Federal Heat Pump Grant Program Costs Could Quadruple to $2.7 Billion

Heating oil, more widely used in Atlantic Canada for home heating than other parts of the country, is delivered to a home in this file photo. (John Rucosky/AP Photo via Tribune-Democrat)

A federal grant program to help homeowners convert their oil furnaces to electric heat pumps could potentially cost as much as $2.7 billion, almost four times its initial budget of $750 million, according to the Parliamentary Budget Officer (PBO).

“The PBO estimates that there are up to 244,000 households nationwide that could be eligible for OHPA [Oil to Heat Pump Affordability] program funding,” said a legislative costing note published Jan. 18, as first covered by Blacklock’s Reporter.

“If all eligible households access the program, we estimate that the OHPA program could have a maximum potential cost of $2.7 billion.”

This cost assumes that all eligible households apply and receive the maximum grant available, said the note titled “Enhancements to the Oil to Heat Pump Affordability program.”

As of mid-October 2023, around 10,000 households had been approved for and/or had already received funding under the program.

Based on trends in uptake, the PBO estimates that the program, which had originally been allocated $750 million over four years, from fiscal 2023–24 to fiscal 2026–27, will cost $797 million over five years, said the note.

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The uptake was projected by extrapolating historical participation trends in the OHPA program and comparing it to tends under the Greener Homes Grant, according to the note. The Greener Homes Grant is a federal grant that covers retrofits like home insulation, windows and doors, heat pumps, and solar panels.

Initially, from March to October 2023, the program offered grants of up to $10,000 to eligible households for conversion to a heat pump. Then, on Oct. 26, Ottawa increased the maximum grant to $15,000 for jurisdictions that administer the federal program through their provincial infrastructure and that will match the additional $5,000 federal amount. The enhancement also included an additional $250 one-time bonus for households in those “co-delivery” provinces.

The enhanced grants are specifically available in Nova Scotia, Prince Edward Island, and Newfoundland and Labrador, while other provinces continue to offer the original amount.

In addition to the OHPA program enhancement, the federal government on Oct. 26, 2023, suspended for three years a 17-cents-per-litre carbon tax on home heating oil, effective Nov. 10, a move primarily benefiting homeowners in Atlantic Canada. This region predominantly relies on oil for home heating.

Prime Minister Justin Trudeau, in addressing the carbon tax relief later that month, said there would be no further exemptions or suspensions of the carbon tax.

Labour Minister Seamus O’Regan, representing St. John’s South—Mount Pearl in N.L., highlighted the historical burden of home heating oil costs in the region and defended the region-specific nature of these initiatives.

“Constituents are scared to death about a source of home heating that was always astronomically expensive but only getting more expensive,” said Mr. O’Regan on Oct. 31.

“We have had to suffer through home heating oil. I just find it a bit rich that everybody is just getting so excited about carve-outs and exceptions in particularities to regions. That’s how this country is built.”

Privy Council polling, conducted through focus groups in Atlantic Canada, indicated that the implementation of the carbon price was not expected to significantly change Canadians’ carbon-emitting activities like driving and heating their homes. This region is particularly relevant as it houses 24 Liberal MPs who are up for re-election.