Heat Pump vs Gas Furnace: True Cost Comparison for Bay Area

The Great Heating Debate

With California's push toward electrification and heat pump rebates exceeding $6,000, many Bay Area homeowners are wondering: should I switch from gas to a heat pump?

This analysis breaks down the real costs to help you decide.

Understanding the Options

Gas Furnace

• Burns natural gas to create heat
• Requires separate AC for cooling
• Common in most Bay Area homes
• Efficient in cold weather

Heat Pump

• Moves heat rather than creating it
• Provides both heating AND cooling
• Powered by electricity
• Most efficient in mild climates (like Bay Area)

Upfront Cost Comparison

Gas Furnace + AC System

ComponentCost Range

Gas furnace (96% AFUE)$3,500-6,000 Central AC (16 SEER)$3,500-6,000 Installation$2,000-4,000 Total$9,000-16,000

Heat Pump System

ComponentCost Range

Heat pump (16 SEER/9 HSPF)$6,000-12,000 Installation$2,000-4,000 Electrical upgrades (if needed)$0-2,000 Total Before Rebates$8,000-18,000

Available Incentives (2024-2025)

IncentiveAmount

Federal Tax Credit (30%)Up to $2,000 TECH Clean CaliforniaUp to $3,000 PG&E Rebates$500-1,000 BayREN/Local Programs$500-1,500 Total Possible IncentivesUp to $7,500

Net Cost After Rebates

• Heat Pump: $500-10,500 (significantly reduced!)
• Gas + AC: $9,000-16,000 (no significant rebates)

Winner for Upfront Cost: Heat pump with rebates

Operating Cost Comparison

The Variables

Operating costs depend on:

• PG&E rates (gas and electric)
• Home size and insulation
• Usage patterns
• Equipment efficiency

Current PG&E Rates (2024)

• Gas: ~$2.00 per therm
• Electricity: ~$0.35 per kWh (average tiered)

Heating Cost Analysis

Gas Furnace (96% AFUE)

• Heating 2,000 sqft home
• Annual gas usage: ~400 therms
• Annual cost: ~$800

Heat Pump (9 HSPF)

• Same home
• Annual electricity: ~3,500 kWh
• Annual cost: ~$1,225

At Current Rates: Gas furnace wins for heating by ~$425/year

But Wait - Consider Cooling Too

Central AC (16 SEER)

• Annual cooling: ~1,500 kWh
• Annual cost: ~$525

Heat Pump (Cooling)

• Same home, same efficiency
• Annual cost: ~$525

Cooling costs are identical (both use electricity)

Total Annual Operating Cost

SystemHeatingCoolingTotal

Gas + AC$800$525$1,325 Heat Pump$1,225$525$1,750

Difference: Gas saves ~$425/year on operations

10-Year Total Cost of Ownership

Gas Furnace + AC

Cost CategoryAmount

Equipment & Install$12,000 10-Year Operations$13,250 Maintenance (annual)$1,500 Estimated Repairs$1,500 10-Year Total$28,250

Heat Pump (With Rebates)

Cost CategoryAmount

Equipment & Install$12,000 Rebates Received-$5,000 10-Year Operations$17,500 Maintenance (annual)$1,500 Estimated Repairs$1,000 10-Year Total$27,000

Result: Heat pump wins by ~$1,250 over 10 years when rebates are included!

Factors That Favor Heat Pumps

1. Rising Gas Prices

PG&E gas rates have increased 40%+ in recent years. If trends continue, heat pumps become more economical.

2. Time-of-Use Electric Rates

With solar or battery storage, you can shift heat pump usage to cheap rate periods.

3. Carbon Reduction Goals

California is phasing out gas appliances in new construction. Heat pumps future-proof your home.

4. Solar Panels

If you have solar, heat pump electricity may be nearly free during production hours.

5. Bay Area Climate

Our mild winters are ideal for heat pumps - they rarely need backup heat.

Factors That Favor Gas Furnaces

1. No Electrical Upgrades Needed

Older homes may need panel upgrades for heat pumps ($1,500-3,000).

2. Faster Heat in Cold Snaps

Gas furnaces produce 120°F+ air vs. heat pump's 90-100°F (feels cooler from vents).

3. No Learning Curve

Gas furnaces work exactly like your current system.

4. Existing Infrastructure

If your gas lines, venting, and electrical are already set up for gas, switching has more friction.

Special Considerations

Dual Fuel Systems

Best of both worlds:

• Heat pump for mild weather (most of Bay Area's year)
• Gas furnace kicks in during rare cold snaps
• Cost: Add ~$1,500-2,500 to heat pump system
• May not qualify for all rebates

Mini-Split Heat Pumps

If you don't have ductwork:

• Lower installation cost
• Zone control
• Higher efficiency
• Cost: $3,500-6,000 per zone

Our Recommendation

Choose Heat Pump If:

• You qualify for rebates (reduces cost significantly)
• Your electrical panel can handle it
• You have solar panels
• You care about carbon footprint
• You're replacing both AC and furnace anyway
• You're in it for 10+ years

Stick With Gas If:

• Your furnace is under 10 years old
• Major electrical upgrades needed
• You prefer familiar technology
• Upfront budget is tight (even with rebates)

Consider Dual Fuel If:

• You want heat pump efficiency but gas backup
• You experience occasional cold snaps
• You want to hedge against future rate changes

Making the Decision

The numbers show heat pumps are now cost-competitive with gas in the Bay Area, especially after rebates. The deciding factors are usually:

1. Rebate availability (act while funding lasts) 2. Electrical panel capacity 3. Personal preference for proven vs. new technology

We're happy to evaluate your specific situation and provide quotes for both options.