From Heating Oil to Heat Pump: One Homeowner's Savings Story
Heating and cooling your home make up the biggest chunk of your home's energy costs. But not enough people are considering a heat pump as a solution.
The Energy Information Administration data shows 31% of energy consumption comes from air conditioning and space heating. It's no wonder CNET's latest energy cost survey found 78% of Americans are stressed out about their utility bills.
While these energy-efficient HVAC systems have gained popularity in recent years -- outpacing gas furnaces for the past three years -- the same CNET survey also showed only 14% of respondents plan to upgrade to a heat pump to help reduce those energy costs.
At CNET, we are big fans of heat pumps because of their efficiency and ability to both heat and cool your home by transferring heat rather than generating it. While heat pumps are often advertised as a money-saving home upgrade, the actual savings depend on where you live, electricity rates and the HVAC system you're replacing.
So, how much can you really save with a heat pump? We asked home electrification expert and Pennsylvania homeowner Wael Kanj, who is also a senior researcher at Rewiring America, a nonprofit that advocates for home electrification efforts.
A heat pump case study: Pennsylvania
Heat pumps are an energy-efficient way to keep your home comfortable year-round. Heat pumps run on electricity and move heat from inside your home to outside to cool it. Then it reverses the process for heating by pumping the heat inside.
We spoke with a homeowner in Pennsylvania who tracked their heating and cooling costs for the past nine years. The home was built in the late 1950s and used an air conditioner and heating oil before installing a heat pump in January 2022.
Prior to installing a heat pump, the homeowner's electricity costs included air conditioning, lights and home appliances. In 2019, the homeowner completed an energy audit to evaluate the home's efficiency and made weatherization improvements in 2020.
We reviewed their energy cost data to assess the overall energy savings from switching to a heat pump compared with using electricity and heating oil.
Before installing a heat pump, the homeowner's average electricity bill totaled $138 per month. After the heat pump, their average bill increased to $153. While the homeowner's total electricity costs increased, they saved on total heating and cooling expenses by installing a heat pump. Here's how.
Total energy costs
The following table displays the total costs for heating and electricity from 2016 to 2024. There's a significant decrease in overall costs after heat pump installation in 2022.
Year
Annual energy cost
2016
$2,800
2017
$2,700
2018
$4,000
2019
$3,050
2020
$2,100
2021
$2,500
2022
$1,700
2023
$1,900
2024
$1,850
Does a heat pump save you money?
The short answer is yes, heat pumps save you money. But how much you save depends on the system you're replacing, how much energy you use and where you live.
Your electricity bill might go up because heat pumps use electricity for both heating and cooling. But heat pumps will save money overall because you won't pay for heating fuels. Natural gas is cheaper than delivered fuels, like propane or heating oil. So if you're replacing delivered fuels, you will save more than someone replacing a natural gas heating system.
You can determine your home's potential energy savings using the Energy Star calculator or Rewiring America Personal Electrification Planner.
Energy savings depend on where you live
As mentioned, location plays a big role in potential heat pump savings due to the climate, home size, insulation and energy costs.
In cold climates where heat is used more frequently, those using delivered fuels will save more money with a heat pump than those using natural gas. However, some are concerned that extreme cold temperatures affect heat pump efficiency.
"A lot of folks will probably hear heat pumps don't work where it's really cold. And that's just not true," Kanj said. "Many of the modern heat pumps work into negative Fahrenheit temperatures."
For example, the Mitsubishi H2i still keeps working down to minus 13 degrees Fahrenheit. Below these temperatures, heat pumps can lose efficiency and need more energy to operate.
Electricity costs in your area can also impact how much you save with a heat pump. Homes with poor insulation or drafty doors and windows may use more electricity to maintain indoor temperatures. Kanj recommends a home energy audit to make your home as efficient as possible.
Expensive electric bills might be an issue for those in states with high rates, such as Hawaii, Connecticut and Texas. But heat pumps are more efficient than traditional systems, so it may not be as much as you think. For example, the Pennsylvania homeowner's electricity bill increased by only $15 after switching to a heat pump, and they still saved money overall by eliminating heating oil costs.
It depends on your heating fuel
The type of fuel you use for heating impacts how much money you can save with a heat pump.
"If folks are using delivered fuels in their household, then we think there's a high likelihood those would save by switching to a heat pump," Kanj said. "Folks in the southeast and areas with more tempered climates have a higher likelihood of saving money too."
The homeowner from the Pennsylvania case study saved $800 in their first year with a heat pump compared with the previous year using air conditioning and heating oil.
The estimated annual savings from switching to a heat pump from delivered fuels is $810 more than switching from natural gas. "The savings in natural gas is less, but if you live in a place where you use more air conditioning a heat pump could help you save more," Kanj said.
Heat pumps may not drastically reduce your bill if you already have cheap heating fuel, like natural gas. But prices are expected to rise in 2025. So installing a heat pump offers long-term energy efficiency, savings and potential environmental benefits when powered by renewable sources like solar energy.
Heat pump savings comparison
Here's how much you could save with a heat pump based on your current fuel type, according to Rewiring America.
Fuel type
Annual estimated savings
Delivered fuels (propane or heating oil)
$840
Furnace or baseboard heat
$780
Natural gas
$60
How much does it cost to run a furnace and air conditioner?
Heating and cooling costs vary, and your heating fuel also plays a major role.
Natural gas, electricity, propane and heating fuel are the most popular heating fuels, but usage varies by region. Natural gas is the most common heating fuel, used in 47% of US households. It's the main source in the northeast, the Midwest and the West. Electricity is more common in the South where winters are milder.
Generally, heating and cooling costs are more expensive in regions with extreme temperatures. For example, Massachusetts uses more heat in the winter than warmer climates like Florida. This means homeowners in colder climates spend more on heating, while those in hotter areas pay more for air conditioning.
The type of heating fuel also impacts your costs. Natural gas tends to be cheaper than electricity or delivered fuels, like propane and oil.
Here's an idea of how location and heating source affect costs based on EIA data.
State
Average natural gas usage (million British thermal units)
Average annual heating cost
Primary heating source
Details
Hawaii
30.3
$1,538
Minimal heating (6%)
Warm climate, only 57% homes use AC
Alaska
125.1
$1,509
Space heating (99% use)
Cold climate, only 7% homes use AC
North Dakota
94.3
$1,648
Natural gas
Cold climate, higher heating costs due to natural gas use
Florida
50.3
$1,654
Electricity
Mild winters, high cooling costs due to AC use
The different types of heat pumps
Air-source heat pumps are the most common type, but you have other options to choose from based on your home and budget.
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