Heating will be costly this winter, but much less so with a heat pump

Federal forecasts have warned about high heating bills, yet they don’t account for the much greater efficiency of electric pumps, says pro-electrification group Rewiring America.

If you want to save on your monthly heating bills, heat pumps are the way to go. (Shutterstock)
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Rising energy costs will make it much more expensive to heat U.S. homes this winter. But homes with modern heat pumps will save a lot more money than the latest federal forecasts might lead you to believe. 

That’s the message that pro-electrification nonprofit Rewiring America is trying to get out in the wake of a dire winter fuels outlook released by the U.S. Energy Information Administration this month. 

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News reports on the EIA’s new data emphasized rising costs for both fossil-fueled and electric heating — No matter how you heat your home, the cost of that heat is likely to soar,” reported CNN Business. 

But those costs will actually be quite a bit lower for homes that use more efficient electric heat pumps, which will soon be eligible for thousands of dollars in tax credits and federal incentives under the Inflation Reduction Act, said Rewiring America CEO Ari Matusiak. 

Getting that point across is even more important today than it was in the past because we’re having this conversation at this moment, where efficient electric machines are increasingly going to be a choice for consumers in the market,” he said in an interview. It’s important for us to be able to see what those benefits are in real time as the market unfolds.”

EIA’s winter heating data shortchanges heat pumps 

EIA’s presentation of heating-cost data in its winter fuels outlook has two problems, Matusiak said. 

First, for electric heating, EIA lumps together highly efficient heat pumps and highly inefficient resistance heating systems. Resistance heaters — the things that are heated with coils, which is technology from the 1950s,” as Matusiak put it — are quite inefficient at converting electricity to heat. Heat pumps, which compress condensing liquids to move temperatures from outdoors to indoors in the same way that air conditioners do, use less than half as much electricity as resistance heaters, according to the U.S. Department of Energy. That alone makes up hundreds and hundreds of dollars of difference” in winter heating costs, Matusiak said. 

Second, though EIA frames its outlook as an examination of heating costs, it’s actually using numbers for total household consumption of electricity, gas and other fuels — a fact that’s noted on the second page, but not foregrounded. This framing fails to account for the very different ways that households use these energy sources. The majority of gas used in homes goes to heating, with the rest going to tasks like cooking and clothes drying. But electricity is used for many more things — lights, refrigerators, dishwashers, televisions, other appliances and electronics, and increasingly electric cars. So when EIA contrasts winter gas use with winter electricity use, this is far from an apples-to-apples” comparison, Matusiak points out. 

Correcting for those two errors yields a far more favorable cost forecast for homes warmed with heat pumps, according to Rewiring America’s analysis. Its analysis uses fuel cost data from the National Energy Assistance Directors’ Association (NEADA), which represents state administrators of low-income energy-assistance programs, and presumes the use of heat pumps with a heating seasonal performance factor” (HSPF) of at least 10 — a level of efficiency that corresponds with Energy Star–certified heat pumps that are widely available. 

Running those numbers yields a much lower cost for heat-pump use through the winter months of October 2022 to March 2023, the timespan covered by EIA’s winter fuels outlook. Instead of the $1,359 for electric heating forecasted by the EIA, Rewiring America estimates that homes with heat pumps will spend about $596 on heating over that time period. 

Chart of cost differences for U.S. residential heating from fossil fuels and electrical resistance heaters and heat pumps
Rewiring America

All in all, when using better underlying data, it’s clear that homes with electric heat pumps have the lowest winter heating costs. Households relying on gas furnaces will spend an average of between $900 and $1,000 on heating this winter, Rewiring America forecasts. And homes with old-style electric resistance heaters will spend a whopping $1,700 to $1,800 on average.

Sam Calisch, Rewiring America’s head of special projects, said it would be great” if EIA’s winter fuels analysis could break out heat pumps and resistance heating separately, and distinguish between electricity used for heating and for other household purposes. Providing clear information on heating costs will help Americans make informed choices as they look to upgrade their systems. That’s especially critical for low- and moderate-income households that face the greatest burden from rising energy costs. 

The big picture for fossil fuels vs. electricity 

It’s also important to remember that the cost of fossil gas is rising much more quickly than the cost of electricity for U.S. residential customers, Calisch said. Global natural gas markets have been roiled by the Russian invasion of Ukraine and the consequent sanctions and cutoffs of the gas Russia supplies to Europe, which has led to global price spikes. U.S. companies have jumped at the chance to export more gas to Europe and pull in higher prices than they could get at home, which in turn raises prices in the U.S.

Chart of prices for different fuels at U.S. wholesale or spot market prices
Rewiring America

The above chart shows the trend of rising U.S. wholesale prices for different home-heating fuels. The primary driver of rising U.S. electricity costs is spiking gas prices, since gas remains the country’s most common source for generating electricity, Calisch noted. 

The price differentials between gas and electricity are showing up in U.S. residential energy cost increases. NEADA’s home heating report in September forecasted that residential natural gas heating prices this winter will be 34 percent higher than last winter, while residential electricity heating prices will be 7 percent higher. 

In that report, NEADA Executive Director Mark Wolfe warned that rising energy costs will put millions of U.S. households at risk of falling behind on energy bills and being forced to choose between covering those bills or paying for food, medicine and rent. 

The Inflation Reduction Act’s largest incentives for heat pumps are geared toward low- and moderate-income families, including $8,000 for a heat-pump heater (which can also work as an air conditioner) and $1,750 for a heat-pump water heater.

Gas prices have fallen in recent days, driven by reports of increasing levels of stored gas to supply Europe through the winter. But in the long run, fossil fuel costs are both a major driver of inflation and far more susceptible to volatility in response to global crises like Russia’s war in Ukraine. 

The price of electricity, by contrast, can be moderated by diversity of supply from other generation resources, including the renewable energy needed to decarbonize the world’s economy, Matusiak said. 

You can’t conserve your way out of the inflationary and volatility baseline of fossil fuels,” he said. You don’t need to be a climate warrior to have this as a point of view and as a priority. This is about helping American families make ends meet and stay comfortable.”

Jeff St. John is director of news and special projects at Canary Media.