Heat Pump Operating Cost vs Gas Furnace by Climate Zone

How Operating Cost Is Calculated

To compare operating costs fairly, you need to understand the units of measurement for each fuel and the efficiency at which each system converts that fuel into heat.

Natural gas is priced per therm (100,000 BTU). The national average price in 2026 is approximately $1.20 per therm. A gas furnace at 96% AFUE delivers 96,000 usable BTU per therm of gas burned. The cost per 100,000 BTU of delivered heat is roughly $1.25.

Electricity is priced per kilowatt-hour (kWh). The national average residential rate in 2026 is approximately $0.16 per kWh. One kWh contains 3,412 BTU. A heat pump with a COP of 3.0 at 47 F delivers 10,236 BTU per kWh consumed. The cost per 100,000 BTU of delivered heat is roughly $1.56 at COP 3.0, which is higher than gas at the national average prices.

However, this simple calculation at 47 F does not tell the full story. The heat pump's COP varies with outdoor temperature, and the heat pump also provides cooling in summer, eliminating the cost of running a separate air conditioner. The gas furnace does not provide cooling, so you must add the AC operating cost to get a complete annual comparison.

Zone 1-2: Hot Climates (Miami, Houston, Phoenix, New Orleans)

In hot climate zones, the heat pump's advantage is decisive. These areas have long cooling seasons (6 to 9 months), short heating seasons (2 to 4 months), and mild winter temperatures that keep the heat pump operating at high efficiency year-round.

Annual heat pump cost for a 2,000-square-foot home: $600 to $1,000 (combined heating and cooling). Annual gas furnace plus AC cost: $900 to $1,500 ($200 to $400 for gas heating plus $700 to $1,100 for electric cooling). The heat pump saves $200 to $500 per year, primarily because the heat pump and the air conditioner are the same unit, operating at a higher SEER2 than most standalone AC units, and because the minimal heating demand falls entirely within the heat pump's peak efficiency range.

Zone 3: Warm-Moderate Climates (Atlanta, Dallas, Charlotte, Sacramento)

Zone 3 represents the sweet spot for heat pump economics. The climate has enough heating demand to demonstrate the heat pump's heating efficiency advantage over electric resistance, but winter temperatures rarely drop low enough to reduce the heat pump's COP below 2.5.

Annual heat pump cost: $700 to $1,100. Annual gas furnace plus AC cost: $1,000 to $1,500 ($400 to $700 gas heating plus $600 to $800 cooling). The heat pump saves $200 to $400 per year. Homeowners who switch from a 15-year-old furnace and AC to a modern heat pump often see even larger savings because the old equipment operated at much lower efficiency.

Zone 4: Mixed Climates (Nashville, Kansas City, Washington DC, Portland)

Zone 4 has roughly equal heating and cooling demands, making it a balanced test of the heat pump's year-round capabilities. Winter temperatures dip to single digits occasionally but spend most of the season between 20 F and 45 F, where the heat pump operates efficiently.

Annual heat pump cost: $800 to $1,200. Annual gas furnace plus AC cost: $1,000 to $1,600 ($500 to $900 gas heating plus $500 to $700 cooling). The heat pump saves $100 to $400 per year. The savings vary more widely in this zone because local electricity and gas prices have a bigger impact when heating demand is substantial. Cities with cheap electricity (Portland, OR at $0.12 per kWh) see large savings, while cities with expensive electricity (Washington DC at $0.15 per kWh) see smaller but still positive savings.

Zone 5: Cold Climates (Chicago, Boston, Denver, Indianapolis)

Zone 5 is where the competition tightens. The longer heating season means more hours where the heat pump operates at reduced efficiency due to cold temperatures, while the gas furnace maintains consistent output regardless of outdoor conditions.

Annual heat pump cost (cold-climate model): $1,000 to $1,500. Annual gas furnace plus AC cost: $1,100 to $1,600 ($700 to $1,000 gas heating plus $400 to $600 cooling). The difference is modest, typically $0 to $200 per year in either direction depending on local energy prices. Cities with cheap gas and expensive electricity (parts of Ohio, Indiana) may favor the gas furnace by $100 to $200 per year. Cities with moderate electricity and moderate gas (Denver, Boston) are roughly even.

The critical variable in zone 5 is how much backup heating the heat pump uses. A cold-climate heat pump that handles 90% of heating hours independently costs much less to operate than a standard heat pump that relies on electric resistance backup for 20% to 30% of heating hours.

Zone 6: Very Cold Climates (Minneapolis, Milwaukee, Burlington VT)

Zone 6 has 6,000 to 8,000 heating degree days per year, meaning the heating system runs heavily from October through April. Winter temperatures frequently drop to -10 F to -20 F, and extended cold snaps can last for weeks.

Annual heat pump cost (cold-climate model with some electric backup): $1,200 to $1,800. Annual gas furnace plus AC cost: $1,100 to $1,500 ($800 to $1,100 gas heating plus $300 to $400 cooling). The gas furnace has a slight advantage of $100 to $300 per year in most zone 6 markets, assuming natural gas is available at typical Midwest prices.

A dual fuel system (heat pump plus gas furnace backup) in zone 6 costs $900 to $1,300 per year, which is less than either the all-electric heat pump or the gas-only approach. The dual fuel system uses the heat pump for the 70% of heating hours above the balance point and switches to gas for the remaining 30%, capturing the efficiency of both fuels at their best operating temperatures.

Zone 7: Subarctic (Fairbanks AK, International Falls MN)

Zone 7 represents the most extreme heating conditions in the United States, with 9,000+ heating degree days and extended periods at -20 F to -40 F. Gas furnaces have a clear operating cost advantage here because the heating demand is enormous and even cold-climate heat pumps operate at reduced efficiency for a large portion of the season.

Annual heat pump cost: $1,800 to $2,500 (with significant backup heat use). Annual gas furnace plus AC cost: $1,200 to $1,700 (minimal cooling needed). The gas furnace saves $400 to $800 per year. However, zone 7 contains a very small percentage of the U.S. population, and even here, dual fuel systems can narrow the gap by using the heat pump during the milder portions of the heating season.

The Role of Electricity Price

Electricity price is the single most important variable in determining whether a heat pump or gas furnace is cheaper to operate in your specific location. The breakeven electricity rate (the price at which the heat pump and gas furnace cost the same to run) depends on your gas price and the heat pump's seasonal COP.

At a natural gas price of $1.00 per therm with a furnace at 96% AFUE, the breakeven electricity rate for a heat pump with a seasonal COP of 2.5 is approximately $0.14 per kWh. If your electricity costs less than $0.14 per kWh, the heat pump is cheaper. If it costs more, the gas furnace is cheaper for heating.

At $1.50 per therm gas, the breakeven shifts up to approximately $0.21 per kWh, making the heat pump cheaper in almost every U.S. electricity market. This is why heat pumps are economically dominant in regions that heat with oil or propane (which cost $2.00 to $3.50 per therm equivalent) regardless of local electricity prices.