Electrification describes the shift to using electricity rather than fossil fuels for building heating, hot water heating, and cooking appliances and systems.
Heat pumps are a key strategy in electrification. Heat pumps are heating and cooling systems that move heat indoors in the winter and draw heat outdoors in the summer. Instead of burning fossil fuels, they’re powered by electricity to move—rather than create—heat to keep homes or businesses at a comfortable temperature year-round. Innovations in technology mean that today’s cold climate heat pumps can be up to 400% efficient and many provide efficient heating at outdoor temperatures as low as -15 °F.
Cold-climate air source heat pumps extract heat from the air outside and distribute it inside buildings. This process is reversed during warmer months to provide cooling by drawing heat out of a building’s interior. Air source heat pump systems can be configured to different building layouts and designed to either replace the current system or provide supplemental heating and cooling. Buildings with existing ductwork can install a ducted air source heat pump, which connects to an outdoor compressor, to serve the entire building in place of a furnace or air-conditioning system. Ductless air source heat pumps, often called “mini-splits,” are typically mounted to the wall to serve one room or area of a building.
Ground Source (Geothermal) Heat Pumps
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Ground source heat pumps deliver space heating and cooling by exchanging heat with the ground or a groundwater source through an underground pipe system. By using the relatively constant ground temperature (around 55°F), the system operates more efficiently than electric baseboards and oil, gas, and propane furnaces. Even though the installation price of a geothermal system can be several times that of an air-source system of the same heating and cooling capacity, the additional costs may be returned in energy savings in 5-10 years, depending on the cost of energy and available incentives in your area. System life is estimated at up to 24 years for the inside components and 50+ years for the ground loop.
Ground source heat pumps can be sized to provide 100% of a building’s heating and cooling load without a backup system. They are compatible with new construction or retrofits, and can vary in scale from building-specific to community networks.
Water heating accounts for around 20% of energy use in the average home. Heat pump water heaters use electricity to transfer heat from the surrounding air to water in an enclosed tank. These systems are 2-3 times more efficient than conventional electric resistance water heaters, helping cut energy consumption and costs. Heat pump water heaters are taller than most other water heaters, and require at least 1,000 cubic feet of air space around the water heater. Heat pump water heaters provide the added benefit of dehumidification if installed in a humid location, like a basement.
Disclaimer: The information presented here is for educational purposes only. It is not intended to provide specific tax guidance. For questions regarding your individual tax situation, we suggest consulting with your tax advisor.
EmPOWER: Businesses, localities, and individuals located in EmPOWER utility service territories may be eligible for rebates to defray the costs of heat pumps. Incentive amounts are anticipated to increase in 2025 due to changes in EmPOWER’s underlying legislation.
EmPOWER utility
| Air-source heat pump | Heat pump water heater | Ground source heat pump
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| None as of December 30, 2024. Please check back.
| Up to $1,600 on ENERGY STAR-certified models
| None as of December 30, 2024. Please check back.
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| None as of December 30, 2024. Please check back.
| Up to $800
| None as of December 30, 2024. Please check back.
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| None as of December 30, 2024. Please check back.
| Up to $1,600 on ENERGY STAR-certified models
| None as of December 30, 2024. Please check back.
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| None as of December 30, 2024. Please check back.
| Up to $1,600 on ENERGY STAR-certified models
| None as of December 30, 2024. Please check back.
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| None as of December 30, 2024. Please check back.
| Up to $900
| None as of December 30, 2024. Please check back.
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- Air Source Heat Pump Tax Credit (25C): Eligible homeowners can claim a tax credit up to 30% of project costs, with a $2,000 maximum. This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.
- Geothermal Heat Pump Tax Credit (25D): Eligible homeowners can claim an uncapped tax credit up to 30% of project costs for eligible geothermal heating and cooling systems.
- Heat Pump Water Heaters Tax Credit (25C): Eligible homeowners can claim a tax credit up to 30% of project costs, with a $2,000 maximum. This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.
- Electric Panel Upgrade Tax Credit (25C): In some instances, building owners will need to upgrade their electric panel when swapping a fossil fuel-powered appliance for a heat pump. Eligible homeowners can claim a tax credit up to 30% of project costs, with a $600 maximum. This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.
- High Efficiency Electric Home Rebate Program: As Maryland’s state energy office, MEA will administer the High-Efficiency Electric Home Rebate Program, which will provide rebates for home electrification measures such as heat pumps. This program is currently under construction. Please visit MEA’s dedicated page for more information.
- Greenhouse Gas Reduction Program (GHGRP): The Department of Housing & Community Development’s GHGRP program (a subprogram of itsMultifamily Energy Efficiency and Housing Affordability program) funds projects in eligible multifamily affordable housing that replace fossil fuel-powered equipment with electric alternatives, including heat pump systems. Buildings must be 35,000 square feet or larger (excluding parking garages), and a minimum of 50% of households must be 80% AMI or less.
- Electrify MC (Montgomery County residents ONLY): Electrify MC is a pilot project created to help residents transition from fossil fuel-powered appliances and systems, including heat pumps. Electrify MC will provide residents with a one-stop option to help them electrify their homes. The competitively chosen contractor will provide technical support, perform Home Performance with ENERGY STAR audits, provide recommendations for electrification add-ons, and complete the installations using the financial incentives available through Electrify MC.
MEA curates a newsletter that contains updates on Maryland-specific building electrification funding and financing opportunities. Sign up
here.
