Heat pump operating costs

If you live in a temperate or cool climate and you’re looking to reduce your CO2 footprint, replacing your furnace or boiler with a heat pump is a great way to start. But heat pump operating costs are a concern many people have when they start looking at the tradeoffs.

I didn’t worry too much about this when I replaced my natural gas appliances – furnace, water heater, clothes dryer – with heat pump versions in late 2020. I knew that in the long term, heat pump operating costs would drop below those for natural gas appliances, given how efficient heat pump based appliances have become, and given the Federal carbon tax we pay in Ontario.

For the record I’m completely in favor of the Federal carbon tax. It sends a signal about the importance of cutting our use of fossil fuels. As of 2021, we’re paying $40 per tonne of CO2 emissions. Your natural gas bill, in Ontario at least, is measured in cubic meters or m³; the $40 per tonne carbon tax corresponds to 3.91 cents, or $0.0391, per m³. In 2023 that will jump to $65 per tonne or $0.13 per m³ and by 2030 it jumps all the way to $170 a tonne or $0.33 per m³;. That on its own is a pretty strong incentive to get off natural gas even if in 2021 heat pump operating costs might seem higher than natural gas furnace operating costs.

The other factor to consider when looking at what it costs to operate a heat pump is the maintenance. Most installers recommend regular annual maintenance for gas furnaces to prevent corrosion of the burners and to keep them burning at peak efficiency. I used to pay $120 for my annual maintenance fee. For my forced air central heat pump system, there’s been no need for any professional maintenance.

Let’s look at the overall energy costs for my Toronto home before and after I replaced my gas furnace/electric air conditioner, gas water heater, and gas dryer for an all-electric heat pump heating/cooling system, a heat pump water heater, and a heat pump dryer.

Before I do that though, a brief note on these three systems, since while many people have heard of heat pumps for home heating, not that many people, in North America at least, are familiar with heat pump water heaters or heat pump clothes dryers.

Heat pump home heating/cooling sytsem: I have a forced air HVAC setup – air ducts and cold air returns as in many North American houses. My heat pump is a Carrier Infinity Heat Pump system, with an interior unit in the basement and a compressor unit outside. The interior unit was a swap-out / swap-in replacement for my Carrier natural gas furnace. The exterior unit, likewise, replaced the air conditioning compressor unit I had before. The heat pump heats the house in cold weather, and cools it in really hot weather.

Heat pump water heater: I have a Rheem heat pump hot water heater, purchased from Home Depot, and installed by the same installers who installed my heat pump. The water heater takes air in through an 8 inch circular vent at the top, and pumps air out through a similar vent on the side. In the summer, these vents draw warm basement air in, extract heat from it to pump into the water, and blow cold air out the exhaust vent. So whenever I’m heating water in summer, I’m also cooling my basement. In the fall I attach 8″ ducts to the vents that vent to the out of doors, so in winter I’m drawing cold outdoor air in, extracting heat from it, and pumping out even colder air back to the outdoors. Believe it or not this unit can take 0C air from outside, draw heat out of it to heat water to 46C, and expel air at -5C or -6C back outside!

Heat pump dryer: I have a Whirlpool heat pump electric dryer. Unlike a gas or electric dryer, which vents the damp air from inside the dryer to the out of doors, thereby sucking valuable warm air from your interior space and spewing it outside, my heat pump dryer does not have an exhaust. It’s a closed loop – the only output is water, which condenses on the heat pump coils (hidden away inside – you never see them) and which then goes down the same drain the washing machine drains into. So no more sucking warm household air outdoors in cold weather – and the heat pump is more efficient than an electric dryer. (Heat pump dryers are very common in Europe and Asia but very new in North America.)

Okay, now let’s get back to heat pump operating costs. While I can’t give you exactly how much energy my home heating/cooling consumes, I can fairly easily compute the overall change in my home energy bills between when I was doing all the heating on natural gas, and now that I’ve gone all electric.

The last year I had a natural gas powered furnace, hot water heater, and clothes dryer, I spent $862 on natural gas, and $1,248 on electricity. That’s a total of $2,110 we spent on home energy when we used both natural gas and electricity.

It’s now been over a year since I replaced all my natural gas devices and had my gas line disconnected. My total electric bill for the past 12 months was $1,968, which is less than I spent the previous year on electricity and natural gas combined. If you subtract the $1,248 I spent on electricity before I got rid of my gas appliances, that means the net heat pump operating costs are $720 per year. And that’s in Toronto which while not exactly as chilly as Winnipeg or Ottawa is still a reasonably cold place in winter. And that’s for three heat pumps, not one.

My annual natural gas consumption, in m³, in the year before I started switching off my natural gas appliances, was around 137 m³ per month. In 2020 carbon tax dollars, that’s $97 per year in carbon tax. By 2030, that climbs to a whopping $547 in carbon tax I don’t have to pay. Add to that the $120 a year in furnace service I’m not paying, and I think my heat pump operating costs are pretty reasonable.

Here’s a table that lays it all out:

Heat Pump Operating Costs – some figures

So there you have it. I didn’t even expect this myself until I started doing the math for this article – I figured I was paying slightly more for heat pump operating costs than I was before for my natural gas appliances, but I was willing to pay a little more for the peace of mind of knowing my house was carbon free (other than the CO2 emitted from the small fraction of my electricty that comes from fossil fuels – in Ontario that’s only 6% of the total energy mix – plus, I have a bunch of solar panels on my roof feeding electricity into the grid, so I figure I’m ahead!). And as it turns out, my heat pump operating costs are not only lower than what I was paying for my gas furnace, gas water heater and gras dryer, but they will be a lot lower as the true cost of burning fossil fuels is more and more incorporated into energy costs through the carbon tax.

Go figure. Everyone’s afraid a heat pump is going to cost more to operate than a furnace. I’m already saving $260 a year, and by 2030 I should be saving something like $700. That’s a good deal!

What your HVAC contractor might tell you

You may have come to this page because you’re thinking of installing a heat pump to heat your home, but an HVAC contractor has told you horror stories about how much heat pumps cost to operate. I encourage you to question their view of heat pump operating costs. The installer may make some of the following claims…

Heat pumps just don’t work well in a Canadian climate. This is not true. Thirty years ago it was true that heat pumps were less efficient than electric resistance heating below about 5C, but the technology has advanced considerably since then, and the break-even point has dropped to -15C or thereabouts. And don’t forget there are the depths of winter, and there are the shoulder seasons where it’s 0C or 5C or 10C or 15C and you’re still heating your house. In the shoulder season heat pumps do very well – they’re super efficient where the temperature differential is small.

An HVAC installer relying on their memory of the state of the industry decades ago is not one I would trust to install any heating system in my house. If they tell you this, ask them how many heat pumps they have installed in the past five years. Chances are the number is very low, so why would you choose them?

Heat pumps cost more in terms of maintenance than a furnace. As I show from my own experience above, this is not true. Combustion of natural gas produces all kinds of corrosive chemicals that over time damage the heating system, requiring annual maintenance and more frequent parts replacement than a heat pump. Heat pump maintenance is similar to air conditioner maintenance – occasional cleaning of the coils, checking refrigerant levels, and possibly blower fan lubrication should suffice.

Heat pumps don’t work on radiator-based systems. This is somewhat true if you have an old house with few or small radiators. Boiler-based heat pumps can’t achieve the high temperatures that older gas- or oil-based radiative heating systems use. Modern radiative heating systems use moderately hot water and extensive radiators to heat your home, while older systems (such as the one in my parents’ 100-year-old home) use very hot water and fewer radiators. If your home has tall upright rads that only cover part of one wall in each room, chances are the water in them is very hot. To retrofit such a system to a heat pump boiler, you either need to have a hybrid system with a heat pump for cool-weather days, and a boiler for really cold days, or you need to add additional radiators as part of the installation (or you supplement your rad heat with an alternate source like a fireplace or movable space heaters on cold days). For more modern rad systems there are lots of great heat pump options that will work just fine.

You’ll pay a fortune for electric resistance heating to cover the really cold days. It’s true that heat pumps are inefficient in really cold weather, and you will need a backup system for such days, but challenge your HVAC contractor if they attach alarming dollar figures to the cost of operating the backup system. The heat pumps sold in 2022 are more efficient than electric resistance at temperatures as low as -10C or -15C. Below those temperatures you’ll need an alternate heat source. This can be accomplished by combining your heat pump with your existing furnace or by adding a resistance heater, inside the indoor unit, as part of your setup. I don’t recommend combining old and hew equipment in any setup, and certainly it’s better go to all in on heat pump + electric resistance heater (this is what I have) than to continue with a gas furnace for backup – especially if your goal is to decarbonize.  When the weather is very cold, the resistance heater will kick in, and this will cost you more money, but the number of super cold days is limited (and likely to drop over the years as our climate warms).

Your heating bill could top $1000 a month because of the need for electric backup heat on really cold days. This is pure fear-mongering. Even in the coldest months there are warmer and colder days, and warmer and colder times of day. It would be very unusual for the temperature to drop below -15C for an entire month at a time (unless you live on Ellesmere Island!), and only in this case would you be 100% on resistance heat. Even then, your heating system isn’t runing continuously – it cycles on and off. The only scenario I can see where you would be spending $1000+ per month on resistance heat would be if you lived in a very cold climate (Ontario north of Lake Superior, Manitoba, northern Quebec, Alaska) AND you had a large and very poorly insulated house, and you had really bad luck with the weather!

Why do some HVAC installers paint such a bleak picture of heat pumps

I suspect the main reason is, they don’t install a lot of them, haven’t kept up with the evolution of heat pump technology, and would rather sell you whatever they’re most familiar with and therefore can install most quickly. HVAC installers are experts in how to install and service HVAC equipment. They are not necessarily experts in heat pump operating costs (they’re not the ones paying the utility bill) or overall efficiency. Another possible reason is that heat pumps typically cost more than furnaces or boilers, and they know they are competing with other contractors for your business. If they can convince you to stick with a natural gas appliance, their price will be more competitive and they assume that increases their odds of getting the contract.

In fact, the degree to which an HVAC installer tries to discourage you from installing a heat pump (or from fully electrifying your setup, as opposed to a hybrid heat pump + gas backup system) may give a good indication of how much the installer actually knows about heat pumps and whether you want to hire them. At the start of my heat pump journey, I called the HVAC installer I had used for my high-efficiency furnace 20 years earlier. I had been very happy with the cost and operation of the furnace and the reputation of the company. But the installer told me heat pumps don’t work in Canadian climates and are very expensive to operate. That’s what you would say if you don’t want to sell a heat pump. This was pretty strong evidence to me that the company had fallen out of touch with current HVAC trends. My experience since installing my heat pump (and the fact that over 800,000 Canadian households are heated with a heat pump) shows this just isn’t true.

As you are looking for an HVAC company to buy a whole house heat pump system from, it can be helpful to ask questions about heat pump efficiency and heat pump operating costs – but don’t be frightened away from the process by horror stories about operating costs. Instead, be frightened away from that company that is trying to scare you, and look for an installer who actually has experience installing heat pumps and has a balanced view of the numbers.