Are these tax credits meant to encourage people to replace functional equipment with different types, or are they meant to encourage people to replace broken equipment with a different type? (Or to encourage new construction to use a different type than typical)

Often, for light users, the payback time for switching to a more efficient heat system is longer than the expected lifetime of a new system, so it only makes sense to consider it when the current heating system is broken or when the current cooling system is broken, since a new heat pump could replace heating and cooling.

It's potentially different if you're a heavy user of heating.