The Indicator from Planet Money - Warming your house the green way just got more expensive

Episode Date: February 4, 2026

People wanting to purchase heat pumps might soon face sticker shock. Many consumers have sought out energy credits to find a greener and more affordable alternative to heating oil, but the tax credit to help make them cheaper has expired. Today on the show: how homeowners, the renewables industry, and its critics all feel about it.Related episodes: Metals, government debt, and a climate lawsuitAll these data centers are gonna fry my electric bill … right?Cold-o-nomicsFor sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org. Fact-checking by Sierra Juarez. Music by Drop Electric. Find us: TikTok, Instagram, Facebook, Newsletter. See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

NPR. This is the indicator from Planet Money. I'm Daryan Woods here with friend of the show, Nate Hedgy, host of the public radio podcast Outside In. Great to be back. You've not been on the show for a while. No, I was busy moving. I'm in Juneau, Alaska now.

And actually, lately, I've been spending my days digging out of the absolutely record-breaking amount of snow we had. Yeah, I've been doing a good bit of shoveling here. It has been quite the brisk winter, must say. Yeah, sub-zero temperatures across the country. And I'm sure folks are looking at their energy bills with their jaws dropped. Like, I spent more than $1,000 on heating oil already this winter. But if Americans want to make their homes more energy efficient after this cold snap, it might cost them extra.

Yeah, and that's because a series of clean energy tax credits have officially expired. They save many people thousands of dollars on everything from heat pumps to insulation to energy-efficient woodstores. And now they are no more. So today on the show, what that means for homeowners and the renewables industry. Plus, who's happy these tax credits are gone? When Michelle Dutro and Brendan Jackson bought their first house in Juneau, Alaska, there were a few quirks. The pipes didn't connect.

And one of the sinks, they just, like, emptied into our crawl space under the house. But one of the first big upgrades they made for the house wasn't fixing the plumbing. It was installing a heat pump. Now, if you are unfamiliar with a heat pump, they are, and energy-efficient heating and air-conditioning system that relies on electricity rather than oil or natural gas. In Juneau, having one can save residents hundreds of dollars a year in heating costs. But they aren't cheap to buy. It's crazy how expensive it is.

Like, you know, just for this home, it's one head unit. It's a pretty simple, relatively simple unit and process, and it still would have cost us $10,000 out of pocket. That's where the Biden-era tax credits come in. And here's how they work. Brendan and Michelle pay full price for the heat pump and installation at the shop. And then when they're doing their taxes early in the year, they can write off 30% of that cost, up to $2,000. Which means if they owe any taxes, the feds will slash up to $2,000 off their tax bill. Which will probably be significant for me because I was a contractor last year, so my income wasn't taxed.

So it should be pretty helpful. These credits were supposed to last until the 2030s. but then Congress passed the one big beautiful Bill Act last year, which sunsetted the credits much earlier on December 31st, 2025. Which is why installing a heat pump before that deadline became a priority for Brendan and Michelle. It's like the whole reason that we're doing it now. I think we would have had to save and plan for this for a number of years, and it just wouldn't have been a priority in the same way.

When did you get the heat pump actually installed? It was installed on December 26th, so like just down. under the wire. Tax credits for energy efficiency have been around since the 1970s. Originally, they were developed to wean Americans off foreign oil during an energy crisis. Think Jimmy Carter making speeches at the White House wearing a cozy warm sweater. All of us must learn to waste less energy. Simply by keeping our thermostats, for instance, at 65 degrees in the daytime and 55 degrees at night, we could save half the current shortage of natural gas. Derean, by the way, I am still following that rule.

Okay. My house is cold, but man, I am saving money. And yeah, I legitimately wear a sweater most days. I am wearing long johns, or as you may call them, long underwear. And I like to think that Jimmy Carter would be proud. Absolutely. Back in the Carter era, Americans could receive a 15% credit for insulating their homes or upgrading their storm windows.

Now, whether these subsidies worked is a mixed bag. Home efficiency has gotten better over the years, but there were a lot of other motivating factors, including high energy prices and more stringent building codes. The original Carter credits expired in the mid-1980s. Since then, there have been other iterations, but none as big and broad as the ones President Biden enacted when he signed the Inflation Reduction Act. A big part of that legislation was all about climate change. He was pushing for Americans to make the jump away from most fossil fuels. And taxpayers took it up. The Nonpartisan Congressional Research Service found that millions of Americans use the credits in 2023. But here's where the program has critics. A lot of those folks were also higher earners, more than half made a hundred grand or more a year.

Ryan Young is with the Competitive Enterprise Institute, a libertarian think tank. If you're going to cut taxes, it's better to do it for lower income people. Ryan makes the argument that these credits were essentially a tax break for the middle class. Because in order to take advantage of them, you already need money in your pockets. I mean, enough to front the cost of installing a $10,000 heat pump or a $30,000 solar panel. A lot of the people who are installing solar panels and adding insulation to their homes and other energy saving measures are people who are going to do, that anyway. That's not a very efficient use of the government's resources, especially considering the kind of deficits we've been seeing lately. The energy efficient home improvement credit costs the

government more than $2 billion in lost revenue back in 2023. To put that in some perspective, tax breaks for oil, gas, and coal were nearly $3 billion in 2022. As the Biden era energy credits, including the home credit end, the renewable energy sector might feel a pinch. The nonpartisan Rodeum group found that natural gas demand in the US will increase, and so will prices by up to 7%. I spoke to Ari Matusiac. He's a former Obama official and head of a non-profit electrification group called ReWiring America.

As with anything, when you have kind of a set of incentives and then they go away, there's an impact on the market. He thinks there will be a dip in the purchase of stuff like heat pumps and solar panels this year. But he's optimistic it could be temporary because regardless of tax credits, the residential energy market is leaning away from fossil fuels. Over half of new homes that were built in 2024 were built with all electric heating. Now, some of that electricity is powered by coal and natural gas, but that's been mostly declining. Heat pumps are another bright spot for Ari. Heat pumps outsold gas furnaces for the fourth consecutive year.

Ari also sees an unusual window for more energy-efficient homes, the rise of power-hungry AI data centers. All roads lead to AI data centers. Utilities are looking for ways to, frankly, lessen the amount of power that's being consumed by other customers, like households. So they need more efficient options in order to accommodate all of the growth that's happening on the grid. And so we did this analysis that showed that actually 100% of the electricity needs that these data centers have can be met if we invested in households directly by giving them heat pumps, batteries, and rooftops solar. But, you know, just because the tax credit is gone, it doesn't mean there aren't other incentives for making your house more energy efficient, including state-by-state rebates. Yeah, for instance, in Southeast Alaska, the EPA funded a program that pays up to $8,500 to residents. who want to make the switch to heat pumps.

And that was something that Brendan Jackson and Michelle Dutro took advantage of in addition to their federal tax credit. So that $10,000 heat bump with the tax credit and the rebate only cost them a couple of grand. It sounds like the economic incentives really stacked up for them. Yeah, exactly. This episode was produced by Cooper Katz McKim and engineered by Kwaise Lee. It was fact-checked by Sierra Juarez.

Kate Canaan is our editor and The Indicator is a production of NPR.