Heat Pump vs. Natural Gas Heating: Which Costs Less to Run?
Compare the cost of delivered heat, not a gas therm or kilowatt-hour in isolation. The result depends on the local gas tariff, electricity rate, furnace efficiency, heat-pump seasonal performance, climate, backup heat, cooling value, and fixed gas charges. Regional prices can reverse the answer.
A fair comparison
Gather annual gas use attributable to heating, current gas and electricity tariffs, furnace efficiency, heat-pump performance data for the climate, and expected backup operation. Estimate the useful heat the furnace provides after its efficiency losses. Then estimate the electricity required for the heat pump to provide the same service under the expected conditions.
The heat pump’s rated performance is not a universal seasonal result. Outdoor temperature, defrost, distribution, sizing, controls, and backup settings matter. Use equipment-specific data from the proposed design and have the HVAC professional explain the assumptions; equipment selection remains a separate category.
Add fixed charges and cooling
If gas service remains for backup, the comparison must retain its customer charge, minimum bill, and maintenance. If gas is cancelled, include the cost to replace other remaining gas loads and retire service. A heat pump may also provide cooling value, but count it only if the alternative would otherwise require a separate cooling system or operating cost.
Scenario model
- Favorable heat-pump case: moderate electricity price, efficient seasonal operation, limited backup, and a high delivered gas cost.
- Close case: similar delivered costs after efficiency, with fixed charges and capital cost deciding the result.
- Difficult heat-pump case: high winter electricity price, frequent resistance backup, poor distribution, or a building load that has not been addressed.
Use dated local rates. EIA state and regional electricity data provides US context, but it is not a Canadian tariff. Canadian homeowners need local electricity and gas inputs. Do not convert one market’s estimate into the other.
Operating cost is not conversion cost
Include heat-pump installation, electrical capacity, controls, duct or distribution work, gas retirement, and restoration in the project comparison. A lower annual bill may not recover a large conversion cost during a short ownership horizon. A failing furnace or a planned service upgrade can change the capital comparison.
When the result changes
Recalculate if the enclosure improves, the heat-pump model changes, backup is added, the utility rate changes, or gas service is retained for one appliance. Ask for a written load and performance assumption before signing. The right choice is the one with a credible installed scope and acceptable bill sensitivity, not a universal fuel verdict.
A simple delivered-heat model
For gas, start with annual heating fuel, remove the portion used for other loads, and apply the system’s efficiency assumption. For the heat pump, use the proposed equipment’s seasonal or temperature-specific performance and the home’s expected heating load. Apply each utility’s actual tariff and add fixed charges that remain. State whether cooling and maintenance are included.
Do not use a single coefficient of performance as a guarantee for an entire season. Defrost, distribution, sizing, controls, and weather affect operation. Ask the designer to identify the performance basis and backup threshold, then run a less favorable case.
What to ask before choosing
Request the proposed heat pump’s seasonal and cold-weather performance basis, backup assumption, gas-service status, and building-load assumption. Ask whether the model includes cooling and whether both quotes include comparable distribution and controls.
Ownership decision
Compare annual operating cost with installation, electrical work, gas retirement or retained charges, financing, and equipment life. For a short horizon, a modest bill difference may not recover conversion capital. For a long horizon, repeated gas maintenance, an aging furnace, and future fuel charges may matter more.
A quote-comparison example
One contractor may propose an all-electric heat pump with a service upgrade and gas retirement. Another may propose a dual-fuel system that leaves the furnace and gas account. Compare annual cost only after adding those different capital and fixed-charge assumptions. If both systems use existing ducts, confirm whether duct repairs, controls, condensate, and commissioning are included in both quotes.
Ask for the temperature or operating condition at which backup takes over and whether the estimate assumes envelope improvements. Those details can shift both the energy result and the capacity project. A precise annual number without them is less useful than a broad range tied to an explicit scenario.