What Is the Cheapest Way to Heat a House? Fuel Cost Comparison
The cheapest way to heat a house is whichever fuel gives the most heat per dollar in your area. Across most of the US, natural gas and heat pumps come out ahead, wood can be cheap if you have a stove and a supply, and electric baseboard heat is almost always the most expensive. The right way to compare is not the price of a gallon or a kWh, but the price of one million BTU of heat that actually reaches the house.
Why you cannot compare prices directly
Electricity is sold by the kWh, gas by the therm, propane and oil by the gallon, wood by the cord and pellets by the ton. Each holds a different amount of energy, and each system wastes a different share of it. So convert everything to the same unit: dollars per million BTU of delivered heat.
One kWh of electricity is 3,412 BTU, a therm of natural gas is 100,000 BTU, a gallon of propane is 91,500 BTU, a gallon of heating oil is 138,500 BTU, a cord of seasoned hardwood is about 24 million BTU, and a ton of pellets is about 16.4 million BTU. A heat pump is special: it moves heat from outside rather than making it, so each kWh delivers 2 to 3.5 times its own energy. That ratio is the coefficient of performance (COP).
Cost per million BTU, at example prices
These use typical US prices. Yours will differ, and the order can change, so use your own bills in the calculator.
| Heating system | Example price | Cost per million BTU of heat |
|---|---|---|
| Natural gas (95% furnace) | $1.45 per therm | $15.26 |
| Firewood (EPA stove) | $300 per cord | $17.86 |
| Heat pump (COP 2.5) | 17 cents per kWh | $19.93 |
| Wood pellets (80% stove) | $350 per ton | $26.68 |
| Propane (95% furnace) | $2.80 per gallon | $32.21 |
| Heating oil (85% furnace) | $3.90 per gallon | $33.13 |
| Electric resistance | 17 cents per kWh | $49.82 |
Electric resistance heat costs about three times as much as gas per unit of heat. A heat pump uses the same electricity, but multiplies each kWh into 2 to 3.5 times as much heat, so it costs far less than resistance heat.
What it adds up to for a whole house
A moderate climate (30 kBTU per ft² of heat per year), average insulation, and the example prices above:
| House size | Natural gas | Firewood | Heat pump | Wood pellets | Propane | Heating oil | Electric resistance |
|---|---|---|---|---|---|---|---|
| 1,000 ft² | $458 | $536 | $598 | $800 | $966 | $994 | $1,495 |
| 1,500 ft² | $687 | $804 | $897 | $1,200 | $1,450 | $1,491 | $2,242 |
| 2,000 ft² | $916 | $1,071 | $1,196 | $1,601 | $1,933 | $1,988 | $2,989 |
| 2,500 ft² | $1,145 | $1,339 | $1,495 | $2,001 | $2,416 | $2,485 | $3,737 |
Change the climate, the insulation or the prices in the heating cost comparison calculator to see your own numbers. A cold climate raises every column by half, and a very cold one doubles them.
When does a heat pump beat gas?
A heat pump costs less to run than a gas furnace when its price per kWh falls below a break-even value that depends on the price of gas and the heat pump's COP. For a 95% gas furnace, here is the electricity price at which the two cost the same:
| Gas price | COP 2.0 | COP 2.5 | COP 3.0 | COP 3.5 |
|---|---|---|---|---|
| $1.00 per therm | 7.2¢ per kWh | 9.0¢ per kWh | 10.8¢ per kWh | 12.6¢ per kWh |
| $1.50 per therm | 10.8¢ per kWh | 13.5¢ per kWh | 16.2¢ per kWh | 18.9¢ per kWh |
| $2.00 per therm | 14.4¢ per kWh | 18.0¢ per kWh | 21.5¢ per kWh | 25.1¢ per kWh |
| $2.50 per therm | 18.0¢ per kWh | 22.4¢ per kWh | 26.9¢ per kWh | 31.4¢ per kWh |
Below the figure in the table, the heat pump is cheaper. With gas at $1.45 per therm and a COP of 2.5, electricity must cost under 13 cents per kWh. In a cold climate the COP is lower on the coldest days, so use the lower columns. Where winters are mild, or where electricity is cheap, heat pumps often win by a wide margin.
What the running cost does not tell you
- Equipment and installation. A new furnace, a heat pump or a wood stove each costs thousands of dollars to buy and install. A cheaper fuel only pays back that cost over years.
- Rebates and credits. Many utilities and governments offer rebates on heat pumps, insulation and efficient equipment. Check what is available before you decide.
- Convenience and storage. Wood and pellets need room to store, and someone to carry them and clean the stove. Oil and propane need a tank and deliveries.
- Safety and upkeep. Any combustion appliance needs proper venting, a carbon monoxide alarm and a yearly service. Wood stoves need chimney cleaning.
- Price swings. Oil and propane prices move more than gas and electricity, and often rise in the coldest weeks. Fill tanks and buy wood and pellets in the summer, when they cost the least.
The cheapest heat is the heat you do not need
Whatever the fuel, a house that needs less heat costs less to heat, by the same percentage. Sealing air leaks, adding attic insulation (see how much attic insulation you need) and fixing drafty doors and windows are among the best returns in the house. A smart thermostat that sets back the temperature while you sleep or are away trims the bill further.
If you are replacing a furnace, size it properly: a furnace size calculator gives a starting point, and a contractor should do a full load calculation. If you plan to burn wood, the firewood calculator estimates how many cords a winter takes, and the pellet stove calculator does the same in bags of pellets.
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