The Parliamentary Budget Officer estimates that Ottawa’s program to transition households from heating oil to heat pumps could cost $797 million over the course of the program, in line with the $750 million budget allocation.
However, the total cost could reach $2.7 billion if all eligible households successfully apply.
The Oil to Heat Pump Affordability (OHPA) program was first launched in 2022 and, according to the 2023 budget released last March, the five-year cost was set at $250 million by the end of the 2026/27 fiscal year.
In November’s fall economic statement, the government increased the budget by $500 million for the enhanced OHPA program, bringing the total to $750 million.
This additional money was reallocated from an existing program under Environment and Climate Change Canada.
This version of the program is offered in Newfoundland and Labrador, Prince Edward Island, and Nova Scotia.
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In other provinces, residents are eligible to apply for the original version of OHPA, a grant of up to $10,000 from the federal government to help switch from heating oil to a heat pump.
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According to the Parliamentary Budget Officer (PBO), around 10,000 households across Canada were approved and/or received funding through the OHPA between March 2023 and mid-October 2023.
If this trend continues, the PBO estimates the program will cost $183 million at the end of this fiscal year and then $205 million each year until the program ends at the conclusion of the 2026/27 fiscal year, for a total of $797 million.
To qualify for the OHPA program, households must have after-tax income at or below the median level and must purchase more than 1,000 liters of heating oil per year, among other criteria.
Based on this, the PBO says there are up to 244,000 households that could qualify for the OHPA program. If all of these households successfully applied for the program, the PBO estimates it would cost $2.7 billion.
The PBO notes that in the fall economic statement, the government mentioned that the program could be expanded to include homes heated by natural gas.
If this expansion were to occur, the PBO estimates that more than 1.6 million households would meet the relevant program criteria.
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