Home upgrades

Heat Pump Savings: Key Factors That Save You Money

February 18, 2024
Amanda Smith
December 11, 2022

We all know the drill; as the temperature fluctuates, so does your energy bill. Cooling down your home or office in the summer can set your wallet ablaze, while winter heating puts a freeze on your budget. 

But what if you didn't have to live in fear of touching that thermostat? Heat pump savings can add up to a 60% reduction in electricity use if you use furnaces or baseboard heaters, translating to massive yearly savings.

Heat pumps utilize electricity to transfer heat between your home or office and the outside environment—pumping out hot air in the summer and pulling it in during the winter. Let's learn how they work and how to save on your energy bill.

How Much Can a Heat Pump Save You? 

Common air source heat pumps can save you up to 50% of your existing electric bill annually, while geothermal heat pumps can reduce your energy use by up to 60%. Depending on a few factors, you can save over $500 per year on average after switching to a heat pump system. 

6 Factors That Affect Heat Pump Cost Savings

1. Local Climate

Your local climate can affect your potential heat pump savings. Those on the East Coast and in the Southwest will benefit the most from upgrading to a heat pump. Many buildings in these regions tend to use less efficient heating and cooling methods. Luckily, modern heat pumps can operate efficiently in warm and cold environments.

As heat pumps operate utilizing electricity, areas where electric rates are lower will see more significant savings. If you live in a state with higher electric rates, that doesn't mean heat pumps are a poor choice; the cost will likely still be cheaper than conventional heating and cooling options, whether on a variable or fixed-rate electricity plan.

2. Home Size

Your current home or office size will help determine the savings from switching to a heat pump system. A large building requires more energy to maintain your set temperature; the more you spend to heat or cool your home or office, the more savings you will likely see when transitioning to a heat pump.

Selecting an appropriate heat pump size for your home or office is critical. You'll need a larger heat pump if you have a more extensive space that needs climate conditioning. While a larger heat pump will cost more upfront, obtaining an appropriately sized system will allow for more efficiency in the long run.

3. Home Efficiency

It's likely not surprising to hear that an inefficient home or office will utilize more energy to maintain temperature. However, you may be shocked to learn that a heat pump can lead to more significant savings in typically inefficient settings. This notion is attributed to the simple rule: The more energy you consume, the greater impact a heat pump system can have on your wallet.

Of course, a heat pump will still impact homes and offices that are more efficiently insulated. Whether dealing with a modern building or something with more vintage charm, a heat pump will decrease your overall energy usage—and lower energy usage always equals less money when you break down your electric bill.

4. Pump Type

The type of heat pump you select for your home or office will impact your monthly savings and installation costs. Generally, you will choose between two types of heat pumps: air source or geothermal. However, hybrid pumps and those powered by alternative energy sources (known as absorption heat pumps) are also available.

Air source heat pumps are more common, but geothermal systems may be more efficient, reducing energy costs by up to 60%. However, geothermal heat pumps are usually more expensive upfront.

Additionally, it's wise to look for more efficient heat pumps that feature two-speed compressors and variable-speed (sometimes called dual-speed) motors. These features allow heat pumps to operate in a way that better meets heating and cooling needs with less energy use. Heat pumps with more advanced feature sets may cost more upfront but will likely add up to additional savings in the future.

5. Current Heating System

You'll see a positive impact switching to a heat pump from nearly any other type of system, but the more inefficient your current system, the higher the percentage of savings you'll see. The biggest winners in switching to heat pumps will be those with baseboard heaters and fuel oil systems.

According to information from Carbon Switch and the National Renewable Energy Laboratory, those running inefficient fuel oil or baseboard heating systems can see savings ranging from $929 to $1,287. 

Even efficient systems, such as those running on natural gas, will benefit from switching to a heat pump, saving you up to a couple hundred dollars a year while positively impacting the planet. Combine heat pumps with a budget billing electric plan, and you’ll have a predictable energy bill with fewer fluctuations.

6. Rebates and Incentives

Is there anything better than free money? Thanks to the Investing in America Plan, homeowners can use a 30% tax credit on buying and installing a new heat pump up to $2,000. Some states and municipalities offer additional discounts; we recommend checking with your local Department of Energy for more information.

Heat Pump FAQ

Investing in a heat pump can lead to incredible savings, but you may have a couple more questions before upgrading. Here are some frequently asked questions regarding heat pumps and their money-saving potential.

Does a Heat Pump Save Electricity? 

A heat pump can potentially decrease your electric bill and save you money. During warmer months, you'll find that a heat pump provides a more efficient cooling method than conventional air conditioners—a great way to reduce your electric bill in the summer.

Still, you'll see the true savings add up in the winter when your heat pump takes over the job of a more typical heating system. If your home or office utilized electric heating previously, you'll see a drastic reduction in your electric bill.

At What Temperature Is a Heat Pump Most Efficient? 

Manufacturers and repair technicians generally agree that heat pumps are most efficient above 40°F. 

However, even in colder weather, although less efficient than in ideal temperatures, you are still likely to utilize less energy with a heat pump, saving you money. Heat pump technology has come a long way, allowing effective operation from the sunny shores of Florida to the snowy mountains of Alaska.

How Cold Is Too Cold for a Heat Pump? 

Heat pumps can be used in freezing temperatures and down into the negatives without struggle. Heat pumps from your grandparents' days may have struggled in colder weather, but modern technology allows heat pumps to operate in a wider array of climates.

In fact, according to a study published in Nature Energy, more temperature-frigid Scandinavian countries have massively adopted energy-efficient heat pumps to heat and cool their homes and offices over the last decade.

Save on Your Electricity Bill With Arbor 

Heat pump savings are a reality for those who choose to upgrade to the more energy-efficient heating and cooling solution. Whether selecting an efficient heat pump or a mini split system with multi-zone climate treatment, the team at Arbor is here to help you automatically lower your energy bill at no cost—seriously, no credit card is required, so give it a shot.

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