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Saving Energy with a Heat Pump

One of the regrets of my recent house build was not looking into the heating system a bit closer.  When I was evaluating the heating options pre-build, the options were basically electric heat, oil furnace, or the more efficient heat pump systems.  I went with electric as it was the easiest (and cheapest) at the time as it’s the option that most new houses go with around here.

Even though the house is fairly new, I’m already thinking about what my next build would include!  This is a common problem with people who have built; they never want to stop building because there are always improvements to be made.  With that, I’m convinced that my next house will include a heat pump type heating/cooling system.

What is a Heat Pump?

A heat pump is a heating/cooling system for a home that works very similarly to your refrigerator.  When it’s cold outside, it can efficiently extract the warmth out of the air, amplify it by compressing the refrigerant, and releasing the heat it into the home with a forced air system.  What’s neat about a heat pump is that it can work in reverse and provide air conditioning inside the home during the warmer summer periods.

The Numbers

The cost to install a heat pump initially can be quite expensive.  You need the heat pump, the forced air furnace, the duct work and heat control throughout the home.  From phoning around local stores, the equipment and installation adds up to be around $6,500 – $10,000 depending on the size of your house.

Air source heat pumps (as opposed to ground source/geothermal) is, according to a government of Canada publication,  known to have 50% greater efficiency than traditional electric heat sources.  In other words, if it costs you $2,000 / year in electric heating costs, a heat pump will incur approximately $1,000/year in energy costs.   In this case, the heat pump will pay for itself in 6-10 years.  If you look at the government of Canada link above, that table includes the pay off period for different regions within the country.

Advantages

  • Environmentally friendly where it reduces household carbon footprint.
  • Reduces monthly heating costs.
  • The ability to be a source for heat and air conditioning all in one unit.

Disadvantages

  • Upfront expense.
  • If the outside temperature gets too hot/cold, the heat pump becomes less efficient.
  • In places with an abundance of snow (like Newfoundland), the heat pump must be kept clear of snow.

Final Thoughts

If we do decide to build again, I think that we will take the hit upfront and use the heat pump system.  I like the fact that it’s environmentally friendly, there’s a significant monthly cost savings, and it has the ability to have air conditioning for those muggy nights.  In addition to those immediate benefits, the heat pump will pay for itself over the years.

Do you have a heat pump installed in your house?  If so, am I missing anything?

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FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 37 comments… add one }
  • Brad Dillman December 10, 2008, 8:24 am

    I’m thinking of getting an air source heat pump before next summer, and my Dad just got one. He’s a plumber and got one for cost and installed it himself, so it was quite a bit cheaper than you listed (around $1,200 I think for 18,000 BTUs). I saw some ads at a local Costco for a single zone air source unit installed for around $3,600. If you buy the correct unit, you can drive multiple zones inside the house from a single outside package (I’m thinking of a dual zone one).

    Air source heat pumps (ASHPs) seem like the only reasonable choice to retrofit baseboard electric. Also, you could consider they make the house more valuable (an upgrade) – they certainly won’t make the house less valuable. And unlike solar they work 24/7 regardless of sunshine.

    I read from a gov’t pamphlet that ASHPs in Nova Scotia have an average COP of 3.0 (i.e. 100W electricity = 300W heat).

    Go ASHPs!

  • MoneyGrubbingLawyer December 10, 2008, 9:22 am

    It’s definitely an interesting option and I’d probably go that route if I were to build a new house. We looked at an ASHP retrofit, but the average cost estimate was around $13k and we calculated that it would take about 10 years or so to pay for itself. Maybe on my next house, but not on this one.

    A friend had an ASHP installed in his house during a major remodel and he’s generally pleased, although his efficiency numbers aren’t anywhere near what the publications promised. His acutal cost savings over electric have been in the neighborhood of 25%-30%- still impressive, but not the 50% he was hoping for. And the task of keeping that bugger clear during winter may not sound like a huge deal, but when you’re shovelling it out during a sleet storm in February it becomes a little more inconvenient.

  • DG December 10, 2008, 9:33 am

    I looked at it for our house that was finished in early 2007 in Winnipeg, but the ASHP heating season is very short here. Ground source heat pumps are becoming more popular, but installation is on the order of $20,000 or more. Our builder did not offer GSHPs at the time, but they do now.

    I did opt for extra insulation and an air-air HRV (http://en.wikipedia.org/wiki/Heat_recovery_ventilation).

    DG

  • Traciatim December 10, 2008, 9:53 am

    If you were building a new house, why not go with a hot water solar heating with a tankless water heater as a backup heat source? You could take a huge chunk out of your hot water and space heating bill, and since the energy is captured locally it’s far more efficient than any other source of heating if you include transportation, extraction, or transmission costs. In case of power failure, have a nice wood stove somewhere too…. plus it’s nice to sit around a warm fire on family night anyway.

    I currently have hot water heat where the oil furnace was replaced with a tankless water heater and it works fantastic. My roofs back peak faces nicely south and i would love to get a solar system in there to keep costs down.

  • stephen December 10, 2008, 10:11 am

    Our heat pump is great, however, when the temperature drops below freezing it really struggles to keep the house above 62F. We live in Virginia, which has relatively mild winters so it doesn’t happen too frequently (it seems like 90% of houses have a heat pump in Virginia).

    If we lived any further north or in Canada for that matter, we would most likely have a furnace or a unit that can heat more efficiently in the cold.

  • Frog of Finance December 10, 2008, 10:36 am

    Two years ago, we replaced our old oil furnace by a bi-energy system, combining a heat pump with an oil furnace. That’s more costly that a straigth heat pump, but we have some increased savings due to the advantageous electricity rates for bi-energy.

    Our costs for heating oil went down from over $2000 a year to less than $500 (while the oil prices were peeking) while our global electricity costs went up by about $250 a year. So we save about $1250 every year, and we got air conditioning in the summer as a bonus — which we use mostly to sleep well at night during hot periods.

  • FT FrugalTrader December 10, 2008, 10:40 am

    Traciatim, I have thought about solar, but we don’t much sunshine in NL. :) I have considered doing a small solar power project for a future shed… stay tuned. :)

    Stephen, yes most heat pump systems here have a backup electric source to heat the air in case that it gets too cold.

  • Frog of Finance December 10, 2008, 10:40 am

    Forgot to mention that, if I was building a new house, I would certainly look at a geothermal system. I wanted to go that way when we replaced the furnace, but it was a lot more trouble with an existing house and the smaller air ducts of an old house. The cost savings would have been small when compared to a bi-energy setup, while having a much larger up-front cost (at least $10 000 more).

  • Money Minder December 10, 2008, 11:02 am

    Is this only an option for new builds? We will be replacing our forced air gas furnace in the next year or two. Would the price and installation be more if we re-fitted with a Heat Pump?

  • Harald Koch December 10, 2008, 11:12 am

    I notice that the gc.ca publication doesn’t include natural gas furnaces in it’s comparison chart; is that because the savings are insignificant when bundled with a high-efficiency natural gas furnace?

    I notice furnace oil is hideously expensive in NL, which would help the payback calculations. But is natural gas available there?

  • DG December 10, 2008, 11:34 am

    Traciatism: I did some calculations earlier this year and my results were something like:

    – Solar water heating payed back in ~20 years.
    – Solar electric payed back in ~75 years.
    – A small windmill payed back in ~40 years.

    The main problem is that Winnipeg (and Canada) has terrible insolation, especially in winter when it is needed most. Another “problem” is that Manitoba has some of the cheapest electricity rates around that make it hard to justify other solutions. Lastly, you have to constantly clean/maintain this equipment to keep it operating efficiently. My conclusion is that this stuff only really makes sense if you are off-grid, but maybe the situation is different where you live.

    All that said, I’m keeping my eye on solar electric. It has the most potential to become ultra cheap and can be ultra low-maintenance since there are no moving parts. It’s not there yet, but a lot of resources are going into making it better. Maybe someday I’ll reshingle my roof with solar shingles :)

    DG

    PS, I can try digging up the analysis spreadsheet if anyone is interested.

  • DAvid December 10, 2008, 11:37 am

    The unasked question so far is about the cooling side. If you have little use for A/C, then the heat pump becomes less an advantage. Electric baseboard heat can be cheaper in some instanes, as you only heat where necessary, wheras unzoned central heat heats all of the home. Zoning central heat is so expensive that in Calgary, a two zone house has two, albeit smaller, furnaces!

    DAvid

  • FT FrugalTrader December 10, 2008, 11:39 am

    Harold, unfortunately, natural gas is not offered in NL.

    DG, I would like to see that spreadsheet!

  • Scott December 10, 2008, 11:39 am

    I was looking into alt-energy to upgrade my house. Seems to be just like what MGL mentioned — a 10-year pay-off period. I would love to go solar but my household is a low energy (heating oil) consumer so the pay-off would be a very, very long wait. As well, solar is still very expensive for a very modest savings.

    Something you should look at for your next house (or like me, when the old units die in your current house) is, as Tractiam mentioned, your water system. Don’t be fooled by the amount of sunlight hours in your area — the sun is VERY powerful! Research solar hot-water tanks or ‘on-demand’ hot-water systems (available in both gas and electric).

    There is a house in my neighbourhood, about two blocks away, that has a wind turbine set up in the backyard. It is running every time I happen to look up at it (they also have a small shed dedicated to all the tech/batteries needed to operate the turbine!). Don’t know much about the cost or efficiency of it.

    Apologies that NONE of this was about heat pumps!

  • 9 OH 2 December 10, 2008, 1:56 pm

    The answer is a solar/wind hybrid solution….with batteries. The bad news is that this technology is still in its infancy which means it is not efficient enough to justify its premium price. The good news is that there is finally enough interest (consumer demand) for private companies to start investing R&D money to fix this. The plasma tv was invented in 1964 but it wasn’t until 2002 that consumerism demanded that they get bigger, clearer, lighter and cheaper. From 2002 to 2008 they became way bigger, 1080p, 50% less heavy and 15% of the price. The same will happen with the cars we drive and the way we heat out homes…it is just a matter of time. Nobody wants to be the guy who dropped 10K on a 37″ plasma in 2002. The world is going to look very different within 5 years or so.

  • TC December 10, 2008, 2:25 pm

    We built a house in St. John’s just over a year ago. We too were faced with deiciding on a heating system. in the end we built an R2000 home with electric heat and propane fireplace and we have seen significant savings already from our old house. The upfront costs was about $7000 to upgrade to R2000. We expect this to pay for itself in 5-7 years. We went from a 1200 square foot bungalow to a 2500 square foot 4 bedroom, 2 story house and our heating and eletrical costs are about 10% cheaper which is actually quite a difference considering we have double the square footage.

    We were looking at a heat pump but decided against it mainly because of the potential maintenance costs.

  • Mr. GoTo December 10, 2008, 2:42 pm

    Heat pumps are fine in moderate climates but when it gets really cold there are two problems: The air temp exiting the vents does not feel warm, which bothers people. Also, at low outside temps, the auxiliary electric strip heat is often demanded by the unit and this really runs up the power consumption.

  • Finance Matters December 10, 2008, 3:29 pm

    Since I have gas heat already I would not change but would consider if building a new home (unless the cost of gas skyrockets in the future).

  • Paw Doc December 10, 2008, 6:12 pm

    http://www.oee.nrcan.gc.ca/residential/personal/retrofit-homes/retrofit-qualify-grant.cfm?attr=4#eligible $3500 for installing a system. Other programs are available depending on the province.

    Grants are available for such a conversion. For me I think the most economical systems are pond or lake systems or horizontal trench systems for geothermal.

    Don’t forget about passive solar and even straw bale houses. My next house will be a passive solar design with post and beam construction with straw bale infil. It really isn’t the 3 little piggies, straw homes are very energy efficient and economical. My favorite website/blog for this is http://www.glenhunter.ca/house.html

    Kevin

  • DG December 10, 2008, 9:29 pm

    FT, I couldn’t find the spreadsheet but I found a more detailed email I sent to a friend at the time which has some good info….

    DG

    from March 2008:

    Okay, here’s my simplistic analysis. None of the options seem economically feasible at this time.

    The Seido 1-16 (http://www.canadiansolartechnologies.ca/solar-technology/) solar heater costs ~$6000 plus installation. According to the Edmonton profile, it yields an average of about 1.4GJ/month, or 389kwh/month. Annually, you will displace $277 worth of electricity consumption, so it will take ~21 years to payback the hardware alone (doesn’t include installation and annual maintenance).

    The whisper 100 wind turbine (http://www.windenergy.com/whisper_100.htm) costs $3000 at Canadian tire, includes a charge controller, and advertises a capacity of 100kwh/month. You will displace $71 of annual electricity consumption, so it will take you 42 years to payback the turbine/controller alone (assuming it lasts that long, and you actually make 100kwh/month).

    For photoelectric, lets work backwards and shoot for an average of 200kwh/month. Average power output over the month would be 274W. Using insolation factors for Winnipeg, we need ~2kw of cell capacity. 200kwh/month displaces $142 of electricity usage/year. Photoelectric cells cost about $7/watt these days, so payback time for just the cells would be 98 years (yikes!). Keep in mind that cells used to cost $100/watt, and development is progressing at a rapid pace (http://theoffgridhome.com/2007/11/20/1-per-watt-of-solar-energy/). You will approach 10 year payback when cost drops below $1/W.

    For the electrical systems above I have not included transmission losses from the collector/turbine to the controller. Also, I am assuming that all power will be immediately consumed by low voltage DC resistive heating elements, eliminating the need for batteries and inverters.

    my numbers:

    Manitoba hydro: $0.0594/kwh
    Winnipeg Insolation: 3.41kwh/m^2day ( http://www.apricus.com/html/insolation_levels_canada.htm)
    Sun Peak: 1kw/m2
    Solar cell Wp measure at sun peak, or 24kwh/m2day
    So to calculate the average power delivered by a solar cell in winnipeg, multiply its peak power rating by 3.41/24, or 0.14.

  • Sarlock December 11, 2008, 12:40 am

    Next house I build will be geothermal for sure. A bit more expensive up front, but pays off over the long run, especially if energy costs resume their upward spiral after this current recession runs its course.

  • Bill December 11, 2008, 4:06 pm

    I live in New England so we have extremely crazy weather. I would love to install a solar system in the future for my hot water and electric. Another 5-10 years, those systems are going to be very cheap as more and more companies are making them.

  • AK December 11, 2008, 5:28 pm

    When calculating the savings that some of these systems provide, please do not forget to include the potential electrical costs associated with installation & operation of some of these systems (especially geothermal.)

    I work in the electrical trade, and you need to pay attention to the power draws some of this equipment requires. You are not saving $$ or the environment if you install an earth friendly system that requires just as much if not more electricity to run than a simple high efficiency electric furnace.

    We recently replaced an old oil burning furnace (which was costing us a small fortune in oil every winter) and after researching all the options we ended up going with a mid-range electric furnace. Because we live in an area with lots of winter weather and no natural gas available our options became much more limited! Now that we have 2-tiered electrical, our electric bills are around $200/month (2200 sq ft of badly insulated 1960’s house) and we have also installed a high efficiency wood stove for those extra cold months.

    I don’t believe that one source of heating is ideal for everyone, and that it is very dependent on the area you live in!

  • stephen December 15, 2008, 10:51 am

    FrugalTrader – Yes, my point was once it gets too cold (below freezing), the back up electrical source for heat pumps (Emergency Heat) costs a great deal more than a tradional furnace in terms of energy costs. So you would probably be better off avoiding a heat pump.

  • Lakedweller December 16, 2008, 6:01 pm

    I must preface with my location, Central Alberta, to provide some context to my comments. It is “heating season” from September/October to May (8 months of the year) so I don’t think about the expense of cooling my house, just how to reduce the amount of heat lost. And of course reducing electricity consumption.

    I have conducted considerable research into the best heating system to use in my 2 storey, 2400 sq ft house. The exciting fact is that there are a lot of options, as everyone has indicated above. And boy, would I love to have a massive solar heating array on the south side of my house.

    But dollar for dollar it is so much more productive to invest in reducing heat loss than to build heat generation.

    Here is a list of projects that will get you farther with less investment:

    1. Hire an energy auditor to come and inspect your house. In Alberta, the analysis was subsidized for a few years, so it only cost $100. I think it is still less than $300 without the subsidy. The auditor will complete a blower door test, essentially reducing the pressure in your house and using the negative pressure to show where the air leaks are. This is absolutely the best bang for your buck!!! Common air leak locations include where the gas and electricity enter the house, around power outlets/switches, poorly sealed doors and windows, the attic hatch, cracks in the exposed foundation.

    2. If your house is more than 10 years old, rip off the siding and add a layer of vapor barrier and insulation. Not the insulation you use in your walls, but the blue “hi-40” board sheets. Focus on window openings and at the foundation. This can “generate” 10% increases in efficiency in heat loss.

    ***Remember, these are not flashy solutions. Nobody will drive by your house and say “Wow, Fred really invested a lot of money into his new heating system”.***

    3. Get every one of your heating systems on a programmable timer. Obvious, but not follwed for most marginal systems like underfloor heating.

    4. My wife decides how hot the hot water heater is set because its her bath that creates the greatest demand on the HWT. To minimize heating more water than necessary or making it hotter than required, I ask her to fill her bath with only the hot water tap on. That saves me about 15% per month.

    (I have apppliances, dishwasher and washing machine, that heat water as required, so hotter water isn’t necessary for cleaning purposes.)

    5. Completely remove the gas or wood burning fireplace. I am speaking from my experience with poorly sealed gas and wood fireplaces. If you are really thinking about efficiency, this is a sacrifice worth making. And you might be able to recoup the costs by selling the fireplace to someone more estheticly focused. Fireplaces are poorly insulated because of fire regulations (which are a good thing) so they allow cold air in when not in use and use heated air as combustion air when in use (so you end up heating the air twice).

    6. The other result you may get from an energy audit (if you hire an excellent consultant) is an indication of whether your ventilation system is balanced. There are heat registers (air flows out) and air intakes throughout the house. There should also be two vents that draws air from outside, one is for fresh air and the other (called a damper) is for combustion in the furnace and HWT (gas). Make sure you are drawing air from both the outside vents when the furnace is working, and not drawing air when its not working. A simple gate flap can be installed on the fresh air intake to minimize unintended air exchange. The same can be done with the “damper”.

    7. Continuing with the ventilation system, it is important to make sure the system is a closed system. Make sure vent piping is sealed all the way from the furnace to where it comes out of the vent in the floor. Remove the vent cover. Can you see into the joists around the vent opening. That is where some of your heat is escaping to. Same thing with fresh air intakes. These are usually not ducted so you have to be extra suspicious of the materials used to channel air back to the furnace.

    A $5 roll of duct tape (not the “Red Green” stuff, the shiny sticky foil tape) will pay for itself in about two weeks in January!!!

  • Don December 20, 2008, 10:56 pm

    I installed an air heat pump this fall and have been very impressed so far. It is hooked in with my hotair oil furnace which is 25yrs old. As I am typing this reply the outside temp is -11c with a wind chill of -18c (10—m4f). The unit runs for 94min and off for 7. When it goes down to -12c it will run non stop and colder then that it will lose and will require the oil heat to kick on. So far when it was -15c the oil heat ran for 10min and shut off then the heat pump was able to hold it for 60 to 70 min. I set the temp at 69 day and 68 night. The info you read that they are not efficient below freezing is very old school. My unit uses 2kwh per hour when it runs non stop. So far I have used about 10L of oil this winter. My oil usage is going to drop 85% and my total cost will be half.

  • Darby December 22, 2008, 2:57 am

    I recently installed a Goodman 13 SEER unit in Saint John, New Brunswick. I’m running it at 18.5 C during unoccupied times and 20 C during occupied. I installed this unit after my first year in the house and previously had oil. At a cost of $1600 for oil last year I didn’t want to repeat that. My install cost was around $3600 (Heat Pump, Air handler, plumbing, electrical and new HP thermostat) The unit has worked great so far, it cost me ~ $50 last month to heat, I would have spent about $200 in oil by this time last year. (to be fair I have installed some new windows as well – some savings can be contributed to that)
    As I write this it’s – 3.5C (white-out conditions) and the only time the electric back-up comes on is during defrost cycle.
    In conclusion I would highly recomend installing a HP, especially if you already have the ducting, I.E. replacing an old oil furnace.
    But as Lakedweller says, the first thing to do it tighten up the house and definatly get an enery audit. (ripping off the siding to install foam might be a bit extreme, but if you do do it go with an isocyanurate foam (R6/in))

  • The Best Heat Pump Systems January 15, 2009, 9:22 am

    interesting article !

  • allanbassenden February 4, 2009, 8:46 am

    What tempature outside should heatpump stop working cold and elect furance backup come on tks allan

  • DAvid February 4, 2009, 11:07 am

    allanbassenden:
    It varies, and on most heat pumps can be set to different temperatures, based on the costs of the fuels (it may be cheaper to run an 80% efficency furnace for 10 minutes than a 150% efficient heat pump for 30 minutes). In addition, most thermostats have a comfort function. If the house does not warm fast enough when heat is called for, the aux heat is turned on.

    You might be best to contact your supplier.

    DAvid

  • Ms Save Money March 17, 2009, 2:29 pm

    Yes, having a heat pump would definitely help to save some money.
    Anyway, I just moved into another house – and I’m looking around to see what I can save money one. Anyone have any ideas?

  • GS April 10, 2009, 3:48 pm

    I bought a $2000 geothermal unit, and cut a large hole on the side of my existing oil furnace, which I now use as a backup heatsouce, attached the heatpump and connected it onto the existing ductwork. I plumbed it with some plastic pipe to use water (@ 45 F) from my existing well, and its handles all my heating unless it gets extremely cold (-25 celcius or colder) then the oil furnace comes on and helps out a bit. Compared to just oil heating its about half the expense, so payback is probably under 5 years. I guessed on the size of the unit for heating, so in air conditioning mode its probably a little too excessive (it cycles off/on more often)

  • Brian February 8, 2010, 4:55 pm

    A day late and a dollar short, but I would argue the benefits of a heat pump are wildly overstated. I live in Indianapolis, Indiana and was told my heat pump would pay for itself in 6-10 years by supplanting my gas-powered furnace for temps anything north of 35 F. One problem with that scenario. The “wildly escalating cost of natural gas” they scared me about never came to pass. And so, instead of paying 30-40 cents per hour for my natural-gas furnace to heat my house when temps are in the 35-65 degrees F range, I pay the electric company $1.50-$1.75 per hour.

  • jean hynes May 25, 2010, 8:36 pm

    we just got a 24000btu heat pump installed.in our basement and we are impressed so far. will have to wait until winter to see any savings in our electrical bill. are there any rebates for buying a heat pump?

  • Andy May 27, 2010, 10:43 am

    I think the thing to remember with all of this is that if you can go with natural gas, go with that. We built a 1700sqft house in 2007 and the highest gas bill we’ve ever had was $145 for a single month. That includes heat, hot water, dryer, and stove.

    Like in one of the comments above, turn your hot water tank down, if you need hotter water, just turn the hot on by itself. Also if you go away for a week and no one is staying at your house, turn it right down along with your heat.

  • JimC March 19, 2011, 9:40 pm

    It also doesn’t hurt to wrap your hot water tank, and hot water piping with insulation. I found that reduced the hot water tanks cycling by about 30%, and it’s noticeably warm under the wrap vs before when the exterior of the tank used to be air temp.

  • Ted White March 10, 2012, 10:06 pm

    I’m considering a heatpump and would like to know which brand is generally considered as most reliable.

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