When Does a Heat Pump Replacement Save Money?

When you're ready to replace your home's old furnace and air conditioning unit, a heat pump can save you up to 30 percent on your heating and cooling bills, particularly if your furnace was installed before 1992 and uses a pilot light. The pilot light furnaces run at about 65 percent efficiency, while the least efficient heat pumps run at 80 percent. Heat pumps work best as air conditioners, lowering the humidity of the home while they make the air cooler. In cold weather, heat pumps effectively heat your home, but they use more energy to do so.

In cold climates, heat pumps lose efficiency because the outside air is too cold to pull much heat from; the pumps usually pull warm air from outside and push it into your home. Once the temperatures fall below 50 degrees, the heat pumps begin to use a coil heating element to heat the air inside the pump before allowing it to flow into your home. Heating this element uses electricity, raising your electric bill in the cold months. Ground source heat pumps are a solution to this problem. They are buried where the ground temperatures remain nearly constant all year, allowing for more efficient heating and cooling. Many also serve as water heaters, allowing you to replace a third appliance with one device.

Another option for cold climates is to install a dual-fuel heat pump. These don't replace your furnace; they work with it, drawing heat from your existing furnace instead of an inefficient heating element. The heat pump functions on its own until the temperatures drop too low for it to heat the home, then it activates the furnace only when necessary to provide warm air. It turns off the furnace to save energy when the furnace isn't needed.

You can save money by replacing an older heat pump with a newer model. Many older models use Freon-22 as the coolant, which the Environmental Protection Agency has prohibited. People with existing systems don't have to replace them, but the cost of Freon-22 has skyrocketed because it's being phased out. Newer models use less expensive coolant, making annual maintenance much cheaper. Older models don't work as efficiently as newer models. For example, an older model might have a Seasonal Energy Efficiency Ratio (SEER) of 6, while newer models could have a SEER rating of 10 to 16, depending on your needs. This rating helps determine how efficiently the unit cools your home in warmer months. The American Council for an Energy-Efficient Economy recommends a SEER rating of at least 14.5 to help you see a noticeable difference on your utility bill.