Heat pump vs gas furnace: running costs compared

Which is cheaper to run, and why (the verdict)

Whether a heat pump or a gas furnace is cheaper to run comes down to your local electricity-to-gas price ratio and the heat pump efficiency. A modern heat pump delivers roughly 2.5 to 4 times more heat per unit of energy than it consumes, so it often beats a 90%-efficient gas furnace on running cost — especially where electricity is reasonably priced (around $0.17/kWh) relative to gas (around $0.05/kWh of fuel energy). Where gas is very cheap or winters are extreme, the gap narrows. Upfront cost and incentives also shape the total.

The short version: for most US homes a heat pump is the cheaper or roughly tied way to heat, and it almost always cuts carbon. The decisive number is not the equipment label but the ratio of what you pay per kWh of electricity to what you pay per kWh of gas energy. Below we show the formula, the three cases that flip the answer, and a fully worked comparison you can reproduce in our heat pump savings calculator.

How efficiency works (heat-pump COP/SCOP vs furnace AFUE)

Heating equipment is rated on how much useful heat it returns per unit of energy you feed it. The two systems use different scales, and that difference is the whole story.

• A gas furnace is rated by AFUE (Annual Fuel Utilization Efficiency). A 90% AFUE furnace turns 90% of the gas it burns into delivered heat; the other 10% goes up the flue. AFUE can never exceed 100% because you cannot get more heat out than the chemical energy you burned.
• A heat pump is rated by COP (coefficient of performance) at a single condition, or SCOP (seasonal COP) averaged across a heating season. A heat pump does not burn fuel — it moves existing heat from outside air into your home — so its COP is comfortably above 1. The U.S. Department of Energy puts modern air-source seasonal performance at roughly 2.5 to 4.0.

That is why the comparison is lopsided per unit of energy: a SCOP of 3.2 means 1 kWh of electricity produces 3.2 kWh of heat, while a 90% furnace needs 1.11 kWh of gas energy to deliver 1 kWh of heat.

The heat pump's energy advantage is enormous. Whether that translates into a cash advantage depends entirely on the price you pay for each kind of energy — which is where the running-cost formula comes in.

The running-cost formula for each

Both systems must deliver the same annual heat demand (the useful heat your home needs, in kWh). The cost of supplying it is:

heat_pump_cost = annual_heat_demand / SCOP        * electricity_price_per_kWh
furnace_cost   = annual_heat_demand / AFUE         * gas_price_per_kWh

Two homes with identical heat demand can land on opposite verdicts purely on price. Notice the levers: the heat pump's bill scales with your electricity rate divided by its SCOP, and the furnace's bill scales with your gas rate divided by its AFUE.

If you would rather not run the arithmetic by hand, the heat pump savings calculator does it with your own demand, prices and SCOP, and also converts each result into CO2.

What tips the balance (electricity vs gas prices, climate, incentives)

Three factors decide the verdict, and only one of them is the equipment.

Electricity vs gas prices. This is the dominant lever. EIA residential electricity averages around $0.17/kWh but ranges from under $0.12 to over $0.30 by state, while delivered natural gas works out to roughly $0.04 to $0.06 per kWh of fuel energy. A low-electricity-price state, or a home with rooftop solar feeding the heat pump, pushes the heat pump well ahead.

Climate. A heat pump's SCOP drops in severe cold, so a home in a harsh climate should model a lower SCOP (closer to 2.5) and may rely on backup resistance heat on the coldest days. A 90% furnace, by contrast, holds its efficiency regardless of outdoor temperature.

Incentives. Rebates and tax credits do not change running cost, but they cut the net upfront cost and therefore the payback period. Price your own local programs into the install figure.

For a clean comparison of how much electricity each appliance pulls, see what uses the most electricity; for pairing a heat pump with self-generated power, are solar panels worth it and are home batteries worth it cover the economics.

Upfront cost and payback

Running cost is only half the decision. A whole-home air-source heat pump commonly costs from about $5,000 to $20,000 installed, depending on size, ductwork, brand and region, with cold-climate and ground-source systems at the top of that range. A gas furnace is typically cheaper to install, so the heat pump usually carries a higher upfront price.

Payback is driven by the net cost — the heat pump price after grants, minus what you would otherwise have spent on the alternative system — divided by the annual running-cost saving:

payback_years = net_extra_upfront_cost / annual_running_cost_saving

The catch is visible in the formula: where the annual saving is small (the US-average case below), payback on running cost alone can be very long, and incentives plus the carbon benefit do much of the heavy lifting. Where electricity is cheap or gas is expensive, the saving is large and payback is short. This is why a single national average is misleading — the answer is genuinely local.

Compare your running costs

We modelled the same home three ways to show how sensitive the verdict is, holding heat demand at 12,000 kWh/year and using the calculator's defaults of a SCOP of 3.2, a 90% gas furnace, $0.17/kWh electricity and $0.05/kWh gas energy.

Base case (US-average prices), run through our calculator:

• Gas furnace: 12,000 ÷ 0.90 × $0.05 = $667/year
• Heat pump: 12,000 ÷ 3.2 = 3,750 kWh → 3,750 × $0.17 = $637.50/year
• Annual saving: about $30 — modest, because cheap gas competes closely with this electricity price.
• CO2: (13,333 kWh gas × 0.18) − (3,750 kWh × 0.39) = 2,400 − 1,463 ≈ 0.94 tonnes saved/year.

Now hold everything constant and only change the electricity price:

The verdict swings from a clear heat pump win to a clear furnace win on electricity price alone — which is exactly why you should use your own numbers rather than an average. The carbon saving, meanwhile, stays positive across all three cases.

→ Compare your heat pump vs gas running costs in the calculator

The bottom line

For most US homes a heat pump matches or beats a gas furnace on running cost and almost always cuts carbon, because its SCOP of around 3.2 crushes a 90% furnace on energy per unit of heat. The decision flips only where electricity is expensive relative to very cheap gas. Versus electric resistance heating, the heat pump wins outright. Don't settle for an average — put your own heat demand, prices and a climate-appropriate SCOP into the heat pump savings calculator to see your real number.