Heat Pump vs Gas Furnace: Which Is Cheaper to Run?

If you're replacing a furnace or building a new home, the heat pump vs gas furnace question comes down to one thing: which costs less to run? The answer depends on three numbers — your local gas price, your electricity rate, and your climate. This article walks through the comparison without assuming one answer is right for everyone.

A gas furnace converts fuel to heat at its AFUE efficiency rating. A 90% AFUE furnace turns 90% of the gas energy into heat in your home. At $1.20 per therm, the effective cost per 100,000 BTU of delivered heat is $1.20 ÷ 0.90 = $1.33.

A heat pump moves heat rather than creating it. Its HSPF rating tells you how many BTU of heat it delivers per watt-hour of electricity. An HSPF 9 heat pump produces 9,000 BTU per kWh. At $0.14/kWh, the cost per 100,000 BTU of delivered heat is (100,000 ÷ 9,000) × $0.14 = $1.56.

In this example, gas wins. But change one number and the answer flips.

The "break-even" electricity price — where a heat pump and gas furnace cost the same to run — depends on the gas price and the heat pump's efficiency. For an HSPF 9 heat pump vs a 90% AFUE furnace:

| Gas Price ($/therm) | Break-Even Electricity ($/kWh) | Heat Pump Wins When Electricity Is... |

|---------------------|-------------------------------|--------------------------------------|

| $0.80 | $0.07 | Below $0.07/kWh |

| $1.00 | $0.09 | Below $0.09/kWh |

| $1.20 | $0.11 | Below $0.11/kWh |

| $1.50 | $0.13 | Below $0.13/kWh |

| $2.00 | $0.18 | Below $0.18/kWh |

For a higher-efficiency cold-climate heat pump (HSPF 12), the break-even electricity price is about 33% higher — making the heat pump competitive against gas at typical US electricity rates even when gas is relatively cheap.

The average US residential electricity rate is $0.14-$0.16/kWh. The average US residential natural gas price is $1.00-$1.30/therm. In that range, a standard HSPF 9 heat pump and a 90% AFUE gas furnace are roughly comparable — neither has a decisive operating cost advantage. The decision comes down to equipment cost, cooling needs, and personal preference.

Heat pumps have an unambiguous operating cost advantage in these situations:

1. You currently heat with oil, propane, or electric resistance. These fuels are 2-4× more expensive per delivered BTU than natural gas. A heat pump saves $1,500-$4,000 per year in these cases — enough to pay back the installation in 3-5 years.

2. You need AC replacement anyway. A heat pump provides both heating and cooling. If you're replacing a 15-year-old central AC and furnace together, the combined avoided cost ($8,000-$12,000) can make the heat pump effectively free or even cheaper than separate units. This is the most overlooked part of the heat pump economics.

3. Your gas prices are above $1.50/therm. Some regions — particularly the Northeast and parts of California — see natural gas prices well above the national average. At $1.80/therm, even a standard HSPF 9 heat pump beats gas at typical electricity rates.

4. You have access to time-of-use electricity rates. Some utilities offer overnight rates of $0.06-$0.08/kWh. A heat pump running mostly during those hours dramatically shifts the cost comparison in its favor.

Gas furnaces remain the cheaper operating choice when:

1. Natural gas is under $1.00/therm. Parts of the Midwest, Texas, and the Mountain West see gas prices this low. At $0.80/therm, gas is hard to beat on operating cost alone.

2. Your electricity rate is above $0.18/kWh. Parts of California, the Northeast, and Hawaii have high electricity rates that tilt the comparison toward gas, especially with a standard-efficiency heat pump.

3. You have a relatively new, high-efficiency gas furnace. Replacing a 5-year-old 96% AFUE furnace with a heat pump rarely makes financial sense on heating savings alone. The avoided replacement cost argument disappears when the existing equipment has years of life left.

4. Your home lacks adequate insulation. A heat pump delivers heat at a lower temperature than a gas furnace. In a poorly insulated home, the heat pump may need to run almost continuously or engage expensive backup resistance strips. Fix the insulation first — it improves the economics of any heating system.

A common objection is that heat pumps don't work in cold weather. This was true 20 years ago but no longer applies to modern equipment.

Modern cold-climate heat pumps maintain 100% capacity at 5°F and continue operating to -15°F or lower. Below those temperatures, electric resistance backup strips engage — adding to operating cost but maintaining comfort. In practical terms, even in Minnesota or Maine, a cold-climate heat pump handles 95%+ of annual heating hours without backup strips. The backup cost is small enough that the annual savings over oil or propane remain large.

For natural gas comparisons in very cold climates: a dual-fuel system (heat pump for moderate cold, gas furnace for extreme cold) can capture the best of both — efficient heat pump operation most of the year with gas handling the coldest days. This configuration is more expensive to install but may optimize both cost and comfort.

Operating cost is important, but it's not the only consideration:

• Carbon emissions: A heat pump powered by a grid with even moderate renewables produces less CO2 per BTU of heat than burning gas on-site. As grids decarbonize, this advantage grows automatically — your heat pump gets cleaner over time without any equipment changes.

• Indoor air quality: Gas furnaces produce combustion byproducts (carbon monoxide, nitrogen dioxide) that require proper venting. Heat pumps have no on-site combustion, eliminating this indoor air quality concern.

• Cooling included: A gas furnace needs a separate air conditioner for summer. A heat pump handles both — one system instead of two, one maintenance schedule, one replacement cycle.

• Comfort profile: Heat pumps deliver lower-temperature air over longer cycles, which some homeowners find more comfortable (fewer hot/cold swings). Others prefer the blast of hot air from a gas furnace. This is genuinely a matter of personal preference.

The comparison comes down to your specific numbers. Use our Heat Pump Cost & Savings Calculator to plug in your home size, climate, current fuel, local utility rates, and installation cost. It shows annual operating costs for both systems, the payback period, and whether the verdict is a strong fit, marginal savings, or gas wins at current prices. No signup, no sales pitch — just the math.