From Heating Oil to Heat Pump: A Homeowner's Savings Story

Heating and cooling your home forms the biggest part of the home’s energy costs. But not enough people use heat pumps as a solution.

Energy Information Management Data shows that 31% of energy consumption comes from air conditioning and space heating. No wonder CNET's latest energy cost survey found that 78% of Americans feel stressed about their utility bills.

Although these energy-efficient HVAC systems have become increasingly popular in recent years – the same CNET survey also showed that only 14% of respondents plan to upgrade to heat pumps to help reduce these energy costs.

At CNET, we are a big fan of heat pumps because of their efficiency and ability to heat and cool your home by transferring heat instead of generating heat. While heat pumps are often advertised as money-saving home upgrades, the actual savings depend on where you live, power rate and the HVAC system you are replacing.

So, how much money can you really save with a heat pump? We asked Wael Kanj, a home electrification expert and Pennsylvania homeowner, who is also a senior fellow at Rewiring America, a nonprofit that advocates for home electrification.

Heat Pump Case Study: Pennsylvania

Heat pumps are the energy-saving way to keep you comfortable throughout the year. The heat pump runs on electricity and then moves heat from home to outside to cool it. It then reverses the heating process by pumping heat internally.

We spoke with a Pennsylvania homeowner who has tracked their heating and cooling costs over the past nine years. The house was built in the late 1950s and used air conditioning and heating oil before installing a heat pump in January 2022.

Before installing a heat pump, homeowners’ electricity costs include air conditioning, lighting and household appliances. In 2019, homeowners completed an energy audit to assess the efficiency of their homes and improve climate in 2020.

We reviewed their energy cost data to evaluate the total energy savings from switching to heat pumps compared to using electricity and heating oil.

The average homeowner's electricity bill totaled $138 per month before installing the heat pump. After the heat pump, their average bill increased to $153. Despite the increase in total electricity bills for homeowners, they save on total heating and cooling costs by installing heat pumps. This is the method.

Total energy costs

The following table shows the total cost of heating and electricity from 2016 to 2024. The total cost after heat pump installation has dropped significantly in 2022.

Can heat pumps save you money?

The short answer is that the heat pump saves you money. However, how much you save depends on the system you want to replace, how much energy you use, and where you live.

Your electricity bill may rise because the heat pumps all use electricity for heating and cooling. But heat pumps can save money overall, because you won't pay for heating the fuel. Natural gas is cheaper than fuel supply such as propane or heating oil. So if you are replacing the delivered fuel, you can save more people than the one who replaces the gas heating system.

You can use the Energy Star calculator or rewire the US personal electrification planner to determine potential energy savings for your home.

Energy saving depends on where you live

As mentioned earlier, location plays an important role in potential heat pump savings due to climate, home size, insulation and energy costs.

In cold climates where heat is used more frequently, people using fuel using heat pumps can save more money than those using natural gas. However, some people are concerned that extreme cold temperatures will affect heat pump efficiency.

“A lot of people may hear that heat pumps aren't working properly in really cold places. That's not true,” Kanjie said. “Many modern heat pumps will play bad Fahrenheit.”

For example, the Mitsubishi H2i continues to work to minus 13 degrees Fahrenheit. At these temperatures, the heat pump may lose efficiency and require more energy to operate.

The cost of electricity in your area will also affect the amount of savings you can save with a heat pump. Insulated or windows and windows may use more electricity to maintain indoor temperatures. Kanj recommends conducting a home energy audit to make your home as efficient as possible.

Expensive electricity bills can be a problem for states in states such as Hawaii, Connecticut, and Texas. However, a heat pump is more efficient than a traditional system, so it may not be as much as you might think. For example, Pennsylvania homeowners’ electricity bills increased by just $15 after switching to a heat pump, and by eliminating the cost of heating oil, they still save overall money.

It depends on your heating fuel

The type of fuel you use to heat can affect how much money you can save for the heat pump.

“If people use supply fuel in their homes, we think that’s likely to save by switching to heat pumps,” Kanjie said. “There are also more likely to save money in the Southeast and more grumpy areas.”

Homeowners in the Pennsylvania case study saved $800 in their first year with a heat pump compared to using air conditioning and heating oil last year.

The estimated annual savings from moving from delivering fuel to heat pumps is $810 more than the conversion from natural gas. “There is less gas savings, but if you live in a place that uses more air conditioning, the heat pump can help you save more,” Kanjie said.

If you already have cheap heating fuels, such as natural gas, the heat pump may not significantly lower your bills. But prices are expected to rise in 2025. Therefore, installing a heat pump can provide long-term energy efficiency, savings and potential environmental benefits when powered by renewable energy such as solar energy.

Save heat pump comparison

According to Rewiring America, this is how much money you can save based on your current fuel type of heat pump.

How much does it cost to run a stove and air conditioner?

Heating and cooling costs vary, and your heating fuel plays a major role.

Natural gas, electricity, propane and heating fuel are the most popular heating fuels, but usage varies from region to region. Natural gas is the most common heating fuel used in 47% of U.S. households. It is the main source of the Northeast, Midwest and West. Electricity is more common in the milder winter south.

Generally, heating and cooling are more expensive in high temperature areas. Massachusetts, for example, uses more heat in winter than warmer climates like Florida. This means homeowners spend more on heating in colder climates, while homeowners in hotter areas pay more on air conditioning.

The type of heating fuel will also affect your cost. Natural gas is often cheaper than electricity or fuel transport such as propane and oil.

Here are some ideas on how location and heating sources based on EIA data affect costs.

Different types of heat pumps

Air source heat pumps are the most common type, but you can also choose other options based on your home and budget.

• Air source heat pump: Use the heat of the house's air tube between the house and the outdoors. These are good choices for replacing heat and cooling gas furnaces with heat pumps.

• Mini Split Heat Pump: Tubeless System that provides targeted heating and cooling for a single room or area of ​​your home. A great option for no plumbing or looking for flexible temperature control homes.

• Geothermal heat pump: Use ground temperature to transfer heat. The cost of geothermal heat pumps is higher than that of open source heat pumps, but can provide higher efficiency. If you prioritize the benefits of lasting and can invest in higher upfront prices, these systems are a reliable option.

• Absorption Heat Pump: This system is similar to an air source heat pump, but uses energy from natural gas or steam instead of electricity. These are less common, but are a great choice for large houses or commercial buildings.