The capacity of a heat pump declines as the outside air decreases and more frequent defrost cycles are required. A "balance point" calculation is used to determine the temperature at which the HP can no longer provide all the heat required to heat the space. At this "balance point" strip heat or in the "dual-fuel" application, a furnace is brought on to supplement the system. There is then a point even lower in temperature where the compressor should be "locked out", as it is no longer cost effective to operate. Yes heat pumps work when it is below freezing. lc
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