For anyone that is interested in understanding how to control their utility costs I think it’s important to know the facts when it comes to a high efficiency furnace vs heat pump technology. In fact at the end of this article I’ve included a real life financial comparison of a Southern Ontario homeowner showing the total costs for a high efficiency furnace vs heat pump system and the numbers are very interesting.
Over the last couple of years there has been a huge movement towards high efficiency heating equipment. Both the federal and provincial governments have sought to encourage energy efficiency by offering rebates to those replacing low or mid efficiency equipment with “high efficiency” (usually characterized by > 95%).
Predictably, there has been much discussion about what this actually does, and more importantly, how valuable it is. I will not be the one to stand here and say that reducing your gas consumption by >5% to heat your home is not a worthwhile pursuit. Unfortunately, there is some dissention about what kind of cost premium this should command. Equally unfortunate is the fact that few people in the HVAC industry have bothered to make the case for higher efficiency. I see this as part of a greater discussion. Consumers are faced with these kinds of decisions constantly – does the premium you have to pay for a product end up being a long term savings?
I am here to emphatically say “YES”. The very fact that most heating systems now last in excess of 15 years tips the scales heavily in favour of efficiency. This is even more important as input costs rise (Natural Gas, Propane, Electricity and Oil). In fact, the justification is so strong that it makes conversion to new ultra efficient heat pumps a huge cost savings (with or without government incentives).
Cost Comparison of High Efficiency Furnace vs Heat Pump
The actual numbers can vary widely, but for starters, let’s consider a 2000 sq ft house built around 1970. With heating loads of ~ 45,000 b.t.u.s this house generated heating costs of around $2500 per year using a 90% efficient furnace. This furnace was nearing the end of its life and the customer was faced with replacing his heating system; either a high efficiency furnace with a 15 SEER A/C, or a 17 SEER Heat Pump with an electric back up system.
The costs for both systems were as follows:
Furnace and A/C: $8,600.
Heat Pump and Electric Back up: $12,400.
Both vendors accurately told the customer that their heating bills would be reduced. So the choice is easy, right? How could a system that costs almost one half more be better value? The answer lies in magnitude of the savings.
The furnace savings are easy to calculate – by improving the efficiency by 5%, the gas consumption should go down by 5% ($125 per year). The heat pump system, however, generated savings in the 30 – 35% range (very common with heat pumps). This represents annual savings of $750. The net improvement for the heat pump system then is $750 – $125 = $625. To calculate the payback divide the difference in savings ($625) into the cost differential ($12400 – $8600 = $3800). In this case the payback would be just over 6 years – giving you another 9 years to pocket the savings for a total 15 year savings of $5,625! Not to mention that heat pumps typically have warranties longer than furnaces!
Before you dismiss this because your situation is different consider that if you are paying more than $2500 a year for heating, the savings get even better! The difference is in how inexpensive the system converts inputs into heat (see our blog on Heat Pump Efficiency).
What does become relevant then, is how long you plan on staying in the home that you are buying the system for. For most people the system you will be buying might last longer than you will be in the home. For that reason, upgrading the heating system makes sense as well. The buyer of your house will be less likely to adjust your purchase price for an antiquated, inefficient heating system. In the end, it’s clear that when you compare high efficiency furnace vs heat pump technology the long term winner is in most cases aheat pump by a long shot.

We are all holding our breath as Washington borrows billions of dollars to get the economy back on track. How can the Stimulus Bill help you as a homeowner? One of the ways involves incentives available for upgrading to an Energy Star rated heat pump, air conditioner, water heater or gas furnace. A new Energy Star, green HVAC Heating and HVAC Air Conditioning System can qualify for up to $1500 in tax credits for these upgrades. In some cases local utility companies add another rebate above that. Not only do you save on the purchase, but the energy savings can be as much as 45% over your current outdated inefficient system. This is fabulous if you are ready to upgrade for energy saving and efficiency.
There are a few other energy ideas to consider. Topping the list of consideration should be an energy audit. If you suspect that you have areas of heat loss in your home, it might be a good idea to have an energy audit done. Local HVAC Air Conditioning and HVAC Heating Contractors can do this. You might also contact your local utility company for recommendations of energy measurement and conservation. Be sure you check out your insulation. The US Department of Energy website helps you determine what amount of insulation (R-Value) is recommended for your zipcode. Insulation gives seasonal comfort for all seasons and is a very important factor in energy savings. How old are your appliances? The Energy Star logo now appears on everything from light bulbs to water heaters and furnaces to ceiling fans. If you are near the end of life on your HVAC System, do yourself a favor and checkout a new Energy Star System. The choices we can make for energy efficiency are increasing constantly. A few simple solutions to increase your energy efficiency are plugging small holes in the house that let heat out or cold in. A can of expanding foam insulation, available at all building supply and hardware stores, works great for filling holes where pipes, dryer vents, telephone, cable and electrical conduits enter your home. Foam insulating inserts can be placed under your receptacle and switch plates, especially on exterior walls. You might be amazed at how much energy escapes through these openings. Weatherstripping doors and windows is another inexpensive solution to energy loss. In regards to your home, age can be painful! If your house was built before 1970, it could be consuming twice as much energy through loss as its newer counterpart.
As a homeowner you have several potential benefits to consider in light of the Stimulus Bill. The benefits are as diverse as home siding, upgraded doors and windows, HVAC heating and HVAC cooling, water heaters and heat pumps. You can expect some pretty competitive advertising from dealers as they fight over consumers. That is not such a bad thing as competition for your home improvement can cause healthy pricing benefits!

A home should be an environment that is comfortable in both the hot, summer months and the frigid, cold temperatures of winter. However, heating and cooling your home so that it is comfortable during these extreme temperature periods can get to be quite expensive. If you aren’t careful, you can rack up a huge energy bill during the winter or summer months without even realizing it. Heating and cooling a home requires so much energy, so sometimes consumers can become devastated at the amount they pay at the end of the month.

However, there are ways to save money on heating and cooling your home. These ways often have a less harmful impact on the environment and a less harmful impact on your pocketbook. While these methods may require an initial investment to make them operational, the money you save over time in heating and cooling your home will be worth the initial investment.

Insulate Your Home

The first and easiest way to make heating and cooling your home more energy efficient is to ensure that air is not escaping from your home or seeping in from the outdoor environment. Poor insulation is often the number one culprit in homes that use energy inefficiently.

You can improve the insulation in your home by installing energy efficient windows that are double paned, or you can have the cracks and gaps sealed around the windows with insulating material. You can also add insulation to your attic and prevent warm air from seeping out through your roof. These small home improvement fixes can help you save a lot of money on your energy bill at the end of each month.

Geothermal Heating and Cooling

Another great way to make your home more energy efficient is to install a geothermal heating and cooling system in your home. Geothermal systems rely on the heat that is generated from the ground in order to make your home more comfortable.

The earth is a wealth of energy, but many consumers don’t know how to tap into the energy that is right below their feet. A geothermal heating and cooling system taps into the heat sources and uses them to power an HVAC system. This type of system is expensive initially, but it can save you thousands of dollars in the course of a lifetime.

Solar Heating and Cooling

Solar power is another great way to save money on your energy bills each month. The energy from the sun is completely free and is abundant almost all year round. If you live in an area of the world that does not have a lot of rainfall, solar heating and cooling systems may be perfect for your area.

A solar heating and cooling system uses huge solar panels to absorb the energy from the sun and convert that energy into a usable energy that can help to power an HVAC system. With the energy from the sun powering the heating and cooling system in your home, you won’t have to shell out so much money each month to an energy company.

The 179D tax deduction came about as part of the Energy Policy Act of 2005 (EPAct). Congress wanted to incentivize the utilization of energy-efficiency components in a building to one of the following parties:

1.The owner of the building
2.The tenant
3.The primary designer of an energy-efficient government building. (Architect, engineer, contractor etc.)

The deduction available is up to $.60 per sq./ft. for lighting, HVAC and building envelope, creating potential for $1.80 per sq./ft. if all three components qualify. These deductions are applicable to buildings that were either built or retrofitted after 12/31/2005.

Since EPAct came into effect, the IRS has provided interim guidance on EPAct deductions through several additional notices. IRS Notice 2006-52 describes in detail the rules and how to ensure a building qualifies if it was a new build or a retrofit. It requires the taxpayer to obtain certification that the property satisfies the energy efficiency requirements of 179D and specifies the software that must be used to calculate energy and power consumption. To further the cause, the IRS issued Notice 2008-40, which allowed a government building (non-taxpaying entity) to pass the deduction to the “primary designer” of the qualifying assets.

Until recently, taxpayers looking to claim the 179D deduction were limited by the three year statute of limitations for filing amended income tax returns for a particular tax year. That has changed with the issuance of Revenue Procedure 2011-14, which will allow some taxpayers to bypass this statute of limitations and claim this deduction all the way back to 1/1/2006 without filing one single amended income tax return. Taxpayers who wish to take the deduction without amending any returns will file a Form 3115 (Application for Change in Accounting Method) and will get to take the entire “catch up” deduction on the return that is being filed. This means that a taxpayer could potentially claim deductions from 2006-2010 (or 2011) all on one return and significantly reduce their tax burden, if not eliminate it altogether.

Deciding whether or not to amend returns or file for a Change in Accounting Method (Form 3115) is entirely dependent upon each taxpayers situation. If taxable income was higher in open years and therefore the taxpayer was in a higher tax bracket, it still may make sense to amend those returns. The impact of Revenue Procedure 2011-14 will also depend on whether or not any deductions have already been claimed or returns have been amended. A thorough analysis of each taxpayers scenario by an advisor experienced in 179D is advantageous to determining the best approach and claiming the maximum deduction allowed under the law.

Home energy assessment refers to the process of inspection, survey and estimation of the flow of energy in a particular building. This activity is carried out with the intent to reduce the amount of energy consumed in a building. Special emphasis is given to the fact that the resultant solution does not cause any negative effect on the output energy.

The process of energy audit is done by a professional, who surveys the heating, ventilation and air-conditioning or HVAC system of a residence. Advanced equipment like infrared cameras and blower doors are utilized to determine the appropriate solution for an effective heating and cooling of the house. Such services can be easily availed from an expert heating contractor. Their professionals carry out a thorough inspection of the entire building, beginning with the walls, ceilings & floors to doors, windows and skylights. While carrying out the process of surveying, all the places of leakage and points of infiltration of air are taken into consideration. The audit also takes into account the physical condition and efficiency of the various mechanical systems of the house. These may include the heating, air conditioning and ventilation equipment.

The assessment is made while keeping in mind factors like the local climate, roof overhang, solar orientation and the energy consumption of the house like electricity, natural gas or other energy sources. Apart from surveying the heating, cooling and ventilation systems of a premise, there are other factors that these experts take into account. These include the size of the premise where the system is to be installed, the age of the building and the renovation done to the same. Size of the premise matters a lot, as a large air conditioner will be unable to efficiently dehumidify the air, whereas a small HVAC system will be ineffective in creating comfortable conditions inside the premises. Based on such findings a heating contractor suggests remedial solutions to improve the energy consumption of the building, without making a compromise on the energy output.

The solutions offered by these experts also include Westchester heating services like furnace installation, boilers, radiant flooring, heat pumps and hybrid heat systems & geothermal systems. The cooling solutions, on the other hand, include installation of efficient and effective central air conditioning system together with cooling equipment. Maintenance and load calculations also form a part of the cooling solutions. Additionally, the cooling solutions are constituted by air filtration & humidification service and the ultraviolet light system.