Heat Pumps and the Cost of Electricity

Diverse Heating Options

Electric utilities understand that you have a choice when it comes to heating your home, and they will typically reward you for choosing electric heat as a primary or secondary source of heat.  Electric providers base their rates on how much electricity you use, the time of day that you use the most electricity and the time of day that the utility needs to supply the most electricity.  Large commercial and industrial operations that use more electricity are typically billed a lower rate for their usage (kWh), but they are charged per kilowatt for their monthly peak demand (kW).  Most residential users pay a flat rate for each kWh and do not pay a demand charge.  Some utilities are starting to pass along their fluctuating cost structure to residential consumers in the form of time-of-use or time-of-day rates.  These rates will charge residential customers more per kWh during times to peak demand.  This helps the utility recover more cost during peak times and encourages users to shift their usage to off-peak times.  Why does any of this matter for geothermal?

Electric Rate Incentives

Home heating electric usage in the winter months typically uses the most electricity overnight and in the early morning, when the outside temperature is the lowest.  Many utilities in the northern states peak during the mid-morning in the winter and in the late afternoon in the summer.  This means that the geothermal heating systems are not usually coinciding with the peak demand for the utility, which is great news for the utility and the consumer!  For this reason, the electric utilities will typically offer discounted rates for consumers with electric heating options.  If the electric source is backed up by a fossil fuel heating system, the rate is usually slightly discounted, but the electric heat source can be disabled by the utility (load control) during peak times.  If the electric source is the only heat source, then a larger discount is usually offered and the control stipulations are removed.  This is big driver for rural residents that are currently using propane to make the switch to electric.  Here in Minnesota, local utilities offer rates as low as 6 cents per kWh, which is almost half of the retail rate.

Utility Rebates

Although up-front rebates are not as common, many utilities will offer rebates to help offset the initial cost of installing a geothermal system.  Check with your local electric utility to see if rebates are offered in your area!  Your local utility can also provide you with the discounted rate information and other local requirements for the discount.  If you have any questions, please visit our contact page or drop us an email at info@nexgenenergy.net.

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