High Efficiency Furnace vs Heat Pump

For anyone that is interested in understanding how to control their utility costs I think it’s important to know the facts when it comes to a high efficiency furnace vs heat pump technology.  In fact at the end of this article I’ve included a real life financial comparison of a Southern Ontario homeowner showing the total costs for a high efficiency furnace vs heat pump system and the numbers are very interesting.

Over the last couple of years there has been a huge movement towards high efficiency heating equipment.  Both the federal and provincial governments have sought to encourage energy efficiency by offering rebates to those replacing low or mid efficiency equipment with “high efficiency” (usually characterized by > 95%).

Predictably, there has been much discussion about what this actually does, and more importantly, how valuable it is.  I will not be the one to stand here and say that reducing your gas consumption by >5% to heat your home is not a worthwhile pursuit. Unfortunately, there is some dissention about what kind of cost premium this should command.  Equally unfortunate is the fact that few people in the HVAC industry have bothered to make the case for higher efficiency.  I see this as part of a greater discussion. Consumers are faced with these kinds of decisions constantly – does the premium you have to pay for a product end up being a long term savings?

I am here to emphatically say “YES”.  The very fact that most heating systems now last in excess of 15 years tips the scales heavily in favour of efficiency.  This is even more important as input costs rise (Natural Gas, Propane, Electricity and Oil).  In fact, the justification is so strong that it makes conversion to new ultra efficient heat pumps a huge cost savings (with or without government incentives).

Cost Comparison of High Efficiency Furnace vs Heat Pump

The actual numbers can vary widely, but for starters, let’s consider a 2000 sq ft house built around 1970.  With heating loads of ~ 45,000 b.t.u.s this house generated heating costs of around $2500 per year using a 90% efficient furnace.  This furnace was nearing the end of its life and the customer was faced with replacing his heating system; either a high efficiency furnace with a 15 SEER A/C, or a 17 SEER Heat Pump with an electric back up system.

The costs for both systems were as follows:
Furnace and A/C: $8,600.
Heat Pump and Electric Back up: $12,400.

Both vendors accurately told the customer that their heating bills would be reduced.  So the choice is easy, right?  How could a system that costs almost one half more be better value?  The answer lies in magnitude of the savings.

The furnace savings are easy to calculate – by improving the efficiency by 5%, the gas consumption should go down by 5% ($125 per year).  The heat pump system, however, generated savings in the 30 – 35% range (very common with heat pumps).  This represents annual savings of $750.  The net improvement for the heat pump system then is $750 – $125 = $625.  To calculate the payback divide the difference in savings ($625) into the cost differential ($12400 – $8600 = $3800).  In this case the payback would be just over 6 years – giving you another 9 years to pocket the savings for a total 15 year savings of $5,625!  Not to mention that heat pumps typically have warranties longer than furnaces!

Before you dismiss this because your situation is different consider that if you are paying more than $2500 a year for heating, the savings get even better!  The difference is in how inexpensive the system converts inputs into heat (see our blog on Heat Pump Efficiency).

What does become relevant then, is how long you plan on staying in the home that you are buying the system for.  For most people the system you will be buying might last longer than you will be in the home.  For that reason, upgrading the heating system makes sense as well.  The buyer of your house will be less likely to adjust your purchase price for an antiquated, inefficient heating system.  In the end, it’s clear that when you compare high efficiency furnace vs heat pump technology the long term winner is in most cases heat pump by a long shot.

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