Do Heat Pumps Really Save Money – Comprehensive Cost Comparison

Introduction – Do Heat Pumps Save Money

The very short answer is generally “Yes“. But there are 3 key factors that affect this answer: 1) availability of natural gas, 2) the comparative cost of electricity vs natural gas where you live. If you don’t have natural gas as an alternative then the answer is an unqualified yes.

Heat pumps are characterized by a coefficient of performance which measures the amount of heat delivered per unit of electricity used. and is higher than 2-3 compared to near 1 for electric heaters.

Are you considering investing in a heat pump and wondering if it can save you money compared to other heating systems? This article will provide you with a comprehensive cost comparison of heat pumps, natural gas furnaces, electric baseboard heaters, and oil furnaces.

We will explore the factors affecting the costs of these heating systems and help you make an informed decision. We’ll also tell you there are certain situations where heat pumps will NOT save money!

Background Information

A heat pump is a type of heating system that comes in various forms, such as air-source, ground-source, and water-source. Heat pumps work by moving heat from one place to another, making them more energy-efficient than traditional heating systems that generate heat.

Their high coefficient of performance (COP) means they can deliver more heat per unit of energy input than other heating systems.

Other heating systems include natural gas furnaces, electric baseboard heaters, and oil furnaces. Natural gas furnaces burn natural gas to generate heat, making them a popular and efficient option for home heating.

Electric baseboard heaters generate heat through electric resistance and are often used as supplemental heating in individual rooms. Oil furnaces burn heating oil to produce heat, making them a common choice in regions where natural gas is not readily available.

Cooling with a Heat Pump vs Traditional Air Conditioning Systems

Heat pumps not only offer an efficient heating solution but also serve as a cooling system, much like an air conditioner.

When operating in cooling mode, the heat pump essentially reverses its function, drawing heat from the inside of your home and releasing it outdoors to cool your interior space. This makes heat pumps a flexible option for climate control throughout the year.

The cooling efficiency of heat pumps is generally on par with that of traditional air conditioning systems, as both devices work on the principle of moving heat rather than generating it. This process results in comparable energy consumption and, subsequently, similar operating costs for both types of systems.

So where does the heat pump save money? Well that’s due to its incredible efficiency as a heating system for the winter. So even though you might think an AC and heat pump are the same in the summer, the heat pump will perform double duty and shine in the winter as the most efficient heater – bested only by a geo-thermal heat pump which we don’t cover in this article.

Factors Affecting Heating System Costs

Let’s talk a bit about the heating costs.

The efficiency and cost-effectiveness of a heating system can be influenced by factors such as the local climate, availability of fuel sources, the size and insulation of the home, and the fluctuating prices of fuels like natural gas, electricity, and heating oil.

The energy efficiency of a heating system, as well as regular maintenance and potential repairs, can also add to the total cost of a heating system.

Savings Comparison of Heat Pumps Vs Other Heating

The following table shows the annual costs of different heating systems in cold, warm climates and the average of the two figures:

Heating SystemAnnual Cost (Cold Climate)Annual Cost (Warm Climate)Average
Heat Pump$1,862$345$1,103
Natural Gas Furnace$2,536$470$1,500
Electric Baseboard$5,118$949$3,304
Oil Furnace$5,302$983$3,142

The initial investment required to install a heating system can vary significantly between the different types. Heat pumps generally have lower energy consumption than other heating systems, resulting in lower operating costs.

The costs of natural gas, electricity, and heating oil can significantly impact the operating costs of different heating systems.

The frequency and cost of maintenance and repairs can vary between heating systems. Some heating systems have a lower environmental impact, which may qualify homeowners for government incentives or rebates.

Efficiency Comparison

Above we mentioned COP. The Coefficient of Performance (COP) is primarily used for heat pumps and not directly applicable to other types of heating systems like natural gas furnaces, electric baseboard heaters, and oil furnaces.

These systems have their efficiency measured using other metrics such as Annual Fuel Utilization Efficiency (AFUE) for furnaces and Energy Efficiency Ratio (EER) for electric baseboard heaters.

However, for the sake of comparison, the table below presents an approximate conversion of efficiency metrics to COP for the four types of heating systems.

Heating SystemApproximate COP
Heat Pump2.0 – 4.0
Natural Gas Furnace0.8 – 0.98
Electric Baseboard1.0
Oil Furnace0.8 – 0.9

The first cost savings table provided earlier takes into account not only the efficiency of the heating systems but also the cost of the fuel, which is indeed an independent factor.

The efficiency of a heating system, as measured by metrics such as COP or AFUE, is just one aspect of the overall cost equation. The cost of fuel is another critical factor that significantly impacts the annual operating costs of a heating system.

Cost Of Fuel

For completeness we give the cost of the three types of fuel. Please note that these values can vary depending on regional prices, fluctuations in energy markets, and other factors. The costs are expressed in dollars per unit of energy, which allows for easier comparison.

Fuel TypeCost per Unit of Energy
Electricity$0.12 per kWh
Natural Gas$1.00 per therm
Heating Oil$3.50 per gallon

In this table, the cost of electricity is used as a reference for the heat pump, as it operates using electrical energy. Keep in mind that these values are only rough estimates, and actual costs may vary depending on your location and energy provider. Always consult local energy prices for a more accurate assessment of fuel costs in your area.

Cost Of Fuel In Common Units of Energy

To convert the fuel costs to a common unit of energy, kilowatt-hours (kWh), we can use the following conversion factors:

  • 1 therm of natural gas ≈ 29.3 kWh
  • 1 gallon of heating oil ≈ 40.7 kWh

Using these conversion factors, the table below presents an estimate of the cost of different fuel types in dollars per kilowatt-hour:

Fuel TypeCost per kWh
Electricity$0.12 per kWh
Natural Gas$0.034 per kWh
Heating Oil$0.086 per kWh

The combination of the efficiency and the costs per common unit of energy is what makes the heat pump cheaper than other kinds of heating.

Warning: Heat Pumps Will Not Save Money When This Happens

It is important to note that the cost savings associated with heat pumps can be significantly impacted when the outside temperature falls below the operating specifications of the heat pump. With modern heat pumps, you will worry about this when the temperature drops below -10 C or 15 F.

In extremely cold weather, the efficiency of the heat pump can decrease, as it becomes more challenging for the system to extract heat from the outside air.

Consequently, the heat pump may rely on backup or supplemental heating systems, such as electric resistance heaters, which can increase energy consumption and operating costs.

To maintain cost savings and energy efficiency in regions with very cold temperatures, it is crucial to select a heat pump designed for cold climates or consider a dual-fuel system that combines a heat pump with a more traditional heating system, such as a natural gas or oil furnace.

This setup allows the heat pump to operate efficiently during milder temperatures, while the furnace takes over during colder periods when the heat pump is less effective. By doing so, homeowners can still benefit from the energy efficiency and cost savings of a heat pump without compromising comfort during extreme cold spells.

UK Home Owners

Great news for UK households! The UK government has launched a Boiler Upgrade Scheme (BUS) in May 2022, encouraging households in England and Wales to replace their gas boilers with heat pumps or other low-carbon alternatives.

The scheme provides an upfront grant of £5,000 for air source heat pumps or £6,000 for ground source heat pumps. Eligibility criteria include being a homeowner or non-domestic building owner in England or Wales and replacing an existing fossil fuel boiler (so people with electric heating are out of luck) with a heat pump or biomass boiler.

The scheme excludes homes outside England or Wales, new build developments, social housing properties, and installations of hydrogen boilers and hybrid heat pumps. To apply, one must find a TrustMark or Microgeneration Certification Scheme-registered installer who will guide through the application process.

Other incentives, such as tax credits, rebates, and discounts, are available for those ineligible for the scheme.

Determining the Best Heating System for Your Home

When choosing a heating system, consider factors such as comfort, ease of use, and environmental impact. Analyze the upfront costs and potential long-term savings of different heating systems to determine the best option for your budget. Seek guidance from HVAC professionals to ensure the heating system you choose is the best fit for your home and individual needs.

Conclusion – Do Heat Pumps Really Save Money

In conclusion, heat pumps can offer significant cost savings compared to other heating systems, especially in cold climates. However, it’s essential to carefully consider your specific situation and consult with professionals before making a decision.

Staff Writer
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