Efficient Electric Heating with Heat Pumps

If you heat your home with electric, propane or heating gas, installing a cold-climate heat pump will save you money on heating.

Man installing a heat pump

What is it?

An air-source heat pump is an electric heating appliance that can cool and heat your home more efficiently than traditional electric systems. Because of this, they are an important alternative heating source for homes currently heating with electric or propane. Heat pumps have been used to heat and cool homes in mild to warm climates — particularly the southern and northeastern U.S. — for many years.

The technology has recently become more capable and reliable for use in colder temperatures and climates like those in the upper Midwest. Units suitable for our climate are appropriately called cold-climate air-source heat pumps. 

Impact on cost and emissions

The following graph illustrates the impact of installing an air-source heat pump in a cold climate, part of a recent CEE study. It shows the reduction in energy use (by both electricity and propane consumption) for six homes in Minnesota when they switched to a cold-climate heat pump.

Importantly, another impact of efficient heat pump systems verses traditional propane or electric resistance heating systems are their impact on the reduction of carbon dioxide (co2) emissions. Due to reduced overall energy use, Co2 emissions naturally go down. Furthermore, when taking into account the increase in cleaner electricity sources such as wind and solar in the future, switching to electric heat pumps could result in a possible 40% decrease in carbon emissions. Great for your pocketbook and the earth!

Should I get a heat pump installed?

If you heat your home with electric or propane, installing a cold-climate heat pump can mean significant savings on annual heating costs.

  • In homes that use propane for heat, installing a cold-climate heat pump can reduce propane use by 63 percent, although it will increase electricity use slightly in order to run the heat pump. Even with the increase in electricity usage, the home still saves 30 percent in heating costs!

  • In homes that use electric baseboards for heating, a cold-climate heat pump can reduce electricity use by about 53 percent. That’s like bringing your $150 heating bill to $75!

If you heat your home with natural gas, it would not be cost-efficient to replace your furnace with an air-source heat pump, since the cost of natural gas is relatively low. However, if you need to replace your air conditioner, it may be cost-effective to replace it with a heat pump (it sounds counterintuitive, but remember it can cool your home as well!) to use it to cool in the summer, and heat in the spring and fall when temperatures are milder.

Please note: If you plan to replace your heating system with a heat pump you will need to keep a backup heating system due to the Midwest’s extreme cold temperatures. While heat pump technology has improved and will continue to improve in the face of the super cold, they aren’t yet able to meet the necessary heating capacity when outdoor air temperatures drop to below zero levels.  

How much will it cost?

Total installation cost can vary from $3,000 to $11,000 depending on the system your home needs. With an 18-year life expectancy, lifetime savings can range from $6,000 to $11,000. Note that the cost and payback also depend on the age of your current system — if your propane furnace or AC need to be replaced already, the payback could be as quick as six months.

Next Steps

Want to see if a heat pump is the right choice for your home? First you should contact a rebate-eligible installer based on your electric utility. Cold-climate air-source heat pumps are still an emerging technology in Minnesota, and installation costs can vary considerably. CEE recommends those interested in air-source heat pump technology get multiple bids from contractors in their electric providers preferred contract network.

CEE’s Energy Advisors are available to help you find a contractor and lead you though next steps. Contact us through the “Ask Us” button below.

outside resources

Air Source Heat Pump Collaborative

Excellent resource if you are a contractor or homeowner interested in learning more about the technology. This is a partnership between CEE and many Minnesota utilities.

Cold-Climate Air-Source Heat Pump Research

CEE's research on the use of heat pumps in Minnesota homes.

Air-Source Heat Pumps from US Department of Energy

More information on heat pumps and their use around the country.