New national heat pump rebate aims at oil heat and AC upgrades

Prime Minister Mark Carney has announced a $2-billion National Heat Pump Rebate Program, according to Clean Energy Canada. The rebate is open to any household, but the think tank points to two groups who stand to gain the most: the roughly half a million Canadian homes still heated with oil, and anyone about to replace an ageing central air conditioner.

Why oil-heated homes are the biggest winners

Clean Energy Canada says furnace oil has hit a record average of $2.48 a litre across the country, up from $1.54 a litre a year earlier, pushing oil heating bills into the thousands of dollars for a typical winter. Re-running its modelling at today's oil price, the group estimates a single-detached home in Nova Scotia switching from an oil furnace to a cold-climate heat pump could now save as much as $2,733 a year on heating, versus the $1,767 it had estimated earlier this year.

That gap matters because a heat pump swap is not cheap up front. Our live cost model puts a $12,000 typical installed cost for a mid-range ducted system, with a usual range of $9,350 – $15,600 before GST/HST, depending on house size and the state of your existing ductwork. Heat pump installation breaks down how that figure splits between equipment, labour and any duct or electrical work. A new federal rebate aimed squarely at oil-to-heat-pump conversions would narrow that gap considerably for the households with the most to gain from switching off oil.

Why AC shoppers should look at heat pumps too

The second group Clean Energy Canada flags is homeowners already planning to install central cooling, whether because window units and fans couldn't keep up this past summer or an old central system is on its way out. Its argument: a heat pump uses the same compressor technology as a one-way air conditioner, so it cools a home just as well, but it also delivers efficient heating through fall and winter at several times the efficiency of a furnace or baseboards. Clean Energy Canada calls choosing cooling-only air conditioning over a heat pump "a no-brainer" once the new rebate is factored in.

The installed cost of the two systems is already close before any rebate. Our figures show a ductless mini-split running $9,950 typical, mid-range, against $12,000 for a mid-range ducted heat pump — a premium of a few thousand dollars for a system that heats as well as it cools. A rebate that covers most of that gap, as Clean Energy Canada suggests it could for lower-income households, would make the heating-and-cooling option the obvious choice for anyone shopping for new central air.

What we don't know yet

Clean Energy Canada's piece is an analysis of the policy's likely impact, not a program guide, and at the time of writing we don't have confirmed application dates, intake rules or rebate tiers for this federal program beyond what it reports: that income-qualified households (it cites a four-person Ontario household earning below $96,439 before tax as an example) could see an increased rebate of up to $10,000, enough to cover most of the cost of a heat pump replacing an oil furnace or an old AC system. We'll update this page with the program's official rules once they're published.

In the meantime, two federal and provincial programs already confirmed are worth knowing about if you're planning a heat pump project:

• The Oil to Heat Pump Affordability program offers up to $10,000 federally for oil-heated homes, or up to $25,000 where it's co-delivered with a participating province.
• In Ontario, Home Renovation Savings offers up to $7,500 toward a cold-climate air-source heat pump in electric, oil, propane or wood-heated homes (up to $2,000 for gas-heated Enbridge customers), through a pre-approved, participating contractor.

The federal Canada Greener Homes Grant and Loan, by contrast, are now closed to new documentation.

What this means for your budget

If you're heating with oil or an old electric baseboard system, or you're already pricing a new central air conditioner, it's worth getting quotes for a heat pump alongside whatever you were planning, since any rebate is likely to apply to the heat pump option rather than a straight AC swap. All the figures above are before GST or HST, which will apply on top of the installed price in every province. And whichever way you go, it's worth checking that the price you're quoted is in line with the market before you sign anything — our "is my quote fair" tool compares a quote against local labour and material costs for exactly this kind of job.