Heat Pump Cost in Indiana (2026)

Indiana's energy economics create an unusual situation: both natural gas and electricity are cheap. Gas at $1.25/therm and electricity at $0.18/kWh produce a narrow operating cost gap. A 2,000 sqft home with a 90% AFUE gas furnace spends roughly $1,250-$1,650 per winter. The same home with a cold-climate heat pump (HSPF 10) spends roughly $1,400-$1,800 — a difference of $150-$300 per year. Multiply by 15 years and you're looking at a $2,250-$4,500 lifetime operating difference, which is roughly the premium a heat pump commands over a gas furnace replacement. This means the total cost of ownership over a system's life is close to a wash. For gas-heated Indiana homes, the decision is not about fuel savings — it's about when equipment needs replacement, whether you need air conditioning anyway, and your personal electrification goals.

Duke Energy Indiana is the state's largest electric utility, serving Indianapolis and the southern two-thirds of the state including Bloomington, Terre Haute, and Evansville — roughly 860,000 customers. Duke Indiana operates its own generation fleet with a mix of coal, gas, and growing solar. Indiana Michigan Power (I&M), an AEP subsidiary, serves Fort Wayne, Muncie, South Bend, and northeastern Indiana — roughly 460,000 customers. I&M has a significant wind portfolio with over 2,000 MW of contracted wind capacity. NIPSCO serves the northwestern corner of the state — the Calumet region including Gary, Hammond, Michigan City, and the Indiana suburbs of Chicago — roughly 470,000 customers. NIPSCO is rapidly transitioning from coal to renewable generation. Each utility has different rate structures; NIPSCO in particular has proposed time-of-use rates that could lower off-peak heat pump operating costs.

About 11% of Indiana homes — mostly in rural counties south of Indianapolis and in the northern agricultural belt — heat with propane or fuel oil. These homes are typically beyond natural gas distribution lines and face propane prices of $2.50-$3.50 per gallon for delivered heat. A heat pump converts that to roughly $1,400-$1,800 in electricity per winter, saving $1,200-$2,500 annually over propane. The payback period is 4-7 years. Some rural electric cooperatives (REMCs) offer energy efficiency programs that may include heat pump incentives — check with your specific co-op. For oil-heated homes (a small but real share at 2%), the savings are even larger because fuel oil prices in the Midwest have been structurally higher than propane on a per-BTU basis.

Indiana's Senate Enrolled Act 309 phases out retail-rate net metering for solar by July 2027, replacing it with avoided-cost compensation. This policy change has generated significant attention in Indiana's energy community, but it is specifically about solar generation compensation — it does not apply to or affect heat pump installations. Heat pumps are regulated as an end-use efficiency measure, not as a generation technology. There is no pending legislation that would change heat pump incentive structures in Indiana. The confusion between solar and heat pump policy is common but important to clarify: if you're installing a heat pump without solar, the net metering debate is irrelevant to your project.