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Heating and Cooling

Heat Pump vs. Furnace: Cost, Differences, and Recommendations

We’ve noticed that most discussions about heat pumps vs. gas furnaces are very unsatisfyingly boring: they never tell you what you should get! They just list some pros and cons and say “well it depends on you!”. That’s not very helpful.  

This article is different.  

The more we researched heat pumps, the more we realized that except for a few extremely rare scenarios, heat pumps are likely the better choice for the majority of households. Here’s why:

  • Heat pumps can save a lot of households money on their utility bills (details, exceptions and scenarios below)
  • Heat pumps can heat and cool (so they replace your A/C too)
  • Heat pumps don’t come with any carbon monoxide risk (“the silent killer”)
  • Heat pumps don’t come with any gas explosion risks
  • Heat pumps are more efficient than a furnace (their famous “300% efficiency”)
  • Heat pumps made today can work well down to -13F (very few places where people live get below that), in fact as we show below, Norway is one of the world leaders in heat pump installations per capita – yes, Norway. 

In particular, a heat pump is an absolute no-brainer if:

  • You have solar on your roof because your cost of electricity is very low (or zero most of the time) so a heat pump will save you a bunch of money on avoided gas costs
  • If you also need an A/C (that is, you’re installing a full HVAC system) because a heat pump replaces both things with one device, saving you a decent amount of money upfront
  • If your other option is propane based heating, electric resistant heating (baseboard heater) or other non-efficient heating
  • If you care about your carbon impact, because electricity has green sources while natural gas doesn’t, so a gas furnace guarantees fossil fuel use and carbon emissions.  

So this article makes the case for getting a heat pump, in particular, air source heat pumps. We’ve tried our best to share our research, link to many useful articles and videos, and explain our reasoning for why we think most households are better off getting a heat pump. 

Of course it’s still up to you what to get, but we think taking this clear, line-in-the-sand stance is more useful than throwing up our hands, shrugging, and saying “I don’t know, here are some basic definitions, you decide” (which we feel many articles on this topic do).  

We’ve done our best to link to sources and explain why we believe each claim we’re making, but of course, this is all just our opinion and every homeowner and household and person needs to decide on these purchases themselves. 

If you want to save time from reading this article and are considering getting a heat pump and simply reading the above has convinced you it’s at least worth a serious look, the most effective thing you can do is to call 2 – 3 local HVAC companies in your city and ask them the key questions: 

  • How much would an installed heat pump system vs. gas furnace cost? 
  • What have other customers with heat pumps said about it? Are they saving money? Is it heating enough? 
  • Are there local rebates in our area for installing a heat pump (there are in many places right now)

Contents: 

  • How heat pumps work vs. how furnaces work
  • Why a heat pump is a better choice for most homes
  • The only two reasons a furnace may be better for you

How Heat Pumps Work vs. How Furnaces Work

How Gas Furnaces Work

Furnaces are pretty simple to understand: they burn fuel (e.g. natural gas) to create heat, that heat is sent through a bunch of weaving metal tubes (a heat exchanger) which gets hot, and an “air handler” system blows air through those really hot metal tubes, creating a stream of warm air that’s blown into rooms in your house. Furnaces burn fuel of different types but the cheapest (and therefore most common) fuel in the U.S. is natural gas. There are also electric furnaces and oil furnaces, but they are less common.

Here’s a great diagram from the YouTube video linked below to visualize this:

This, as well as how variations of furnaces work like condenser furnaces, single stage vs. dual state, and more is explained succinctly and well in this 5 min YouTube video by AMRE Supply: 

How a Furnace Works | Repair and Replace

In terms of what matters for you: 

  • Burning gas comes with safety risks (namely, carbon monoxide poisining)
  • It also means you have a gas bill. In fact, gas furnaces are typically the biggest user of gas in a home, way more than gas stoves, and typically more than gas water heaters, meaning it’s the thing most responsible for high gas bills. This is more true the colder your climate is. 
  • Gas furnaces only heat, they don’t cool. So if you live in a place that gets hot, you’ll need a separate A/C unit. 

How Heat Pumps Work 

Most people haven’t heard of heat pumps and have no clue what they are or how they work. We’ll change that. 

Outdoor units of heat pumps sitting outside a building, just like A/C units (from energy.gov

In short, they work basically like an air conditioner that can also work backwards. Yes, that means heat pumps can both heat and cool your home and they can replace both a furnace and an air conditioner. Specifically, a refrigerant (basically a fluid) is cycled through coils that go outside and inside your home. In heating mode, the refrigerant is cooled before it goes outside, then sucks heat from the outdoor air and releases that heat inside and cycles back again. In cooling mode, it does the opposite: it sucks heat from your room (making your room colder) and releases that outside.

In more detail, heat pumps also use heat exchangers (like we discussed above for gas furnaces) to actually transfer the heat from the refrigerant to your home. But instead of burning a fuel to heat up the heat exchanger, in a heat pump, the refrigerant is turned into a high temperature vapor via a compressor, which uses electricity to compress the gas. When gasses compress they get hotter. That hot vapor flows through the heat exchanger, and a blower fan blows air through it. This heated air then circulates through your air ducts, again, just like a furnace.

Types of Heat Pumps

There are two types of heat pumps people talk about: air source heat pumps and ground source heat pumps. 

What we’re talking about throughout this article is air source heat pumps, which means, just like your A/C unit, the refrigerant cycles outside and exchanges heat with the outside air (drawing heat from it in heating mode, or expelling heat to it in cooling mode). 

But there are also ground source heat pumps, where piping takes the refrigerant into the ground outside your home or building and the refrigerant exchanges heat with the ground. They are used in colder climates when the ground has more heat than the outside air, but they are much more expensive to install and a lot less common. And, as we discuss at length below, modern air source heat pumps that you would buy today work really well in cold climates, down to -13F, which most inhabitable places do not reach often, are extremely popular in cold countries like Norway and Finland, and therefore should be fine for you. 

Finally, there are two types of air source heat pump configurations to consider: ducted and mini-split heat pumps. Ducted heat pumps work like the A/C units you see outside most single family homes: a single unit connects to the ducts in your home and pushes cold or hot air throughout the house. Mini-split heat pumps are smaller units with an outside unit that connects through the wall to an indoor unit that is attached to the interior wall of a room (like the wall A/C units you see in many hotel or motel rooms).

Benefits of Heat Pumps

So the end result for you is effectively the same as a furnace: hot air blowing through the vents of your house (for a duct based heat pump). The difference is heat pumps  just don’t need to burn any fuel (like natural gas) to do it, just electricity to run the fans and cycle the refrigerant around and compress it to make it hot and release it again to make it cold. The fact that heat exchangers don’t need to burn a fuel like natural gas to blow hot air through your home gives them their advantages

  • No gas costs, only electricity. For most homes, especially in colder places, the furnace is the biggest source of gas use, so removing it can dramatically cut your gas bill (think of how often your heater is on vs. your stove and how much more gas your heater likely uses, it’s a lot). 
  • No gas means no carbon monoxide risk from the heating system. Of course, if you have other gas appliances like a gas stove or water heater in your home, don’t throw away your carbon monoxide detectors quite yet! But each gas using appliances you remove means one less risk of carbon monoxide poisoning, which is incredibly dangerous and very often fatal. 
  • Because it’s not using a fuel, just cycling a refrigerant around, it’s energy efficiency is really high, commonly 300%. Meaning for each unit of energy a heat exchanger uses to run, it gives you 3 units of heat. 
  • For many homes and climates, the increased efficiency of a heat pump means it can save you money every month on your utility bills (detail below).

Useful Videos and Images To Further Learn How Heat Pumps Work

One of the best videos I’ve found to learn how heat pumps work is from This Old House: 

If you want an even more technical, engineering focused video, you can check this one out from The Engineering Mindset:

Although this diagram looks complicated, it’s one of the best to truly understand how a heat pump works (from the video above): 

Do Heat Pumps Work in Cold Temperatures? 

A resounding yes! This is one of the biggest myths about heat pumps – that they don’t work well in really cold temperatures, but as this article from Sealed explains, this myth is part of an old lingering reputation from how heat pumps were made in the  1980s. It’s no longer true. Modern day heat pumps can work great down to -13F (-25C). 

As Sealed explains, this is due to significant improvements in how key components in heat pumps are made, most importantly the compressor, which compresses the refrigerant to heat it up. These compressors are now variable speed (as opposed to just on and off) which allow them to work extra hard in cold temperatures.

How can a heat pump actually extract heat from the outside when it’s -13F degrees outside? 

Because heat always travels from hot to cold, and heat pumps can make their refrigerants really cold before sending it to the outside air. For example, as the This Old House YouTube video embedded above explains, an expansion valve lets the gas expand, which cools it down, and that can get the refrigerant down to -37 degrees Fahrenheit! So if the refrigerant, sitting at a frigid -37F is exposed to your outside air that’s -13F, the outside air is still hotter than the refrigerant and thus will warm it up. 

Heat Pumps Are Really Popular in Some of the Coldest Countries

If you’re still not convinced, consider that Norway — yes, super cold Norway – is the world leader in per capita heat pump installations. In Europe, the top 3 countries in heat pumps installed per capita are Norway, Sweden, and Finland, the coldest countries in Europe! 

Here’s the full chart of European heat pump installations per capita from resilience.org:

Why are countries with the coldest climates turning more and more to heat pumps? 

First, because, like we said, heat pumps work really well down to and outdoor temperature of -13F, and very few places that humans live get to -13F

For example here average temperatures in January (High/Low) from Oslo and Helsinki as well as two cold cities in the US: Anchorage Alaska and Minneapolis, Minnesota: 

  • Oslo, Norway: 32F/23F
  • Helsinki, Finland: 29F/20F
  • Anchorage, Alaska: 23F/11F
  • Minneapolis, Minnesota: 22/6F

Even Minneapolis, the coldest of those 4 cities, is seeing heat pump installations rise and has a program from their power company, Minnesota Power, promoting heat pumps. Those two facts would only be true if heat pumps worked in Minneapolis, which they do. On that second linked page, Minnesota Power even says what we’re saying in this article: that current heat pump technology has them working fine all the way down to -13F. 

Basically, unless you’re living in a city that’s colder than Minneapolis — or, said another way, a place where the temperature routinely goes lower than -13F — a heat pump can heat your home just fine. 

Second, places where it’s cold turn to heat pumps more because those people spend a lot of money on heating! If you’re in Miami where January’s average low is, I kid you not, 63F, you probably don’t think about your heating costs that much (by the way, you should still get a heat pump in Miami though because heat pumps are also air conditioners). But if you’re in Norway or Minneapolis, you spend a lot on heating, so being efficient saves you money

So if the coldest countries and states are seeing heat pump installations explode, it probably means heat pumps heat homes pretty well.

Efficiency: Why Heat Pumps Are So Much More Efficient

Gas furnaces are typically around 85% efficient with modern high efficiency gas furnaces running around 95% efficiency. Gas furnaces are never 100% efficient because you’re burning the gas and then trying to collect as much of that heat as possible, and you can never capture all of it (for example, you need to send the harmful gas like carbon monoxide away in a flue vent, or risk carbon monoxide poisoning, so that will by definition carry some of the heat with it). 

In contrast, it’s well documented that heat pumps are 300% or 400% efficient. 

How is that possible?

Because heat pumps aren’t burning anything to generate heat, they’re just moving a fluid around and transferring heat. The electricity used is just for moving this fluid around (and compressing it, to get it hot before it transfers that heat to your home) and running the fan that blows the hot (heating mode) or cold (cooling mode) air throughout your home. So you’re just using the refrigerant as a metaphorical conveyer belt, and moving it around in a loop, outside to inside, outside to inside. It doesn’t take that much energy to do that in comparison to burning a fuel. 

So for example, say your home needs 1000 kWh of heating in a winter month (this obviously varies drastically depending on where your home is located, it’s size, how well insulated it is, and what you set your thermostat to, but 1000 is a round number we can work with and in the range of how much heat a 1000 – 1500 square feet home in a mild climate may need). 

To output 1,000 kWh of heat, you’ll need 1,111 kWh of natural gas with a 90% efficient gas furnace. 

In contrast, a 300% efficient heat pump would only require 333 kWh of electricity to generate that 1,000 kWh of heat. 

So simply put, heat pumps are well known to be far more energy efficient than gas furnaces. 

But how does that translate to cost? 

Heat Pump vs. Furnace Cost to Operate

To properly calculate your exact heating costs using a heat pump vs. a gas furnace you need a lot of different inputs: 

  • Your climate zone 
  • The size of your house
  • What temperature you like to set your thermostat to during the day vs at night
  • How often you are home and using the heater
  • Cost of electricity for you
  • Cost of gas for you

Obviously that’s going to get complicated, so to be more helpful, we need to approximate. We’ve done that and here are some high level takeaways. Note that to get your exact cost of operating a heat pump, you need to call a local HVAC company and have them estimate the size of heat pump you need and help you figure out your monthly cost. Most will do this for free and most will give you an honest opinion of heat pumps vs. natural gas furnaces (because they don’t care as long as you go with them to install either one). 

Heat Pumps Are Typically Slightly Cheaper to Operate Than a Natural Gas Furnace

The roughest approximation can be done by noting that natural gas costs are often 2X – 3X cheaper than electricity on a per kWh basis. (You can deduce this by looking up residential natural gas prices on EIA.gov, and translating that cost, which is dollars per thousand cubic feet to dollars per kWh, by dividing by 293). Here is an example of some of the August 2021 prices in $/kWh: 

So if heat pumps are 3X – 4X more efficient than gas furnaces but gas is 2X to 3X cheaper than electricity, depending on where you live, running a heat pump (compared to a gas furnace) will be slightly cheaper or roughly equal to heating your home with a natural gas furnace. 

What’s important to note here is that the only reason natural gas furnaces compete at all with heat pumps on operating cost for heating is because natural gas is extremely cheap in the United States. If you live somewhere where natural gas costs are equal to or more expensive than electricity (I’m looking at you, Hawaii) chances are very high that a heat pump will be much cheaper. And, as the data below shows, if you’re heating your home with any other method (propane, fuel oil, baseboard heaters, etc. a heat pump will likely save you a lot). 

This is consistent by an analysis by Carbon Switch, who used NREL data to approximate how much money you’d save by switching to a heat pump from different existing heat systems: 

You can see that the average annual savings of a heat pump when you’re switching from a natural gas furnace is only $105. So just as we said, you’ll probably save a little bit compared to a natural gas furnace, but it’s roughly equal. 

(Aside: The above table from Carbon Switch also shows you that switching to a heat pump from any other source like a fuel oil furnace, electric furnace, baseboard heaters, or propane furances is bound to save you money. Why? Because all of these other fuel sources cost more than natural gas. Natural gas is cheap in the U.S., that’s the only reason gas furnaces have a shot at being cost competitive with heat pumps (despite 3 – 4X lower efficiency) 

Example of Two Houses: Milder Winters Mean More Potential Savings

Our conclusion of rough cost parity is also consistent with a comparison of two homes in Ohio that Nate the House Whisperer walks through in this video:

First he shows a mild winter year and we see an almost identical cost to operate, with the heat pump home coming in slightly cheaper (but not by much): 

The home on the left has a furnace and the home on the right has a heat pump (only a heat pump, not a dual fuel heating system with a backup furnace). You see the total cost to operate (gas + electric bill) is almost the same after a year. If anything, the heat pump house is slightly cheaper (but that is a negligible difference in the span of the year). He notes in the video that their county has $0.13/kW electricity prices, so right around the U.S. average. 

Then he looks at a milder winter: 

Now the heat pump house (right) is considerably cheaper to operate than the furnace only house ($250 less). The reason for this is that a milder winter means the refrigerant of the heat pump picks up more heat from the outdoor air (since it isn’t as cold outside) so the compressor so the refrigerant can get hotter faster and you don’t have to keep the heat pump on as long. 

Heat Pump vs. Furnace Cost to Install

Just like most of the details in HVAC and home improvement, the details matter in cost, but overall gas furnaces are typically in a slightly lower price range than heat pumps (but many situations may lead to a heat pump being similarly priced). 

How Much Does a Gas Furnace Cost to Buy and Install?

Various sources say that furnace installation costs about $4000 – $8000 for the system plus installation. With some sources saying replacing a gas furnace with another one can be as low as $2000. 

How Much Does a Heat Pump Cost to Buy and Install?

Note: At the time of writing, many utilities are offering rebates on heat pumps. After reading this section, call a few HVAC installers near you, ask about heat pump costs and also ask if there are rebates for installing heat pumps. 

The range for heat pumps is similar, although heat pumps come in different types and levels and some high end heat pumps can cost more than $10,000 installed (but those are often the most efficient as they can tune the amount of pumping they are doing instead of just on and off – like a dimmer switch vs a simple light switch). 

Here we’re only going to talk about standard split heat pumps, meaning they feed into your duct system just like a furnace (as opposed to mini split systems where a single wall unit is installed – like a hotel AC unit – that is connected to an outdoor unit that sits right outside the room or building). 

For example, this HVAC company’s YouTube video says heat pumps run from $5500 – $8,000 for an entry level heat pump (entry level includes well known brands like Trane and Carrier), $7,500 to $11,000 for mid range. You can see how that range has a lot of overlap with the typical gas furnace cost range. So the way to figure out the cost for you is to call several local HVAC companies. 

In that video, they say the difference between mid-range and entry level is mostly around single stage (either on or off) vs. two stage (on, partially on, fully on) so you have more control on how it’s pumping. These two stage heat pumps cost more up front, but because they aren’t just on or off and have a mid-stage, they are more efficient and can save you money during operation. 

This price range is confirmed by HVACDirect who says most families pay $7000 – $10,000 for a heat pump (installed). 

Again, talk to your local HVAC companies about your options and what makes sense for you. Also remember that heat pumps also act as A/C units, so you don’t have to buy an AC unit, which also cost between $3000 – $7000. So if you live in an area that also needs an A/C unit, buying a heat pump instead of a gas furnace and an A/C can save you thousands of dollars up front

Climate and Environment: Heat Pumps Are Definitely the More Carbon Friendly Choice

Finally, if you care about reducing your carbon impact and greenhouse gas emissions, heat pumps also win (hands down) on this front. The first reason is of course because for every unit of gas burned, a gas furnace releases slightly less than a unit of heat. But with heat pumps, for every unit of electricity consumed, they release 3 units of heat. So even if your electricity comes exclusively from fossil fuels (like gas does), a heat pump needs far less of it to heat your home. 

Second, electricity actually has a good chance of being produced with a renewable source. Gas doesn’t. 

For example, in 2020, 20% of US electricity generation was from renewable sources. And many states utilities generate even more carbon-free electricity. For example, Southern California Edison says nearly half its power is renewable and in northern California, PG&E says a whopping 93% of its electricity generation is from non-GHG emitting sources (carbon free). As a result, California as a state has often reached 95% or 97% renewable power generation at certain moments (these numbers vary because renewable power generation from solar and wind vary, but reaching nearly 100% of power generation from renewables is fantastic). 

Other states, like Vermont, South Dakota, Washington, Maine, Idaho and also have extremely high percentages (80% – 99%) of their electricity generated from non-GHG sources (renewables plus nuclear). Here is NEI data on power generation by source and state: 

Finally, of course, rooftop solar is exploding in popularity, and is the cheapest source of residential electricity today, so if you have rooftop solar, replacing a gas furnace with an electric heat pump can make your home heating nearly carbon free (you’ll need to heat at night, so if you don’t have a battery pack attached to your solar, that will draw power from the grid) and extremely low cost (since you’re generating your own electricity for “free”). 

Finally, in a bigger picture climate change perspective, heat pumps have been identified as a key part of the net-zero carbon emissions plan, because, experts agree, we need to move away from natural gas in order to hit net zero emissions. While there are renewable natural gas projects, they are niche and even if we one day maximized them, they’d provide only a small fraction of the US natural gas use. So experts are in agreement that to get to net zero and avoid catastrophic climate change, we need to electrify as much as possible, and keep producing more and more electricity from carbon free sources (renewables plus nuclear). That means moving away from gas furnaces and using heat pumps instead. You can learn more about this in this video from Vox about heat pumps:

Or from the book Electrify: An Optimist’s Playbook for Our Clean Energy Future  MIT Ph.D. Saul Griffith

Or the book Speed & Scale: An Action Plan for Solving Our Climate Crisis Now from famous venture capitalist John Doerr outlining all the ways we need to reduce carbon, including electrifying heating via heat pumps.

Basically if you want to help with climate change and the move to a net-zero carbon economy, choosing a heat pump over a gas furnace is one of the best personal choices about your home you can make. 

Final Thoughts: Which One Should You Buy? 

As we said at the beginning, a heat pump is the better choice for the vast majority of homes. That said, we see 2 situations where you may consider sticking with a gas furnace: 

  1. You are in an extremely cold place that routinely sees temperatures below -13F. Again, the vast majority of humans don’t live in places like this. In that case, you can still enjoy the benefits of a heat pump by getting a “dual fuel” system, basically a heat pump with a gas furnace as a backup. Most of the time, the heat pump will run (even in really cold places, temperatures below -13F are rare, most of the time it won’t get there), but when it gets really cold and you need extra heating, your furnace can help. Ask your local HVAC company if this makes sense for you. 
  2. You are extremely budget constrained, have the ductwork and setup for a gas furnace and need a replacement gas furnace or heating system for the cheapest possible upfront cost. Even then, we recommend first calling HVAC companies near you and asking if they install heat pumps and how much those cost relative to gas furnaces. Like we said above, many heat pump systems cost about the same as gas furnaces. Call HVAC companies and ask, they’ll be able to size out the systems for you.  

In fact, that is the best next step for everyone reading this article or considering whether or not to buy a heat pump: call 2 – 3 local HVAC companies and ask them these questions:

  1. What size heat pump do I need? 
  2. What would the fully installed cost of a heat pump for our home? What about a gas furnace, what’s the difference? 
  3. What have you heard from other customers that have a heat pump in this area? Do they save money? How much? 

Buying a Heat Pump is a No Brainer If You Are In These Situations

That said, if any of the following are true, choosing a heat pump vs a gas furnace is likely a no brainer:

  • You’re building a new home or also considering replacing your A/C unit. As we’ve said, heat pumps both heat and cool your home, so it’s one device that replaces both a gas furnace and an A/C unit, and thus likely to save thousands up front (and more long term). Call 2 or 3 local HVAC companies to ask about the price of: a heat pump install vs. gas furnace plus A/C. 
  • You have solar on your roof. Assuming your system is large enough, you’re generating your own electricity for “free” (free is in quotes because you pay for the solar installation up front, but after a few years, rooftop solar pays back its install cost via savings on your electricity bill, so after that it’s free) during the day, so overall your electricity bill is low and in particular during peak daytime hours, you’re likely generating more than you use, so heating (or cooling) your home during those hours could definitely be done for free. 
  • You are using an old-fashioned electrical heating system like baseboard heaters, space heaters, etc. Those just generate heat by heating up coils with electricity. They are nowhere near as efficient as a heat pump (and they don’t also replace your A/C) which generates 3 units of heat for every unit of electricity it consumes. You will save a lot on your electricity bill by switching to a heat pump.
  • You care about your carbon impact. As we said above, it’s well established that one of the most impactful things you can do to help society move away from fossil fuels and to renewable sources is replace anything that burns gas or fuel based fossil fuels (natural gas, propane, or gasoline) with electricity. We can generate electricity carbon free (see Vermont in the table above, for example) at low cost (often lower cost than fossil fuel based electricity) but we can’t get produce natural gas, gasoline or other liquid fuels from non-carbon sources. 

Again, if you want to see how all of this applies to you, including exactly how much a heat pump vs. a gas furnace would cost for you, the best thing you can do to get clarity is call 2 or 3 local HVAC companies. They’ll tell you what the cost of different heat pumps are, the installation costs, and more.