New Grant for Heat Pumps announced in Canada - the Oil to Heat Pump Affordability (OHPA) Grant 2023

The federal Government of Canada recently announced details of a new grant of $5000 to switch from oil fired furnaces to heat pumps in a bid to help low and middle income Canadian households.

Immigration, Refugees and Citizenship Minister Sean Fraser made the announcement about the Oil to Heat Pump Affordability (OHPA) Grant on behalf of Natural Resources Minister Jonathan Wilkinson on Monday November 21, 2022 in Stellarton, Nova Scotia.

So what is the Oil to Heat Pump Affordability (OHPA) Grant in Canada?

The new measure will provide households with a grant of up to $5,000, depending on their income. The new affordable Oil to Heat Pump Conversion Grant will cover the costs of switching, including the purchase and installation of heat pumps and the safe removal of the oil tank. This is a $250 million investment by the Canadian federal government into encouraging the electrification of heating systems and to help reduce certain communities reliance on fossil fuels.

The OHPA grant will be available in January 2023

The money will be provided up front to pay for the system change. The new grant can be combined with existing grants for greener homes such as the Canada greener homes grant, and the greener homes Canada interest free loan scheme.

Canadian household eligibility for the OHPA Grant:  

• To be eligible for the OHPA heat pump grant households have to declare an after-tax revenue at or below the median household after-tax income, as defined by Statistics Canada’s low income measure threshold (e.g., $53,140 after-tax for a family of four);
• Eligibility for the OHPA grant is for homes that are oil-heated as of January 2023, which must be demonstrated by providing copies of oil fuel bills from the 12 months preceding their application; and
• To be eligible, the applicant for the OHPA grant must be the primary resident and owner of the home.

Why is the government of Canada trying to encourage switching to heat pumps?

While national in scope, the OHPA grant is intended to reflect the fact that a higher proportion of Atlantic Canadians use oil as their primary source of heat. The announcement is another way that the Government of Canada is following through on its commitment to deliver practical solutions on home heating, especially for Atlantic Canadians, while fighting climate change and eradicating fossil fuels. 

In other words, helping households transition to heat pumps not only helps lower energy costs for Canadians, but also helps cut pollution and carbon emissions. The OHPA grant is yet another example of the Canadian government’s commitment to making life more affordable for Canadians while fighting climate change from coast to coast.

In one example given, Kayla Muir and her husband are the parents of two young boys, ages 1 and 3. Last year, at the end of winter, her family could no longer afford to fill their tank. She says she went to the local gas station to fill up one can at a time.

“One of the biggest expenses for our family is heating in the winter and sadly we have to cut back on other necessities to pay for it," said Kayla.

How much has heating oil increased in cost from 2021 to 2023 in Canada?

In Atlantic Canada, 30% of homeowners still use oil to heat their homes including 56% of homeowners in Prince Edward Island. And the price of oil has tripled in the last two years in many areas. 

A complementary heat pump grant program

The Canadian federal government says that replacing an oil furnace with a heat pump can save homeowners thousands of dollars each year. On average, homeowners who switch from oil to cold-climate heat pumps to heat their homes would save between $1,500 and $4,700 per year on home energy bills. Minister Fraser noted that this kind of announcement is both a way to help households suffering from the effects of inflation and to combat climate change.

“When we saw Hurricane Fiona, we couldn't deny that there was a cost to climate change," Fraser said.

This new heat pump grant may be combined with other federal or provincial programs. In New Brunswick, the government has launched an energy-efficiency program that includes free mini heat pumps for households with a gross income of up to $70,000 per year. In Nova Scotia, the government recently removed a financing option for the purchase of a heat pump.

In Prince Edward Island, the demand for heat pumps is skyrocketing due to the rising price of fuel oil. Last February, the price of a litre of fuel oil was $1.33 in Prince Edward Island. On October 15, the price of a litre of fuel oil rose to $2.08, an increase of 56 per cent. On Monday, the price of heating oil in that province was $1.68.

Other advantages of heat pumps include:

• Using heat pumps for air conditioning, as a heat pump can actually be configured to do both heating and cooling. This can help you save on purchase price and maintenance costs, as you would have one machine doing the job previously done by two. 
• Improved indoor air quality in urban areas; since there are no fuels being burned, there is no exhaust to permeate though neighbourhoods. 
• Heat pumps are also quite versatile; they can be used to heat incoming air from the outside, or as an air-to-water heat pump for generating residential hot water. 
• Heat pumps can also be used in conjunction with geothermal heating and cooling, where the heat is either taken from the ground or added to the ground when it is operating in cooling mode. 

The OHPA grant will be available starting in early 2023 through the Canada Greener Homes Initiative Portal. The $2.6-billion Canada Greener Homes Initiative (CGHI) already provides eligible homeowners with up to $5,000 to retrofit their home to reduce energy use and save money. Homeowners can therefore benefit from both the OHPA and CGHI grants to replace their oil furnace with heat pumps.