The Problem With Electric Furnaces — Cost Comparison (December 2022)

An expensive way to heat your home

Many homeowners replace broken HVAC systems with a new version of the same product. But if you have an electric furnace, this decision could cost you $10,000 to $25,000 in unnecessary utility bills over the next 10-20 years. 

That’s because electric furnaces are one of the least efficient ways to heat your home. The average homeowner can expect to pay about $1,300 per year to heat their home using an electric furnace. 

By comparison the average homeowner can expect to spend $500 to $600 heating their home using a heat pump. In other words, electric furnaces cost about twice as much to operate than heat pumps. 

In this guide we’ll go over how electric furnaces work, the pros and cons of installing an electric furnace, and how they compare to heat pumps and other heating systems.

How do electric furnaces work?

You can think of an electric furnace working like a massive hair dryer. Colder indoor air is pulled into a heat exchanger where it is heated over electric heating elements. A blower fan then blows the warm air through ductwork to heat your house.

Your home’s thermostat is connected with the furnace to control when the heating elements and blower fan turn on. If the indoor temperature is below the set temperature, they turn on, and when it’s reached, they turn off.

Unlike gas, propane, and oil furnaces, electric furnaces don’t need venting since there’s no risk of CO2 poisoning. 

Electric furnace sizing and capacity

Electric furnaces are generally sized in two units: British Thermal Units (BTUs) and kilowatts (KWs). These are different metrics that essentially communicate the same thing: how much heat a furnace can generate. 

1 KW is equal to 3,412 BTUs. 

Here’s a table showing the most common electric furnace sizes in KWs and BTUs:

KWBTUs5 KW17,000 BTUs10 KW34,000 BTUs15 KW51,000 BTUs20 KW62,000 BTUs

A home in a moderate climate needs about 25 to 45 BTUs per square foot. If you’re in a cold climate zone, you’ll need 45 to 60 BTUs per square foot.

But these are just rules of thumb that can give you a roundabout idea of your home’s needs. The best way to figure out how much capacity you need for a furnace or heat pump is to get an energy audit or a Manual J test.

Electric furnace prices and cost

Electric furnace prices range from $650 for small budget furnaces to about $5,000 for large, variable-speed models. 

Models with variable speed blowers are able to keep your home at more consistent temperatures and save energy, but they’re also more expensive. High end brands like King Electric, Stelpro, and Winchester cost between $1,100 and $5,600 before installation.

Single speed blower models will have less temperature variability, but cost less. Budget brands like Goodman and Direct Comfort cost between $650 and $900 for the unit alone. 

Average installation cost

According to Modernize, the installed cost of an electric furnace ranges from $1,200 to $5,900. The average cost to install an electric furnace is about $3,500. 

Installation costs vary depending on the following factors: 

• Whether or not you need to install new ductwork 
• Whether or not you need to do any electrical work
• The size of your home
• Whether it’s a new install or a replacement

New installs are generally more expensive than replacements because of all the other work you’ll need, like installing new ductwork.

The larger your home, the larger the furnace you’ll need to adequately heat it. Electric furnaces are sized by the kW or BTU. 

But installation cost isn’t the only thing to consider. While electric furnaces cost less upfront, they are far less energy efficient than heat pumps. Installing an electric furnace could cost you $10,000 to $25,000 in unnecessary utility bills over the next 10-20 years. 

Average cost to operate per year

The average home in America is about 2,000 square feet and uses 35 million BTUs of energy for space heating. That’s the equivalent of about 10,000 kWh per year. So at an average price of $0.13 per kWh for electricity, that means electric furnaces cost about $1,300 per year on average to operate. 

But if you live in a colder climate, you can expect that number to be much higher. For example, in the Northeast the average home uses about 50 million BTUs of energy for space heating, or roughly 15,000 kWh per year. And electricity costs about $0.20 per kWh there. So if you live in the Northeast, electric furnaces cost about $3,000 per year.

Here’s a table showing how much it would cost the average homeowner to heat their home using an electric furnace by census region: 

Census regionAnnual heating costSouth$891Pacific$944West$1,069Mountain$1,157Midwest$2,100Middle Atlantic$2,561Northeast$3,036

Pros of electric furnaces

• Electric furnaces are relatively cheap and easy to install. The upfront costs are about half the cost of a gas furnace or heat pump.
• They have a long operating life and are easy to maintain. A good electric furnace can last for 20 to 30 years. 
• Electric furnaces are safe to run and don’t have the risks of carbon monoxide like gas furnaces. 

Cons of electric furnaces 

• They are expensive to operate. The upfront savings you get will be quickly eaten away by high energy bills.
• Electric furnaces are not well suited for colder climates (mostly because you’ll spend a fortunate on electricity)
• Most of the country still relies on coal for electricity. That high electricity use equals a larger carbon footprint.

Electric furnace vs. heat pump

The main benefit of electric furnaces compared to heat pumps is their lower upfront cost. But this comes with a major tradeoff: electric furnaces are far more expensive to operate than heat pumps. 

Heat pumps use advanced technology to heat and cool homes at 200-400% efficiency. In other words, they turn 1 kWh of electricity into 2 to 4 kWh of heat. The result: much lower utility bills.

Why an electric furnace is better

• An electric furnace is cheaper to buy and install. The upfront cost of a heat pump is on average $10,000, compared to an average of about $4,000 for an electric furnace.
• It has a longer lifespan. An electric furnace will last 20 to 30 years with regular maintenance, while a heat pump will last about 15 years because it’s used year-round (to heat and cool your home).

Why a heat pump is better

• It’s far more energy efficient, which equals much lower energy bills. When you switch from an electric furnace to a heat pump, you’ll save $815 a year. That savings will pay back the upfront cost in 11 years.
• A heat pump is heating and cooling in one. The same energy efficient heat exchange process keeps your home comfortable year round.
• All electric furnaces require ductwork. Heat pumps on the other hand come in ductless models, often called mini-splits. 
• The energy savings also means you’ll reduce your carbon emissions. Switching from an electric furnace to a heat pump reduces your home’s yearly carbon dioxide emissions by an average of 5.1 metric tons.
• It’s a more comfortable heat. Electric furnaces produce a dry heat that can cause dry skin and irritate allergies and asthma. A heat pump pulls in air from outside for heating, which has more moisture.

Electric furnace vs. gas furnace

The main advantage of electric furnaces compared to gas furnaces is the fact that they don’t require a gas line. If you’re home doesn’t already have a gas line it generally costs about $1,000 to add one. But in some cases – like in more rural places – it’s not even possible.

If you have a gas line, then the main advantage of a gas furnace is the fact that natural gas is generally cheaper per BTU than electricity. 

For example, based on average utility rates in America, it costs about $16 per delivered BTU to use an 80% efficiency gas furnace. An electric furnace by comparison costs about $41 per delivered BTU. In other words, it costs 2.5x more per BTU to heat a home with a gas furnace than an electric furnace. 

It’s worth noting that because a heat pump runs at 250% efficiency, they cost about the same per delivered BTU as an 80% efficiency gas furnace — about $16 per delivered BTU. But in the case of a heat pump you get air conditioning too, hence why they are generally regarded as the best option. 

Why an electric furnace is better

• An electric furnace has a lower upfront cost than a gas furnace. A gas furnace requires extra infrastructure for piping in natural gas and venting out the carbon monoxide gas that’s produced from combustion, which makes it cost around twice as much to install.
• An electric furnace is safer because it doesn’t produce carbon monoxide like a gas furnace.
• An electric furnace will likely last longer than a gas furnace. It won’t need replacing for 20 to 30 years compared to 15 – 25 years for a gas furnace. Maintenance is also easier and cheaper to keep up with.

Why a gas furnace is better

• A gas furnace has much lower energy bills because of the lower cost of natural gas.
• If the power goes out, your gas furnace will still keep you warm on a cold night. 

Electric furnace vs. baseboard heating 

Baseboard heating systems are a type of zone heating that allow you to control the temperature in individual rooms. The baseboard unit, which runs along the bottom of the wall, uses a metal heating element to generate and slowly release heat into the room where it’s placed.

Unlike an electric furnace, there’s no need for ducts or blowers like other forms of heating.

Why electric furnace is better

• Forced air is more energy efficient than baseboard heating which amounts to lower energy bills.
• It’s less restrictive when it comes to furniture placement and design. There is no fire risk and no wall units to worry about.
• Baseboard heaters have to be cleaned regularly to operate at their maximum efficiency. Forced air requires less cleaning to function properly.

Why baseboard heating is better

• Baseboard heating is inexpensive to install. The average upfront cost is around $500-1,000 per room.
• You can customize temperatures in each room by installing units where you need them.
• It runs quietly because there are no furnaces, ducts, and vents to make noise.
• There’s no need for ductwork, so it’s easier and less expensive to install.

Electric furnaces are an attractive option because of their lower upfront cost, but a heat pump is the most energy efficient option in every climate. As a result, heat pumps can save you the most money over time. 

On average, American homeowners can save $557 per year on heating and cooling costs by making the switch from another heating source. Homeowners that currently use an electric furnace or baseboards and air conditioning can expect to save between $1,000 to $1,500 per year switching to a heat pump. 

To learn more about heat pumps, check out our guide here.