Energy-Efficient Heating: The Cheapest Way To Heat A Home

person adjusting thermostat in home

Heating a home is expensive; though, you probably already know this after seeing your December bills. Heat accounts for the largest portion of the utility bill in many homes, around 30 percent, according to the US Department of Energy (DOE). 

There are many ways to cut heating costs, like wearing extra layers instead of turning up the heat and using a programmable or smart thermostat. However, investing in an energy-efficient heating system is one very effective and economical way to heat your home.

What Makes A Heating System Energy Efficient?

Before getting into energy-efficient heating options, it’s important to understand what makes a system efficient. Efficiency is measured based on the amount of fuel going toward heating your home versus the amount lost.

Your heating system has an Annual Fuel Utilization Efficiency rating (AFUE). The AFUE tells you how much heat from the energy system is usable. It’s displayed as a percentage. For example, a system with an AFUE of 90% indicates a high-efficiency rate (only 10% is not going to good use). 

The DOE requires present-day systems to have a rating of at least 80%; however, if you have an older home and have never upgraded your heating system, yours is likely operating at an efficiency below that level. Look for your system’s AFUE or Energy Star rating to determine its exact percentage.

Do Energy-Efficient Heating Systems Save Money?

Yes! Efficiency translates to less energy consumption, which means lower bills. Systems built before 1992 typically waste a lot of energy and money. The DOE says that installing a system with a rating of at least 90% can reduce your heating bill by as much as 50%.

An energy-efficient heating system may be a higher upfront cost; however, it will save you money in the long run. Additionally, energy-efficient systems are more environmentally friendly as they have lower carbon emissions. 

Types of Efficient Home Heating Systems

There are three main types of efficient home heating systems: furnace, heat pump, and boiler.


A furnace is considered one of the most efficient heating systems, especially if it uses natural gas instead of electricity (which can be very expensive). A furnace works by heating a metal heat exchanger, which then transfers heat to cold air. Then the furnace’s fan (also known as a blower) pushes the warmed air into the air ducts and distributes it through the home. 

Furnaces, particularly new ones, have high-efficiency ratings. Additionally, they are relatively affordable. A new furnace can cost anywhere from $2,000 to $7,000, depending on the size of your home. 

Heat Pump

heat pump outside of a home

A heat pump is a dual heat and air conditioning system. During the winter months, it transfers heat energy from a cool area to a warm space, like your house. In summer, it moves the warm air inside your home to the outside, making the indoors cooler.

There are several heat pump systems: ducted air source, ductless air source, geothermal, and absorption heat pumps. 

Geothermal heat pumps can reduce energy use by 30% to 60%, according to the DOE. These heating systems transfer heat to your home from the ground or a nearby water source, which remains relatively constant in temperature. As a result, geothermal pumps work well in extreme temperatures. 

Ducted air-source heat pumps are the most widely used across the US and work well in mild to moderate climates. These heat pumps can reduce your electricity use in heating by approximately 50%.

Heat pumps are generally energy efficient as they transfer heat rather than generate it. In areas that experience extreme temperatures, however, heat pumps can be more costly. This is because they can raise your electricity bill just as much as they lower your gas bill.

When deciding whether to install a heat pump, you’ll need to consider the climate, electricity prices compared to gas, and property size. 

One other thing to remember is heat pumps use a Heating Seasonal Performance Factor (HSPF) rating. The DOE requires pumps to have at least an 8.2 HSPF rating. To be sure you’re buying an energy-efficient one, you can look for a heat pump that is Energy Star certified.


Another option for heating your home is using a boiler. Boilers heat water in the tank and then distribute the hot water via various pipes that lead to radiators throughout a home. 

Boilers that use natural gas are very efficient, even more so than furnaces. Some have AFUE ratings up to 100%. Other types of boilers, such as oil and electric ones, are uncommon in the US. 

The only downsides to boilers are their bulkiness and high initial and repair costs. They can cost up to $10,000, and repairs can be expensive. 

How to Choose A Heating System

The type of heating system and its efficiency will vary depending on the climate and what sources are available in your area. For example, some homes are only built for electrical systems, while others may be set up for natural gas. 

What Is The Cheapest Way To Heat A Home?

furnace exhaust pipe blowing steam outside

When natural gas heating is possible, it’s almost always cheaper and more energy efficient than electrical heating systems. 

The key to finding the cheapest way to heat a home is combining an energy-efficient system with heat-retaining practices such as adding insulation, sealing ducts, and installing energy-efficient windows. These upgrades can make your heating system even more productive. 

Wrapping Up

Finding a heating system that is energy efficient and cost-effective will require some research and investigation as what's best in one area, may be less than ideal in another. So when deciding whether to install an electric or gas heating system, you’ll need to look at what’s available in your area and compare electricity and gas prices.

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