we have a 20,000 square foot commercial facility in Maine that uses around 5,000 gallons of oil to heat the building each winter. 
• This costs $20,000 per year on oil. We'll assume that the cost of oil is going to increase 3% per year. 
• If they installed a biomass heating system, it would reduce their heating bills by ~60% to around $8,000 per year. This is a $12,000 annual savings rate that will increase at 3% per year. 
• The issue is that this new heating system might cost around $70,000. 
• Is it a good investment to spend $70,000 to save $12,000 per year? Yes! 
• Does that mean that the business has the cash to invest $70,000? No! 
• Even if they had the cash, does it mean they might need to spend it in other places of their business, like marketing, hiring, investory, etc? Probably yes, it's very likely that the business can invest the money in other places with higher returns. 
• Here's the alternative, a no money down biomass heating system lease. For no money down, they can have a biomass heating system installed, and simply save 10% on their heating bill per year, or around $2,000. 
• Yes, they are saving much less, but they don't need to spend any money and they get cash to the bottom line that they can bank on. 

We see a similar situation with the solar pv market. Here's an example of what it might be like for a homeowner to buy versus lease a solar array. 

1. A homeowner buys a 5kW solar pv array for their home for ~$2 per watt (after tax credits, etc). 
2. This means the total installation cost will be around $10,000. 
3. Let's say they pay $.16/kWh for electricity. This means that the array will produce around $1,280 of power per year. This assumes it produces 8MWhs per year. 
4. Is spending $10,000 to save $1,280 a great investment? Yes! This is an amazing investment. It's over 10% per year, every year, for 20 years. That's better than the stock market. It's even better, because the return will increase at the rate that utility prices increase. 
   
5. Does that mean that all homeowners have $10,000 to invest in solar? No
6. Does that mean that if they had $10,000, they might want to invest in some other place? Yes! Of course that may want to. 

Here's how a solar lease works. 

1. You pay $.16/kWh for electricity from the utility. You can sign a solar lease and for no money down, you can simple pay $.14/kWh for all the power that the solar array produces. Simple as that. 
   
2. That's a 15% savings, for no money and no risk. 
3. If you're electric bill was $1,000 per year, it will now be $850, because you're just switching to a cheaper energy source. 

Let's review

Financing and leasing in the renewable energy and energy efficiency is about removing barriers to adoption for all properties owners. Yes, these are amazing investment if you have the cash and want to spend it on a specific application. 

The reality is that most property owners, both residential and commercial, do not have the cash, and if they did, they have other places they want to invest it. For these property owners, which represent a majority of the market, it makes sense to lease the equipment and lower operating costs instantly. 

Financing provides a way to lower energy bills, and increase profits, for no cash with little to no risk. 
 

There's been a lot of talk about air source heat pumps in Maine lately. Efficiency Maine has been adding programs to support heat pump adoption and the Maine legislature is also supporting the technology. 

If you simply want to know how to save on heating costs and need to learn how a heat pump works, we've created a simple guide that will explain how a heat pump works here. 

There Four Reasons why Heat Pump in Maine are Growing in Popularity. 

• First, ductless heat pumps and regular air heat pumps are now able to easily function in Maine. While heat pumps have traditionally been used in the mid-atlantic and south only for cooling, they can now be used for heating too. They will work in extremely cold climates, there's a case study of a family using heat pumps in Presque Isle, Maine. 
• Second, rising heating oil prices in Maine are making air source heat pumps more attractive for homeowners that are looking how to save on heating costs. 
• Third, Efficiency Maine Heat Pump rebates have just be released which can decrease the cost of heat pumps. 
• Lastly, for property owners that cannot afford the few thousands dollars or more to install a heat pump, they have the opportunity to rent them for no money down. 

Heat Pump Cost and Savings

"How much does a heat pump cost?", is a common question that we get. This depends on a number of factor that we'll discuss below.

How much a heat pump costs depends on a number of key factors: 

• Buying vs renting. If you buy the heat pump, you'll have to pay cash for the entire installation and you will be responsible for maintaining it. If rent the heat pump, it can be installed for no cash out of pocket. 
• Ducted vs ductless. A ductless heat pump is a heat pump that doesn't use any ducts. Each unit is comprised of a "cassette" the piece that goes inside of your home and a "compressor" which goes outside. A ducted system is a central heat pump that uses ducts to distribute the air. Ducted systems can be a little more expensive because you will need to install duct around the heat pumps. This requires time and more labor. 
• Full load vs supplemental heat. Heat pumps can be used to heat your entire house 100% of the time or only heat some of your house and work as a backup. If heat pumps are heating your entire house, we would call this "full load". Because this is more equipment, it's more expensive. If heat pumps are only be used as supplemental heat source and you're keeping your existing heating system, it will be cheaper. For a full load house, you might need to install 3 to  6 tons of heat pumps, depending on how large your house is and how efficient it is. If you're using the system as a supplemental heating source, you'll install 1 or 2 tons in the most heavily trafficked areas. 
• Installed cost per ton. Heat pumps, unlike furnaces or boilers, are rated in "tons". Tons is a unit of measurement that describes how much heat the heat pump can create per hour. The more "tons" you need to hear your home, the more expensive the price is. 
• Heating oil prices in maine are rising. As prices for heating oil continues to rise, heat pumps will only save more and more and more money. 

How much Can A heat Pump Save You?

The savings from a heating are driven by four things. The value of savings that a heat pump is created by two things. The cost to create heat with the heat pump and the cost that heat would have cost with another heating sources. To calculate the cost of another heating source, you need to understand

1. Electric prices
2. Average heat pump efficiency
3. Comparable Fuel Source Cost
4. Comparable Heating Source Efficiency

When comparing the cost to deliver heat, we can the term "Million BTUs" or "MMBTU". This allows us to compare various heat sources on an apples-to-apples comparison. 

You can see a chart here that explains the saving of a heat pump versus other fuel sources. 

The amazing thing about renting a heat pump is that you don't need to worry about these economics. If you rent a heat pump, the economics are very simple. You'll rent the heat pump for $450 per year and you'll save $900 year on oil. Check out our heat pump rental program here. 

A Simple Example

Here'a super simple example with a standard home. Let's say your home is 2,000 square feet and your currently use oil to hear your home. You spend $3,000 per year on oil. 

• If you rented a heat pump, you would pay $450 to rent the equipment and you would save $900 on your oil bill. 
• If you want to buy a heat pump to be used as a supplemental heater, you could purchase it for between $3,500 and $4,000. It would save you roughly $800 to $1,000 on oil.  
• Completely replacing the oil heating system might cost between $9,000 and $13,000 dollars but it could decrease your heating bill by 50%

Free Air Source Heat Pump Buyers Guide. 

We've compiled everything we've learned about air source heat pumps into a free buyers guide. The guide includes

1. Heat pump reviews. Which heat pump models work best for heating in Maine.
2. [Free Tool] Heat pump saving calculator. Determine how much you can save.
3. How to find the best contractor to install your heat pump.
4. The top 13 questions to ask every contractor to find the best one. 
5. A list of government programs and rebates available. 
6. Much more!

Chris Williams - Maine Heat Pump Rental

There have been many attempts at financing renewable energy and energy efficiency projects for residential homeowners. The logic is simple. The technologies provide amazing, low-risk, long term rewards but cost a lot of cash upfront. A homeowner might need to invest $5,000 in cash to save $1,500 per year. These returns are amazing, but you can't take advantage if you don't have $5,000 in cash. 

The thought behind lending for these energy projects is simple. Why not lend people the money to get the services completed at no out-of-pocket expense to them and have them pay back the debt with their energy savings?

A small number of these programs have worked and most have failed to get a lot of participation. 

I'm going to provide some examples of the strategies that have worked, those that have failed, and describe how we're bringing a successful heat pump rental program to the Maine market.  

If we look at the most successful strategies on the renewable energy side, the clear winter is the residential solar PPA or lease. The model has led to an explosion of residential solar in the United States, it's one of the fastest growing industries in the US with near 100% growth each year for the past few years. It's catching on because it's simple, easy and clear for the consumer. 

On the residential renewable thermal (biomass, solar thermal and heat pumps) or energy efficiency, few programs have seen significant participation. 

Some bank are providing loans, state agencies are starting to provide PACE financing and other simple debt products. All of these programs should work in theory, the math works and homeowners will save money. However, none have received a large amount of participation. 

Successful Lending is All About a Simple and Fast Process

There's one program, a Cold Climate Heat Pump Rental Program, run by Green Mountain Power in Vermont that was extremely successful in providing air source heat pumps (either a renewable thermal technology or energy efficiency, depending on how you define it) to their members for no money down. 

The program rented out over 200 units in less than one month. All of these units are offsetting extremely expensive heating source, oil, propane, and electric baseboard, so it's beneficial to the property owners and the utility. 

If you ever tried to use one of the "non-successful" programs to utilize renewable thermal technology or energy efficiency in your home, you would understand exactly why they're not being adopted. The time and cost to actually use the funds is substantial and the process and timeline is extremely unclear. 

Yes, once the work is done it's amazing and can save property owners lots of money. But the process to get those funds is horrible. There's tons of paperwork. It can take months, and tens of hours of work, to get approved and use the funds. 

Here's the 5 reasons why the Green Mountain Power program worked. This is the exact same program  that we're bring to the Maine market with our Maine Heat Pump Rental Program. 

Here are the key characteristics of a successful lending program. 

1. Fast and straightforward. In the Green Mountain Power (GMP) program, the process took no more than 1 month from start to finish. In our program, we can install a heat pump in 2 weeks or less after being contacted by a homeowner. 
2. Simple paperwork. The GMP process included a single sheet of paperwork from the homeowner. The contract could be signed by the property owner in a minute. This makes things easy for the contractor and for the homeowner. 
3. No home audit. Because they are only provided a heat pump as a supplemental heat source, they didn't require an energy audit. This makes the process even shorter and more clear. Homeowners love this!
4. Only supplemental heat. The program didn't provide heat pumps are the primary heating source for the home only as a supplemental heat source. This created a number of benefits. First, it means the program could be used in any home, no one needed to change their existing heating system. This decreased the risk in using the heat pump. Second, it meant that complex HVAC designers were not required to size the system. This decreased the time and cost to instal the equipment.  
5. Clear billing.  The billing for the program was extremely simple. The homeowner pays a flat monthly fee based on the size of the heat pump they installed. Larger heat pumps will offset more oil but the rental fee is a little larger. In all cases, the homeowners electric cost to run the heat pump and rent the equipment is less than the cost of heating oil it replaces, so they save money. 

We'll limiting our 2014 Maine program to 30 homes and we'd love to work with you, read more about the program and how to sign up here.