Electric Heat vs Gas Heat: Which Is Cheaper?

With energy bills putting a crunch on the US this winter, comparing the costs of electric heat vs gas heat can be an important decision for homeowners looking to save money.

In this year’s winter fuels outlook, published by the Energy Information Administration (EIA), it’s forecasted that from November through March, heating-oil customers will pay 21% more this winter, while natural gas customers will pay 9% less.

Meanwhile, households heating their home with electricity can expect to pay 4% more. With these things in mind, here are some ways to lower energy costs, based on different heating sources.

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Heat pumps can keep you warm without the higher costs

Heat pumps are highly efficient and can cut electricity use by 50% when compared with electric resistance heating, according to the Department of Energy. As a result, if you use a heat pump to warm your home, you’ll likely pay much less than the EIA forecast. And they aren't just for mild climates; chilly Maine leads the country in heat pump installations.

Additionally, Rewiring America says in the report that "the agency includes all uses of each fuel in its cost estimates, meaning cost projections for electricity customers include energy used to power other electric appliances such as refrigerators and electronics."

Furthermore, Super El Niño will also play a sizeable role in the weather this winter. The Northeast should see warmer weather while the West has cooler temperatures. If you live in the West and use natural gas, expect a slight increase in bills.

The Midwest and South should expect similar weather to last year, but even the EIA says the unpredictable nature of the weather could lead to variations from this forecast.

However, newer, more efficient heating technologies continue to get cheaper, particularly as economies of scale and subsidies kick in at the state and federal levels.

Electric heat: cost to run

According to the EIA’s Electric Power Monthly report, the average cost of electricity in the U.S. is 18.31 cents per kilowatt-hour (kWh.

The Efficiency Maine Trust provides the following cost breakdown for electric heating systems:

According to the U.S. Department of Energy (DOE), installing a more energy-efficient electric heat pump can reduce energy usage in your home significantly, compared to traditional electric resistance heating such as furnaces and baseboard heaters.

The most common type, ducted air-source heat pumps, reduces energy use by approximately 50%. More expensive options like geothermal heat pumps can reduce energy use by up to 60%. This type of upgrade saves you money on a monthly basis, but you should include sizable upfront installation costs as part of your bill calculations.

However, the American Council for an Energy-Efficient Economy reports that heat pumps may not provide enough heat in especially cold northern regions, resulting in a need for alternative fuel sources and higher bills. In addition, many homeowners may not be able to use the most efficient geothermal heat pump type, which requires digging a large trench near or under your home, according to the DOE.

Gas heat: cost to run

According to the EIA’s Electric Power Monthly report, the average cost of gas heat is 18.31 cents per killowatt hour.

The Efficiency Maine Trust provides the following cost breakdown for gas heating systems:

How fuel source affects home values

For homeowners concerned about their home's resale value if they switch to efficient electric heat, there's good news. According to Remodeling magazine's Cost vs Value report, converting from fossil-fuel heating and cooling to electric is among the most valuable remodeling projects a homeowner can undertake.

These projects return, on average, 72% of the cost at resale. These estimates are based on a project that removes a fossil-fuel-burning furnace and fully installs an electric heat pump for heating and cooling a 2,000-square-foot home.

Which heating source saves me the most money?

The most common electric heat systems have higher monthly operating costs compared with the most common natural gas systems, according to the most recent U.S. government statistics. But efficient heat pumps will save you money, especially over the system's lifetime when compared to gas furnaces.

In some cases, geothermal electric heat pumps can save you money over the most cost-efficient natural gas boilers. They are generally more efficient than gas furnaces and use less source energy on average in moderate climates. However, the more complicated geothermal heat pump systems aren't an option for homeowners without land for an underground trench.

Electric heat pumps, especially when sweetened with tax credits that lower installation costs, are the best choice for many homes. Over the next decade, however, electricity costs may rise given the enormous strain on the nation's electricity supply. This heightened demand is driven largely by the huge amounts of electricity needed by artificial intelligence, cryptocurrency mining, data centers and clean technology factories.

No matter your choice, you can also meaningfully lower your heating costs by doing a few important things.

• If you only use certain rooms in your home, try to use spot heating rather than running your whole home system.
• Keep your thermostat setting at 68 degrees for the majority of each winter day. And if you're away from your home often, a smart thermostat allows you to save:

• Consider getting a home energy audit to identify fixes that optimize efficiency and comfort.
• Once you have the audit in hand, apply fixes like caulking, weatherstripping, insulation, and air filter changes.
• If you don't want to pay for an audit, consider a pocket thermal camera that scans your windows, doors and HVAC to find energy leaks.

For more energy-saving content, check out our home savings hub.

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