Annual Heating Cost Comparison
For a typical 2,000-square-foot home in a cold climate (5,000+ heating degree days), annual heating costs vary significantly by fuel type. Natural gas heating costs approximately $800 to $1,400 per winter season. Electric resistance heating costs $1,500 to $3,000. An air-source heat pump costs $600 to $1,200. Propane heating costs $1,200 to $2,500. Heating oil costs $1,500 to $3,000. These ranges reflect differences in local fuel prices, climate severity, and home insulation quality.
Natural Gas: The Traditional Standard
Natural gas furnaces remain the most common heating system in the US, found in approximately 47 percent of homes. Modern high-efficiency gas furnaces achieve 95 to 98 percent AFUE (Annual Fuel Utilization Efficiency), meaning nearly all the fuel becomes heat. At current natural gas prices of $1.00 to $1.50 per therm, operating costs are moderate and predictable.
The disadvantages of gas heating include exposure to natural gas price volatility, the combustion byproducts that affect indoor air quality, and the carbon emissions that contribute to climate change. Infrastructure costs to connect a gas line, if one is not already present, can reach $5,000 to $15,000.
Electric Resistance: Simple but Expensive
Electric baseboard heaters and electric furnaces convert electricity directly to heat at nearly 100 percent efficiency. However, because electricity costs roughly three times as much as natural gas per unit of energy, electric resistance heating is the most expensive option in most markets. At 16 cents per kWh, heating a northern home electrically can cost $2,000 to $3,000 per winter.
Heat Pumps: The Efficiency Champion
Air-source heat pumps move heat rather than generating it, achieving effective efficiencies of 200 to 400 percent (reported as COP or Coefficient of Performance). A heat pump delivering a COP of 3.0 produces three units of heat for every unit of electricity consumed, making it three times more efficient than electric resistance heating and often cheaper than gas.
Modern cold-climate heat pumps operate efficiently down to minus 15 degrees Fahrenheit, though efficiency declines as temperatures drop. In moderate climates, heat pumps are unambiguously the most cost-effective heating option. In extreme cold, they may require backup heating for the coldest days.
Regional Considerations
Your optimal heating fuel depends on local fuel prices, climate severity, and existing infrastructure. In the Southeast and Mid-Atlantic, heat pumps are the clear winner. In the Midwest and Northeast with cheap natural gas, gas furnaces are competitive. In New England with expensive electricity, gas heating may be cheaper than heat pumps despite their efficiency advantage. Use our electricity cost calculator to model different heating scenarios for your location.