Apply early: budget watchdog warns Ottawa's heat pump grant faces a funding shortfall

Still thinking about applying for Ottawa's heat pump incentive? Ottawa's budget watchdog warns the grant program could run out of money sooner rather than later.

In a report released Thursday, the Office of the Parliamentary Budget Officer (PBO) says that if all eligible Canadians applied for the program — roughly 244,000 households nationwide — it would cost the government $2.7 billion.

The PBO says that while it's unlikely that all 244,000 households will apply, the program is liable to face a shortfall even if only those expected to apply actually ask for the money.

The report says that as of mid-October 2023,10,000 households had been approved for or had received funding from the program. Based on that trend, the PBO estimates the program will run out of money before it runs out of applicants — unless the government increases its budget allocation from $750 million over the next five years to $797 million.

"Those who are on the fence … it's probably a good idea to send in their applications sooner rather than later," said Parliamentary Budget Officer Yves Giroux. "(That's) based on discussions we had with public servants."

In a media statement, the press secretary to Minister of Energy and Natural Resources Jonathan Wilkinson called the program a "success to date" but stopped short of saying it might be in line for more money.

"As is standard practice, [Natural Resources Canada] evaluates programs throughout their lifetime to ensure any decisions made about the program beyond its current timeline are in the best interest of Canadians, especially with regards to affordability and climate action," said Carolyn Svonkin.

Ottawa's Oil to Heat Pump program offers homeowners in all provinces grants to switch from home heating oil to electric heat pumps. The program is open to people who own their homes, have incomes at or below the provincial after-tax median and have purchased at least 1,000 litres of heating oil in the last 12 months.

Households can receive up to $10,000 for a qualified heat pump. Homeowners in Newfoundland and Labrador, Prince Edward Island and Nova Scotia, where the provincial governments co-deliver the program, can receive up to $15,000 in supplementary provincial grants and one-time bonus payments of $250.

Ottawa is encouraging other provinces to help co-deliver the program so that more Canadians can qualify for larger grants. But if other provinces sign on, that could deplete the program faster.

"So if there were more provinces to enter into the agreement with the federal government, then the pressure on the program would significantly increase, especially if it was to be a province with a large number of people who use oil as a heating fuel," Giroux said.

In recent years, the federal government has launched a suite of programs to help homeowners save money on their energy bills and reduce the carbon footprint of their homes.

Greenhouse gas emissions from buildings accounted for 13 per cent of Canada's total emissions in 2021 — about 87 megatonnes — making it the third-highest source of emissions after oil and gas production and transportation. Canada has vowed in its emissions reduction plan to slash emissions from buildings by 37 per cent by 2030 and achieve net zero by 2050.

In 2021, the federal government launched the Greener Homes Grant program, offering homeowners up to $5,000 for energy retrofits. The $ 2.6 billion program is supposed to last until 2027, or until the funds are depleted. Some suggest the money will run out this year.