Flip through 100-year-old photos, and you’ll likely spot rotary phones, oil lamps, and oil or propane boilers. Today, we’ve upgraded to smartphones and LEDs — but more than 10 million US homes still rely on delivered fuels like oil and propane from that bygone era to heat their homes or water. These heating fuels aren’t just outdated, they’re expensive, polluting, and harmful to both household budgets and health.

Thankfully, a modern alternative already exists that’s gaining traction across the United States. Electric heat pumps provide households with high-performance heating, cooling, and water heating, helping many households lower energy bills, improve air quality, and cut pollution.

1. Over 10 million homes still use delivered fuels

Today, over 10 million single-family and manufactured homes heat their water or home with delivered fuels like oil and propane. Two-thirds of these homes are in the Northeast and upper Midwest.

Homes using delivered fuels are disproportionately single-family, rural, and older. Understanding these demographics is important for designing heat pump programs that reach and serve these households.

2. Heat pumps save households thousands of dollars on energy bills

Given the higher efficiency of air-source heat pumps (ASHPs) and heat pump water heaters (HPWHs) — which use about one-fourth the energy of traditional delivered fuel systems — they can significantly reduce energy bills for delivered fuel customers.

Using RMI’s Green Upgrade Calculator, we found that delivered fuel households in the United States could save an average of $970 per year — and nearly $15,000 over the equipment’s lifetime — by upgrading to heat pumps. The highest energy bill savings are in the Southeast given the region’s low electricity prices.

If all delivered fuel customers switched to heat pumps, US customers would save nearly $8 billion annually in energy bills.

3. Heat pumps improve health while lowering carbon and air pollution

Homes that rely on oil or propane for heating release hazardous pollutants that worsen outdoor air quality and in some cases degrade indoor air quality, posing serious health risks for residents.

• Outdoor air pollution: Burning oil and propane emits combustion pollutants like fine particulate matter (PM2.5) and nitrogen dioxide (NO₂), both of which are linked to respiratory and cardiovascular issues. Oil heating is particularly harmful because it releases higher amounts of these pollutants as well as sulfur dioxide, contributing to smog and acid rain.
• Indoor air pollution: Poorly maintained or vented propane and oil heating systems can release harmful pollutants into the home, including carbon monoxide, NO₂, and volatile organic compounds, which can be toxic to people and pets. Even at low concentrations, these pollutants can pose serious health risks.

Electric heat pumps, conversely, produce no direct outdoor or indoor air pollution. They also filter and control humidity of indoor air, improving the health of residents who upgrade to these systems. In addition, heat pumps significantly reduce carbon pollution. We used RMI’s Green Upgrade Calculator to quantify the outdoor carbon pollution reduction benefits of ASHPs and HPWHs in every state.

• Carbon pollution: ASHPs and HPWHs can slash a delivered fuel home’s carbon pollution from water heating and home heating and cooling by around 60 percent in the first year, or 3.9 metric tons of carbon dioxide equivalent (MTCO₂e). That’s equivalent to an entire year’s worth of tailpipe emissions from a gas vehicle. These benefits will become even higher over time as the grid gets cleaner. The largest state-wide benefits today are in New York, with over 4.4 million MTCO₂e per year saved across all delivered fuel homes, given substantial heating energy demand, oil’s high pollution intensity, and a cleaner electric grid.

4. Policymakers can help delivered fuel customers upgrade to heat pumps

Without supportive policies and funding, it will be difficult for the millions of households that rely on delivered fuels to upgrade to heat pumps. The following state policies can unlock funding and create clear pathways to modernizing homes that rely on delivered fuels.

• Allow fuel switching in utility energy efficiency programs: US utilities spend over $7 billion annually on energy efficiency programs, but many don’t allow households with oil and propane-powered water or space heaters to receive energy efficiency incentives. In 17 states, utilities are prohibited or discouraged from incentivizing their over 3 million delivered fuel households to switch to a heat pump system, even if it will reduce energy use. These states should pass legislation or update utility rules to allow delivered fuel households to access funding, which they already contribute to through their electricity bills.

• Implement clean heat standards: States can decrease pollution from the delivered fuel market through clean heat standards, which require fuel suppliers to reduce carbon emissions over time or pay fines. These standards are effective because they set time-bound reduction goals, and fines can fund heat pump installations, such as through incentives and rebates. At least nine states are considering the policy (CT, HI, MA, MD, NJ, NY, PA, RI, IL), with Colorado and Vermont having enacted legislation.

In addition to state policies, electric utilities and regulators can further heat pump deployment by developing electric rates designed for heat pump users. By better reflecting the actual cost to serve heat pump users, these rates can further increase the energy bill savings for delivered fuel customers that switch to heat pumps.

Well-designed programs can make it easier for delivered fuel customers to upgrade to heat pumps

States, utilities, and localities can design heat pump programs to make it easier for delivered fuel customers to upgrade by removing cost and access barriers.

• Financing and incentives: States, utilities, and localities should offer heat pump incentives and financing to households using delivered fuels who are often excluded from existing programs. Incentives should be designed with the customer and contractor in mind to help bridge the cost gap for low- and moderate-income households. Some programs offer higher heat pump incentives for delivered fuel customers than gas to further prioritize these upgrades. Additionally, green financing options for unplanned replacements can enable households to monetize the substantial energy bill savings from heat pumps.

• Effective outreach: Successful programs in Maine, Canada, and Pembroke, IL, have shown that targeted engagement strategies can more effectively reach delivered fuel households.
  • Lead with messages that resonate with rural communities, including the economic, safety, convenience, and energy independence benefits of heat pumps.
  • Collaborate with familiar, trusted messengers, such as community-based organizations, neighbors, and community action agencies, to more effectively communicate heat pump benefits.
  • Deploy tailored outreach strategies such as direct mail, door-to-door outreach, and local education sessions to establish more points of contact.
• Contractor training: States, localities, or utilities should provide, or leverage existing, ASHP and HPWH trainings for rural contractors so they can complete quality installations and more confidently understand these systems’ benefits and existing incentives. Trainings will also build the workforce for high paying HVAC skilled trades jobs required to meet the growing demand for heat pumps. Pairing these trainings with a qualified heat pump contractor list can increase transparency and build consumer trust in the market.

With the right mix of policies and programs, we can help millions of households still using delivered fuels upgrade to heat pumps — unlocking thousands in energy bill savings, reducing harmful air pollution, and improving health and comfort across the country.

To see the assumptions we used in our analysis click here.