A new program in Gustavus will provide residents with money for heat pumps.

Thanks to a $20,000 grant awarded by the National League of Cities, homeowners, businesses, government agencies and municipal buildings can receive incentive payments of up to $500 if they replace their oil-based heating systems with an electric heat pump. Gustavus was one of a dozen cities across the country selected for the organization’s Advancing Economic Mobility Rapid Grant program.

Gustavus City Councilman Mike Taylor worked to secure the grant for the community of about 600 residents. He says heat pumps have been growing in popularity in the city for several years. Taylor has installed a heat pump in his own home, and the city has invested in one for city hall.

“We’re a community that really cares about the environment and thinks about climate change and the role of carbon emissions,” Taylor said. “So a lot of people are looking for ways to reduce their impact and heat pumps are a great way to do that.”

Heat pumps use electricity and coolant to cool the air in the summer and warm it in the winter. Because heat pumps run on electricity instead of fossil fuels, many experts see them as a key climate solution. In Gustavus, heat pumps will use renewable energy from the Falls Creek hydroelectric plant, which supplies nearly 90% of the community’s electricity needs.

Heat pumps are also generally more energy efficient than oil heaters, meaning installing one can reduce energy costs. Taylor said that’s especially important in southeastern communities like Gustavus, where heating oil sells for as much as $6 a gallon.

The cost to install a heat pump typically starts at $5,000, according to Juneau-based nonprofit Alaska Heat Smart. There are several funding sources that could help cover those costs. Gustavus’ local utility, Alaska Power and Telephone, offers an additional $500 heat pump incentive payment, and Sealaska shareholders are eligible for an additional $500 funded by Sealaska Corporation. The federal government also offers tax credits and rebates for heat pump installation under the Inflation Reduction Act.

Taylor hopes that the total funding will be enough to motivate citizens to install a heat pump.

“We hope to make the most of it and maybe reach up to 40 new installations in the community by January,” he said.

Residents can apply for the incentive program now through January 20, 2025. For more information, visit the City of Gustavus website.