Heat Pump & Hybrid Heating Rebates for PSE&G Customers | PSE&G Building Decarbonization Program
Many New Jersey homeowners are in a similar situation:
• Their air conditioner is aging or struggling
• Their furnace is nearing replacement
• They want a more efficient alternative to combustion heating
• They’ve heard about heat pumps — but aren’t sure what’s involved
The good news: many homes in the PSE&G service area are well-suited for heat pump upgrades, and the Building Decarbonization program is designed to support the most common upgrade paths.
What a Heat Pump Is (in Plain English)
A heat pump is an electric system that moves heat instead of creating it by burning fuel.
• In winter, it pulls heat from the outdoor air and brings it inside
• In summer, it works like a high-efficiency air conditioner
• One system handles both heating and cooling
• No on-site combustion is required
Because heat pumps transfer energy rather than generating it, they are more energy efficient than traditional combustion-based systems when properly designed for the home.
Homes That Are Often the Easiest Fit
Many of the smoothest heat pump upgrades start in homes like these:
• Homes with central air and existing ductwork
• Homes with a forced-air furnace
• Homes where the air conditioner is older or due for replacement
• Homes with larger open areas or fewer small closed-off rooms
• Homes planning an HVAC replacement anyway
If that sounds like your home, you’re often a strong candidate for PSE&G incentives and a straightforward upgrade path.
About Electrical Upgrades (A Common Question)
A lot of homeowners ask about electrical capacity — and it’s a fair concern.
Most homes in our area do require some level of electrical upgrade to support a heat pump system.
That’s expected — and it’s specifically addressed in the PSE&G incentive structure.
Depending on the project pathway, PSE&G offers incentive support for qualifying electrical upgrades needed to install a heat pump or hybrid system.
Electrical work isn’t a barrier — it’s a planned part of many successful heat pump projects, and we help homeowners understand what’s required before any decisions are made.
PSE&G Building Decarbonization Incentives
PSE&G’s Building Decarbonization program provides rebates and adders for qualifying heat pump projects. Incentives are structured as a percentage of project cost, capped at defined maximums depending on the pathway.
PSE&G Clean Heat Building Decarbonization Incentive Program– Full Displacement (Cold-Climate Heat Pump)
Best for: Homes where the heat pump will handle most or all heating and cooling.
What it means: The Clean Heat pathway supports installing a cold-climate heat pump that becomes the primary heating system for the home. In many cases, this replaces an older furnace or boiler as the main source of heat, while providing high-efficiency air conditioning as well.
This pathway typically offers the highest incentive levels and works best in homes with ductwork, open layouts, or strong insulation and air sealing.
PSE&G Clean Heat Incentives:
Market-rate customers:
Lesser of $10,000 or 50% of project cost
Income-eligible (LMI) customers:
Lesser of $12,000 or 60% of project cost
Possible adders (when applicable):
• Additional heat pump units: up to $2,000 per additional ccASHP
• Re-ducting: up to $2,000
• Decommissioning: up to $2,000
PSE&G Dual Heat Building Decarbonization Incentive Program – Dual-Fuel Heating (Heat Pump + Existing System as Backup)
Best for: Homeowners who want to add a heat pump while keeping an existing gas system for backup.
What it means: The Dual Heat pathway supports installing a heat pump alongside an existing gas furnace or boiler. The heat pump handles most heating and cooling, while the gas system remains available during extreme cold or peak demand periods.
Integrated controls manage how the systems work together, allowing homeowners to reduce reliance on combustion heating without removing it entirely.
PSE&G Dual Heat Incentives:
Market-rate customers:
Lesser of $5,000 or 50% of project cost
Income-eligible (LMI) customers:
Lesser of $6,000 or 60% of project cost
Required adders:
• Integrated controls: up to $1,500 per unit (maximum two units)
PSE&G Hybrid Heat Building Decarbonization Program – Partial Displacement
Best for: Phased upgrades or partial electrification.
What it means:The Hybrid Heat pathway supports installing a heat pump to supplement an existing heating system, rather than fully replacing it. This is often used to improve comfort in specific areas of the home or to begin electrification in stages.
It’s a common starting point for older homes, homes without full ductwork, or homeowners who want flexibility over time.
PSE&G Hybrid Heat Incentives:
• Market-rate customers:
Lesser of $2,000 or 30% of project cost
• Income-eligible (LMI) customers:
Lesser of $3,000 or 40% of project cost
Integrated controls are required for hybrid configurations.
PSE&G Ground Source Heat Pump Building Decarbonization Program (GSHP)
Best for: Homes with sufficient outdoor space and long-term upgrade plans.
What it means: Ground Source Heat Pumps (also called geothermal systems) use stable underground temperatures to heat and cool the home. These systems are highly efficient and provide consistent comfort year-round.
Because installation is more involved, this pathway is typically suited for homeowners planning a major system upgrade and looking for long-term performance.
• Gas-heated homes:
Lesser of $3,000 per 10,000 BTUh or 50% of project cost
• Delivered-fuel homes:
Lesser of $4,000 per 10,000 BTUh or 50% of project cost
• Income-eligible bonus:
Up to $1,000 per 10,000 BTUh or +10% of project cost
Heat Pump Water Heaters
• $750 rebate per qualifying integrated heat pump water heater
Financing Options
PSE&G offers up to $50,000 worth of on-bill repayment and 0% interest financing options for qualifying projects.*
*Financing is available to qualified borrowers and subject to utility approval and program terms.
Why the Home Itself Matters for Heat Pump Performance
Heat pumps perform best when they’re installed in homes that are tight, well-insulated, and able to hold conditioned air.
That doesn’t mean your home has to be perfect — but it does mean that:
• Insulation levels matter
• Air leakage matters
• Distribution and layout matter
In a well-sealed, well-insulated home, a heat pump can:
• Maintain more even temperatures
• Cycle more efficiently
• Deliver better comfort across rooms
• Operate closer to its intended design performance
This is why heat pump upgrades are often most successful when they’re planned as part of a whole-home approach, rather than treated as a standalone equipment swap.
Additional Incentives for Improving the Home
Many homeowners are surprised to learn that additional utility incentives may be available for improvements that help a heat pump perform at its best, such as:
• Insulation upgrades
• Air sealing
• Duct improvements
• Other home performance measures
In some cases, these improvements can be completed before or alongside a heat pump installation — and may qualify under separate utility programs.
A Home Energy Audit helps identify:
• Which improvements will have the biggest impact
• Which incentive programs apply
• How upgrades can be sequenced logically
• Where incentives may stack or complement one another
The goal isn’t to do everything at once — it’s to make smart, coordinated upgrades that improve comfort and performance over time.
Why We Always Start with a Home Energy Audit
A Home Energy Audit is the foundation for a successful heat pump project.
It allows us to:
• Understand how your home currently uses and loses heat
• Identify the right heat pump or hybrid pathway
• Flag insulation or air sealing opportunities that improve performance
• Confirm eligibility across multiple incentive programs
• Help you prioritize upgrades based on comfort, practicality, and incentives
From there, you can decide what makes sense now — and what can wait.
Putting It All Together
Heat pumps are powerful tools — but they work best when:
• The home can hold heat
• The system is matched to the layout
• Incentives are coordinated intentionally
• The plan is based on real data, not assumptions
That’s exactly what the audit is designed to provide.
Schedule a Home Energy Audit to explore whether a heat pump — and which supporting improvements — make sense for your home.
Ready to Explore Your Options?
If you’re considering a heat pump upgrade under PSE&G’s Building Decarbonization program, the first step is understanding what works best for your home.
Schedule a Home Energy Audit to get started.
