Call it the year of the heat pump. In 2025, the number of heat pumps installed in the service areas of five major Colorado utilities more than doubled to 14,225, marking a twelvefold increase in three years.
The year is an inflection point where the electric heating and cooling technology has reached market acceptance and competitiveness, utility executives, installers and industry representatives say.
“That trajectory is happening right now, we are at that tipping point,” said Patricia Rothwell, executive director of the Energy Efficiency Business Coalition, a trade group.
The coalition has a nine-year “hockey stick” plan for heat pumps with 2021 to 2025 the blade and 2026 as the year the stick bends upward with the goal of heat pumps taking 50% to 80% of the total market by 2030.
“Three or four years ago this was most definitely a niche technology,” said Emmett Romine, Xcel Energy’s vice president for customer energy and transportation solutions. “Now it’s becoming a very widely accepted technology.”
An air-source heat pump uses a refrigerant with a low boiling point, something like 55 degrees below zero, to gather heat in the air even on a cold day and then runs the vaporized refrigerant through a compressor concentrating the heat and sending it into the house.
Heat pumps have been designed for cold weather climates with the ability to operate even in subzero temperatures. In the summer, it doubles as an air conditioner, running in reverse gathering heat in the house and sending it outside.
Heat pumps can range from $15,000 to $30,000 depending on the system and the size of the house.
“Heat pumps have been beating furnaces for several years,” said Shawn LeMons, a contractor with Denver-based heat pump installer Zero Homes. “New news is that heat pumps are gaining on ACs.”
In 2025, 3.642 million heat pumps were sold in the U.S. compared with 3.28 million natural gas and oil furnaces, according to Air-Conditioning, Heating and Refrigeration Institute.
Expiring incentives helped boost sales
Xcel Energy — Colorado’s largest gas and electricity supplier — offers rebates for installing heat pumps and energy efficient gas furnaces and in the last few years the company has gone from issuing more rebates for gas furnaces to more for heat pumps.
In 2025, Xcel Energy doled out 10,640 heat pump rebates worth $57 million, with Denver, Boulder and Littleton among the most active areas.
The Platte River Power Authority, which serves Estes Park, Fort Collins, Longmont and Loveland, saw its heat pump rebates nearly quadruple in 2025 to 1,256, equal to $2.2 million. In 2023, PRPA handed out 225 rebates.
“It all sort of came together in 2025, when contractors have become … more comfortable in installing that product and sales staff have figured out how to stack all of those funding options to present the customer with an option that buys down that total project cost in a very attractive way,” said Ryan Gibson, PRPA supervisor of distributed energy solutions.
Other utilities seeing an increase in heat pump installations in 2025 were Tri-State Generation and Transmission Association and Brighton-based United Power, which had a 50% increase in rebates to 255. Colorado Springs Utilities installations were flat at 235 for the year.
Heat pumps were one of the renewable energy targets at which the Trump administration took aim in its “One Big Beautiful Bill,” doing away with the $2,000 federal tax credit for installations at the end of 2025.
Ironically, the “One Big, Beautiful Bill” created a lot of awareness, “Oh there are incentives,” said DR Richardson, CEO of Elephant Energy, a Broomfield-based heat pump installer.
“Those incentives are now going away at the federal level, and that did spur increased adoption across all markets,” Richardson said.
Gibson said “the end of the year was the biggest push for us by far, so I think (the end of the federal tax credit) definitely was a contributing factor.”
Still, utilities and contractors expect that a host of state, utility and local heat pump rebates and incentives will buoy the Colorado market.
In January, the Denver Council of Governments, a regional planning agency, launched its Power Ahead Colorado Program to cut air emissions from the building sector with $200 million in federal funds.
It includes $40 million in rebates for heat pump and heat pump water heaters. The size of the rebates will be set in March.
In 2025, Xcel Energy tripled its rebates and it will maintain those levels this year. Rebates averaged about $5,000 per installation, Romaine said, but they can go as high as $8,000. The company had a $71 million budget for rebates in 2025.
In November, the Colorado Energy Office launched its Home Energy Rebate Program for low-and moderate-income households with rebates of up to $14,000 for heat pumps and energy efficiency upgrades.
Colorado also still offers a state tax credit of $1,000 for an installation, with the ability to take a third of that as an upfront discount on the system.
PRPA is doubling its rebate when paired with upgrading windows and insulation under its Efficiency Works program.
Tri-State, which provides power to rural cooperatives in four states including 15 in Colorado, offers rebates of $675 to $5,500 through its member co-ops. In 2025, it issued 1,864 rebates — a 46% increase over 2024.
In addition to the utility rebates a handful of municipalities and independent rural electric cooperatives have incentives ranging from $400 to $7,000. Glenwood Springs-based Holy Cross Energy, for example, has rebates of $3,500 for all co-op members and $7,000 for income-qualified households.
“I think that all these other programs are going to help fill the gap of losing those federal tax credits,” the Energy Efficiency Business Coalition’s Rothwell said.
Installers have gotten adept, PRPA’s Gibson said, in “stacking” these incentives to bring down the price of a system.
“That helps reduce that up-front cost for homeowners compared to the cost of a new gas furnace and new air conditioner, and that’s really what drives a lot of the adoption, is that lower up-front price,” Elephant Energy’s Richardson said.
Richard estimated that his customers are seeing about $10,000 in rebates and incentives, with the cost of an installation for a 2,000-square-foot home averaging $25,000.
“We installed a heat pump for a lower-income homeowner in Boulder a few weeks ago, and their net out of pocket cost was under $1,000,” Richardson said. “So, for lower-income homeowners it is incredibly affordable if you stack up the right incentives.”
Contractors are starting to specialize in heat pumps
While contractors are better at stacking rebates, Richardson said that in Massachusetts, where his company also operates, it is simpler because there are statewide rebates under the Mass Save program of up to $8,500 and $16,000 for income-qualified households.
The other key component is the heat pump boom is a growing adoption of the technology by HVAC companies. “The story that everybody tells is that the homeowner calls an HVAC contractor asking for a heat pump and is told heat pumps don’t work,” Rothwell said.
“There has been a shift,” Rothwell said. “Now there are specialists, heat pump contractors that are only selling heat pumps.”
Utilities are playing a major role in training and promoting heat pumps — which are more complicated to install than a furnace — among HVAC installers. Tri-State has its Trade Alley program, which provides training and cash bonuses for each install.
Xcel Energy held 14 training sessions last year with about 480 participants and saw the number of installers registered in its heat pump program rise 50% to 328 between mid-2025 and the end of the year.
The regional council of governments Power Ahead Colorado program includes $13 million for contractor training and support with the goal of developing 4,800 workers in building electrification.
“We’re really starting to see more offerings for training than we ever have,” Rothwell said. “I think that that’s just reflective of the interest of homeowners calling and asking contractors to install heat pumps. That’s what gets the contractors to listen, more than anything.”
Also priming contractor interest is that with the incentives an installer can make a better margin for a heat pump installation, Rotwell said.
Brady Bryce, PRPA’s distributed energy solutions manager, said, “2025 is really that moment where, after multiple years of contractor training and alignment of incentives, contractors were really able to pick it up and run with it, to stack all these opportunities for customers across a pretty large region,” Will heat pumps dominate the Colorado market in the future?
“There has definitely been some exponential growth in the last five years,” Xcel’s Romaine said. “The question everybody’s trying to figure out is if that is going to continue to grow, and if so, how much? That is yet to be determined.”