Math Doesn’t Lie, Contractors Do

They lie about heat pumps!
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In most cases heat pumps cost more to run than gas furnaces in PG&E’s service area.

  1. First we’ll do the math to prove that most heat pumps cost more in PG&E’s area.
  2. Then I’ll show how some heat pumps are given credit for saving money they didn’t.
  3. Finally I’ll show you how some heat pumps save money at first, but cost more in the end.


1: The Math

To understand how heat pumps can cost more to run than gas furnaces, you have to understand there are TWO efficiencies. There’s energy efficiency, which is the ratio of energy in to energy out. Then there’s cost efficiency, which is the ratio of money in to energy out. A device can be both energy efficient AND cost inefficient. Take these two hypothetical cars for example…

If car A gets 20 miles to the gallon, and if car B gets 22 miles to the gallon, then B is more efficient. However, if car A uses regular gas and car B requires premium gas, then B will also cost more to drive. In other words, car B is more efficient and more costly than car A. For PG&E customers who pay full price, gas furnaces are like car A and heat pumps are like car B…

For each kWh, an expensive central heat pump can produce 10K BTUs of heat for your home. There are 3,412 BTUs in a kWh. 10,000 divided by 3,412 equals an energy efficiency of roughly 3 to 1 or 300%. PG&E charges about 45¢ per kWh. So that’s a cost efficiency of 45¢ to 10,000 BTUs. In other words, 10K BTUs of heat from that heat pump costs 45¢.

For each therm, a cheap furnace will produce 80K BTUs of heat. There are 100K BTUs in a therm, so that’s an energy efficiency of 80%. PG&E charges about $2.59 per therm. So that’s a cost efficiency of about 39¢ to 10K BTUs (32¢ for gas, ≈7¢ for electricity). In other words, the furnace is roughly 73% less energy efficient than the heat pump. It’s also 13% cheaper to run!

That was hypothetical. Reality is something else. Due to lack of airflow and for other reasons, a heat pump’s actual efficiency is usually worse than its rated efficiency. Furnaces don’t have that problem. Upgrade the furnace in our comparison to 95% efficiency and, in a very realistic scenario, a 250% efficient heat pump may cost 56% more to run than a 95% efficient furnace!

These numbers were good as of 1/1/25. PG&E’s latest rates are here. Natural gas heat has been the cheapest heat locally for decades. That’s unlikely to change unless they punitively tax gas. Even if they do, I would gladly pay a little more to keep my quiet, reliable, toasty furnace. I realize heat pumps can seem to be all those things too. We’ll get to that on the previous page.

2: Some heat pumps get credit for energy they did not save.

There are at least two somewhat common situations where heat pumps get credit for saving money they don’t actually save:

Both central gas furnaces and central heat pumps distribute air through air ducts. Some old ducts lose 30% of their heat to leaks. New ducts might reduce that loss to 5%. So if you replace your furnace with a heat pump, and if you replace your old ducts at the same time, then your heating bill may go down. But if it does, the credit should probably go to the new ducts. Had you installed a new furnace with new ducts, your heating bill may have gone down even more.

Or perhaps you live in a two story home that has only one thermostat. Because heat rises, you might have to turn the upstairs into an inferno just to make the downstairs comfortable during winter. You can reduce your heating bill by adding a second thermostat and splitting the house into two zones. If you switch from a furnace to a heat pump at the same time, your bill may still go down. However, if you stick with a natural gas furnace it’ll probably go down even more.

 
3: Some heat pumps save money at first, but cost more in the end.

There are at least two somewhat uncommon situations where a heat pump really could save PG&E customers money on their utility bill, but still cost them more in the end:

Buy a central heat pump with an actual efficiency of 400% and then you might pay 33¢ per 10K BTUs. That’s 1¢ cheaper than a 95% furnace. However, I expect a simple 95% furnace that’s paired with a simple AC to cost at least $5,000 less to install. Using this as a guide, it’ll take the heat pump 300 years to break even with the furnace. But even if they cost the same to install, and even if your home needs three times as much heating, you’ll still only save $50 a year. That’s nothing compared to the MUCH higher repair costs and shorter lifespan of a heat pump.

The multi-zone mini-split system has the same potential. A MZMS is naturally “zoned”. It usually has little to no duct losses. And it probably has high actual efficiency. It may lower a PG&E customer’s monthly bill, but it’ll probably take it all back with higher capital and repair costs. It’s so complicated that many MZMS owners have to call around because the original installer can’t fix it. It can be such a pain to repair that, once it hits its early to late teens, some owners give up and replace it. Of course there are exceptions. Just don’t count on being one of them.

The Bottom Line

For anyone paying PG&E-like rates, a complicated and expensive top-of-the-line heat pump might cost less to run than a simple and comparatively-cheap natural gas furnace. However, it’ll probably come with a higher total cost of ownership and a much worse overall experience.


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