Heat Pump vs. Furnace: Costs, Efficiency & What Works Best in Cold Climates
If you're a homeowner weighing whether to replace your gas furnace with a heat pump, you're not alone. With rising energy costs, new rebate programs, and more cold-climate–ready technology than ever before, it’s a smart time to explore your options.
This guide walks through the key differences between heat pumps and furnaces — including installation costs, operating costs, efficiency, and more — and explains why heat pumps or hybrid, dual fuel systems often come out on top in cold climates like Colorado and Minnesota.
What’s the difference between a heat pump and a furnace?
A furnace generates heat by burning fuel, typically natural gas or propane. A heat pump, on the other hand, moves heat rather than creating it. You can think of it like a highly-efficient air conditioner but with a reverse gear for heating. In the winter, it pulls warmth from the outdoor air and brings it indoors; in the summer, it does the opposite to cool your home.
Heat pump vs. Gas furnace: Installation cost
We know the first question many people have when comparing these two systems is about cost. While we encourage you to first consider the size of your home and the local climate, as well as the home’s layout, ductwork and electrical systems, here are some ranges to get you started:
While a heat pump may cost more upfront, federal and utility rebates can dramatically lower the price — especially in 2025, with Xcel Energy rebates in Colorado tripling earlier this year. Learn more about rebates and how to claim them here.
In this decision, the installers you get quotes from really matter. Some HVAC contractors won’t admit that they don’t know how to size and install a heat pump, so they lean into old myths that heat pumps won’t work in cold climates. Make sure you work with an installer that understands your needs and the pros and cons of both systems when making a decision that’s best for your home.
At Zero Homes, we make it easy to get a high quality system design and quote that includes rebates — no sticker shock, just the real deal.
Heat pump vs. Natural gas: Operating cost comparison
Natural gas is cheaper per unit than electricity in many places, but heat pumps are 2–4x more energy efficient, which often offsets the difference.
Our data indicates that the average annual operating cost savings for a 1,800 square foot home with modern insulation in a cold climate that is switching from a gas furnace to a heat pump is $650 per year.
Dual fuel systems, which allow you to switch from a heat pump to backup fuel heating in temperature extremes (such as in northern Minnesota or in some high-altitude areas of the Rocky Mountains), also offer reductions in annual heating expenses.
Heat pump vs. Gas furnace calculator: How to estimate savings
Wondering about your specific home? While some general heat pump vs gas furnace cost calculators exist, they are rarely specific to your home, which is why getting quotes from different contractors is the best way to go.
Zero Homes is unique in providing a high quality HVAC system design and quote without needing an in-home sales visit or contractor walkthrough — a typical requirement to getting an estimate.
What are the disadvantages of a heat pump?
No system is perfect. Here are a few common concerns:
Upfront Cost: Even with rebates, heat pumps are often more expensive to install. The only time this is rarely the case is when replacing a furnace and central air conditioning system — then heat pumps cost less upfront.
Electrical Load: You may need a panel upgrade if switching from gas to electricity-powered heat pump.
Supplemental Heat Needs: In very cold regions, a backup heat source may still be recommended — which is where dual fuel systems shine.
At Zero Homes, we work with every homeowner to address their specific needs and concerns to design a system that will deliver the most comfort, control and value.
So, is a heat pump better than a furnace?
In many cases: yes — especially if you value efficiency, flexibility, and future-proofing.
Here’s why:
Heat pumps provide both heating and cooling in one system
Rebates can significantly reduce upfront cost
Electricity is cleaner and more stable in price than gas
Dual fuel systems offer a best-of-both-worlds compromise
With efficiently designed systems, operating costs are lower than gas systems, even in cold climates
Obviously, we have a slight bias toward heat pumps, but you don’t have to take our word for it:
Final Take: What we recommend
If you live in a cold climate, a cold climate heat pump or a dual fuel system is often the smartest long-term investment. You’ll save on energy, reduce your carbon footprint, and future-proof your home as more cities move toward electrification.
Need help choosing the right system? We’ve designed and installed hundreds of high-performance heat pumps across Colorado and Minnesota. Start here with our heat pump guide, give us a call at (303) 848-8606 or schedule time to speak with us below.
