Will I Save Money on Electric Heating Bills by Installing a Heat Pump?

Unpredictable fuel prices can wreak havoc on your heating bills, leaving you scrambling to keep the house warm enough without blowing your budget. While traditional electric resistance heating represents one of the most expensive methods of heating a house, electric heating pumps can cut your electricity consumption by as much as 50 percent, according to the U.S. Department of Energy. By installing a new heat pump, you can reduce your demand for electricity, which allows you to save money and insulate your family from the volatility of price changes.

Types of Electric Heating Systems

Homeowners who rely on electric heating typically have either an electric furnace, baseboard heaters or an electric heat pump. Both electric furnaces and resistance heaters burn electricity to generate heat. Heat pumps utilize an entirely different technology to heat the home. Instead of producing heat, they capture existing heat from the outside air and transfer it into the home to heat the indoors. Unlike furnaces and baseboard heaters, electric heat pumps can also be used for summer cooling.

Electric Heating Efficiency

Most electric furnaces and other electric resistance heating systems range from 95 to 100 percent efficiency, which is much higher than the efficiency of the average oil or gas furnace. That means that virtually all of the energy electric heaters consume is directly transformed into heat. When you take a closer look at where that electricity comes from, its easy to see why electric heaters are the more expensive choice. Most electricity is generated by burning fossil fuels like coal or gas, and that generation process is vastly inefficient. Up to two-thirds of this energy is wasted during combustion, leading to high electricity prices compared with other heating fuels. If you must heat with electricity, the U.S. Department of Energy says heat pumps can provide up to four times as much energy as they consume, leading to efficiency ratings as high as 400 percent. This superior efficiency can have a significant impact on heating bills.

Cost of Operating Electric Resistance Heating

Based on the average U.S. electric price of $0.12 per kWh, as of January 2013, the U.S. Energy Information Institute estimates it costs about $35.98 per million BTUs of heat generated with a 98 percent efficient electric furnace. The same million BTUs would cost $35.26 with 100 percent efficient electric baseboard heaters.

Cost of Operating a Heat Pump

To calculate the cost of one million BTUs using a heat pump, multiply the price per kWh of electricity by one million BTUs, then divide this figure by the 3,412 BTUs generated by one kWh of electricity, then divide by the efficiency of the heat pump. For example, a 240 percent efficient heat pump at the U.S. average price of $0.12 per kWh would cost $14.67 per million BTUs of heat, according to the U.S. Energy Information Institute, or less than half the cost of the same amount of heat produced by an electric furnace or heater.