Heat Pump vs Gas Furnace: Running Costs and Payback

Cost per kWh of heat for gas, oil, propane and heat pumps, the break-even electricity price, what COP and HSPF2 mean, and why backup heat matters.

2026-10-29 · 11 min read

Heat pump sales pitches tend to promise big savings, and gas utilities tend to say the opposite. Both can be right, because the answer depends almost entirely on two prices and two efficiency numbers. This guide shows how to compare the running cost of a heat pump with gas, oil, propane and electric resistance heat using your own bills, explains COP and HSPF2, and works through the cases where a heat pump saves a lot and the case where it may not save anything. The Heat Pump Savings Calculator does the same arithmetic with your numbers.

Step 1: how much heat does your home use?

You do not need a heat loss survey to start. Your current fuel bills already measure it. The useful heat delivered to your home is:

heat delivered = fuel used x energy per unit x system efficiency

Energy per unit comes from the US Energy Information Administration:

System efficiency is the AFUE (annual fuel utilisation efficiency) on the furnace or boiler label. Standard non-condensing gas furnaces are about 80%; condensing furnaces and boilers 90% to 98%; oil furnaces typically low to mid 80s; electric resistance 100%.

A home that burns 600 therms a year for heating in an 80% furnace receives 600 x 29.31 x 0.8 = 14,068 kWh of heat. Use the heating part of your gas: subtract a summer month's use, multiplied by 12, from the year's total to remove water heating and cooking.

If you already know your heat load from a survey or a heat loss calculation, the calculator also accepts it directly in kWh.

Step 2: what a heat pump needs to supply it

A heat pump moves heat from outdoors to indoors rather than making it, so it delivers more heat than the electricity it uses. The ratio is the coefficient of performance (COP). A COP of 3 means 3 kWh of heat for every 1 kWh of electricity.

COP falls as the outdoor temperature drops, so what matters is the average over the whole heating season, the seasonal COP (SCOP). In the US, heat pumps are rated by HSPF2, the heating seasonal performance factor, in Btu of heat per watt-hour of electricity. Because a watt-hour is 3.412 Btu:

seasonal COP = HSPF2 / 3.412

The federal minimum for split-system heat pumps since 2023 is HSPF2 7.5, a COP of 2.2. HSPF2 9 is about 2.6 and HSPF2 10 about 2.9. HSPF2 is calculated for a moderate climate (DOE climate region IV), so real seasonal COP is lower in very cold places and higher in mild ones. Ask an installer for the expected seasonal COP in your climate, not the COP at 47 °F printed on the data sheet, which is the best case.

On the coldest days many systems switch on electric resistance strips, which run at COP 1. The calculator lets you put a share of the season's heat on backup.

heat pump electricity = heat x (1 - backup share) / SCOP + heat x backup share

For the 14,068 kWh home with a SCOP of 2.8 and 5% backup: 14,068 x 0.95 / 2.8 + 14,068 x 0.05 = 5,476 kWh.

Step 3: compare the cost of a kWh of heat

The clearest way to compare fuels is the cost of one kWh of delivered heat:

cost per kWh of heat = fuel price / (energy per unit x efficiency)

With prices close to the EIA's October 2026 outlook (residential electricity about 18 cents per kWh for 2026; for the 2026-27 heating season about $1.40 per therm of gas, $5.40 per gallon of heating oil and $2.50 per gallon of propane):

The table explains most of the arguments about heat pumps. Against oil, propane and resistance heat, a heat pump is far cheaper per kWh of heat. Against gas at these prices, it is roughly level, and depends on the details.

Worked examples

Each example uses a heat pump with a seasonal COP of 2.8, 5% backup heat, 18-cent electricity and a $14,000 installed cost with no incentives.

The pattern is consistent: oil and resistance heat are strong cases, propane depends on the install cost, and gas is marginal at average US prices.

The break-even price

For gas, it helps to know how close the decision is. The calculator reports the electricity price at which both systems cost the same:

break-even electricity price = current yearly cost / heat pump kWh

For the 80% gas furnace: $840 / 5,476 kWh = 15.3 cents per kWh. If you pay less than that for electricity in winter, the heat pump is cheaper to run; above it, gas is. Turned around, the heat pump wins if gas costs more than $1.64 a therm.

Several things can move a gas home below the break-even line:

• A better heat pump or milder climate. At a seasonal COP of 3.5, the 80% gas home saves $26 a year instead of losing $146.
• A cheaper winter electricity rate. Some utilities offer heat pump or time-of-use rates. At 12 cents per kWh and a COP of 3.2 with no backup, the same home saves $312 a year.
• Replacing air conditioning at the same time. A heat pump is also an air conditioner. If your AC is due for replacement anyway, the extra cost of choosing a heat pump instead may be a few thousand dollars, which changes the payback completely.

Why COP matters more than anything

Seasonal COP is the number with the most uncertainty and the most effect. For the oil home, savings range from $1,219 a year at COP 2.0 to $1,898 at COP 3.5. For the gas home they range from -$489 to +$26. The calculator's sensitivity table shows this for your inputs.

Backup heat matters in the same way. If the oil home's heat pump is undersized and covers 20% of the season with resistance strips, its electricity rises from 7,214 kWh to 9,000 kWh and the saving falls to $1,350. Sizing the heat pump for your design temperature, often with a cold-climate model, keeps backup use low.

Emissions

Using EPA's 2025 emission factors (5.31 kg CO₂e per therm, 10.24 kg per gallon of oil, 5.74 kg per gallon of propane) and the US average grid from eGRID2023 (0.352 kg per kWh), the heat pump cuts emissions in every example: from 3.19 to 1.93 tonnes a year against 80% gas, from 5.63 to 2.54 tonnes against oil, and from 5.27 to 2.05 tonnes against baseboards. The gap is largest on clean grids such as New England, upstate New York and California and smallest on coal-heavy grids. For the full household picture, see how to calculate your carbon footprint.

Incentives in 2026

The federal section 25C energy efficient home improvement credit, which covered up to $2,000 of heat pump costs, ended for property placed in service after 31 December 2025 under the One Big Beautiful Bill Act. State energy offices, utilities and some local programmes still offer rebates; enter them in the calculator's incentives field and check IRS guidance if your installation straddled the deadline.

Before you get quotes

1. Pull a year of fuel bills and separate heating from other uses.
2. Note your current system's AFUE from its label or model number.
3. Run the Heat Pump Savings Calculator at COPs of 2.5 and 3.0 to see the range.
4. Ask installers for a heat load calculation (Manual J in the US), the expected seasonal COP in your climate, and how much backup heat they expect.
5. If you are considering solar too, see solar payback: a heat pump raises winter electricity use, which changes how much solar you can use yourself.

Sources

• US Energy Information Administration, "Units and calculators explained: British thermal units": heat contents of heating oil, propane, natural gas and electricity.
• US Energy Information Administration, Short-Term Energy Outlook, October 2026: residential electricity, natural gas, heating oil and propane price forecasts.
• US Department of Energy, energy conservation standards for central air conditioners and heat pumps (10 CFR 430.32), effective 2023: HSPF2 minimums.
• US EPA, GHG Emission Factors Hub (January 2025), including eGRID2023 electricity emission rates.
• One Big Beautiful Bill Act (Public Law 119-21, 2025): termination of the section 25C credit for property placed in service after 31 December 2025.
• Worked examples computed with the RedBison Heat Pump Savings Calculator.

Open the Heat Pump Savings Calculator