You're Considering a New Water Heater, Furnace, or Cooktop-Should You Go Electric or Gas? The Decision Hinges on Operating Cost, Not Just Purchase Price
Gas is often cheaper per BTU, but electric appliances have higher efficiency. Electric heat pumps are 2–3 times more efficient than electric resistance heating, but may use different amounts of energy than a gas furnace. This calculator cuts through the confusion and shows you the true annual operating cost for each option.
What This Calculator Does
This calculator compares the operating cost of electric vs. gas appliances over their lifetime. You input the appliance's rated energy consumption (in BTU output for heating, therms for gas, or electrical input for electric), the appliance's efficiency (AFUE for furnaces, COP for heat pumps, energy factor for water heaters), and your local rates ($/therm for gas, $/kWh for electricity). The calculator estimates annual operating cost for each fuel type, shows you which is cheaper, and calculates payback period if you're switching to a more efficient model. It accounts for the fact that gas furnaces are 80–98% efficient, electric resistance heaters are 100% efficient but expensive to run, and heat pumps are 2–3 times more efficient than resistance heating but use electricity.
How to Use This Calculator
Decide which appliance category you're comparing: water heater, space heater, furnace, heat pump, or cooking/dryer. For a water heater, you need: the gallons of hot water used daily (typical: 50–80 gallons per household), temperature rise needed (entering water ~50°F, desired hot ~120°F, so ΔT = 70°F), and the appliance efficiency (gas water heaters: 0.55–0.70 EF; electric resistance: 0.90–0.98 EF; heat pump: 2.5–3.5 EF). For heating (furnace, heat pump), you need: annual heating load in BTU (from the Heat Loss Calculator or a professional estimate), and the appliance's efficiency (gas furnace: 0.80–0.98 AFUE; electric resistance: 1.0 but expensive; heat pump: 2.5–3.5 COP, meaning it outputs 2.5–3.5 BTU for every 1 BTU of electrical input). Enter your local rates and the calculator will show annual operating cost for each. You'll immediately see which fuel is cheaper and by how much.
The Formula Behind the Math
The math accounts for energy input, efficiency, and fuel cost:
Gas appliance annual cost:
Annual BTU needed ÷ (AFUE × 100,000 BTU/therm) × $/therm = annual cost
For a furnace needing 50 million BTU annually with 90% AFUE at $1.20/therm:
Electric resistance heating annual cost:
Annual BTU needed ÷ 3,412 BTU/kWh × $/kWh = annual cost
For the same furnace with electric resistance at $0.15/kWh:
Electric is far more expensive because it's all input energy (100% efficient conversion, but electricity itself is pricey).
Electric heat pump annual cost (2.5× more efficient than resistance):
Annual BTU needed ÷ 3,412 BTU/kWh ÷ COP × $/kWh = annual cost
For the same heating load with a 2.5 COP heat pump:
Heat pump is more expensive than gas ($880 vs. $667) in this example, but competitive.
Water heater example:
For heating 60 gallons daily from 50°F to 120°F:
Gas (85% AFUE, $1.20/therm):
Electric resistance (97% EF, $0.15/kWh):
Heat pump (3.0 EF, equivalent to 3.0 COP, $0.15/kWh):
Gas and heat pump water heaters are nearly tied; electric resistance is expensive.
Our calculator does all of this instantly-but now you understand exactly what it's computing. The key insight: efficiency matters enormously. A cheap gas appliance with 80% AFUE loses 20% of fuel to waste. An expensive heat pump with 3.0 COP outputs 3× the energy of its electrical input and can beat gas on cost.
Water Heaters: Gas, Electric, or Heat Pump?
Traditional gas water heaters cost $400–$800 and operate at 80–85% efficiency. Annual cost: $150–$250 for a typical household. Electric resistance water heaters cost $300–$500 and operate at 95% efficiency but electricity is expensive, so annual cost: $400–$600. Heat pump water heaters cost $1,500–$3,000, operate at 2.5–3.5 COP (equivalent to 250–350% efficiency vs. resistance), and annual cost: $150–$200. Payback for heat pump vs. gas: slow, since operating costs are similar. Payback for heat pump vs. electric resistance: fast (3–5 years). Heat pumps also work well in homes retrofitting to all-electric (they can support solar+ battery systems).
Furnaces and Heat Pumps: The Shift to Electrification
Gas furnaces cost $2,000–$4,000, operate at 90–98% AFUE, and heat 50+ million BTU annually at $400–$700/year. Heat pump systems (mini-split or whole-home) cost $3,500–$8,000+, operate at 2.5–3.5 COP depending on climate, and heat the same load at $500–$900/year. In moderate climates, heat pumps can beat gas on operating cost over time. In very cold climates, gas is cheaper or neck-and-neck. However, government incentives (federal tax credits, rebates) now favor heat pump adoption, shrinking payback periods. A heat pump might cost $2,000 more upfront but get a $2,000–$5,000 rebate, eliminating the premium and tilting the decision toward electrification.
Cooking: Gas vs. Electric
Gas cooktops cost $300–$800; electric coil or glass-top cost $200–$600; induction cooktops cost $300–$1,500. For a household cooking 1 hour daily: gas uses ~0.5–0.7 therms per month ($6–$8/month), electric uses ~10–20 kWh/month ($1.50–$3/month). Induction is most efficient (90% power transfer vs. 60–80% for coil/glass, but gas is comparable at 70% when you account for kitchen venting). Operating cost is negligible. Buy based on cooking preference (many prefer gas flame control) and upfront cost, not operating cost. However, gas stoves have been scrutinized for indoor air quality (nitrogen oxides); induction is cleanest.
Rebates and Incentives: The Hidden Cost Equalizer
Federal tax credits now favor electric heat pumps and induction cooktops. A heat pump furnace gets up to $5,000 federal credit plus state rebates, potentially $8,000+. Gas furnaces get no federal credit (though some states offer small rebates). This can flip the economics: a heat pump might be slightly more expensive to operate but $5,000 cheaper net, making it the clear winner. Check ENERGY STAR, your state's energy office, and your utility's rebate programs for current incentives. Incentives change yearly, so timing matters.
Regional Electricity vs. Gas Rates
Electricity costs $0.10–$0.30/kWh; natural gas costs $0.80–$2.00/therm. The ratio varies by region and time. California has expensive electricity ($0.20+/kWh) and moderate gas ($1.00/therm); Louisiana has cheap electricity ($0.10/kWh) and cheap gas ($0.70/therm). The "crossover" point (where electric becomes cheaper than gas) varies. In expensive-electricity regions, gas appliances often win on operating cost. In cheap-electricity regions (or with renewable electricity), electric heat pumps can beat gas. If you're on a grid with mostly renewables, electric appliances will become cheaper as grid emissions decrease.
Tips and Things to Watch Out For
Efficiency ratings vary by region. Heat pump COP (Coefficient of Performance) is climate-dependent. A 3.0 COP in moderate climates drops to 2.0 in very cold climates. This shifts the economics. Ask for regional-specific efficiency ratings, not just AHRI (standard conditions).
Furnace AFUE and actual field performance differ. A 95% AFUE furnace in test conditions might achieve 85–90% in the field due to installation quality, ductwork leaks, and cycling losses. Use conservative estimates, not nameplate values.
Heat pump defrost cycles waste energy in very cold climates. Below freezing, heat pumps must periodically reverse to melt ice on the outdoor coil, reducing heating output. In extreme cold, supplemental electric resistance heat activates (expensive). Cold-climate heat pumps are improving (cold-climate rated models available), but very cold areas still favor gas.
Thermostat habits matter more than equipment. Lowering your thermostat 2°F saves 10–15% of heating cost, regardless of fuel. The cheapest appliance upgrade is a smart thermostat ($200–$400, 5–10% savings, 1–3 year payback).
Hidden costs of all-electric homes: If converting from gas to all-electric, you need heat pump heating, electric water heater, and induction cooking. Electric panel upgrades might be required if capacity is low. Total cost: $10,000–$30,000. Rebates help, but plan for significant upfront cost.
Don't replace functioning appliances for operating cost alone. An 80% AFUE furnace is still functional. Replace at end-of-life with a more efficient model. Payback for replacement before failure is measured in decades.
Frequently Asked Questions
Is gas cheaper than electric for heating?
Depends on local rates. Gas is usually cheaper per BTU, but heat pumps are 2–3× more efficient than electric resistance. A heat pump in a moderate climate beats gas operating cost. A gas furnace usually beats electric resistance. Compare using actual rates and efficiency ratings.
What's the average cost to run a gas furnace?
For a typical home heating 50 million BTU annually: 555 therms × $1.20/therm = $666/year. Ranges from $400 (small home, mild climate) to $1,500 (large home, cold climate).
What's the average cost to run a heat pump for heating?
For the same 50 million BTU, 3.0 COP, $0.15/kWh: 5,863 kWh × $0.15 = $880/year. Ranges from $500 (moderate climate) to $1,500+ (very cold climate). Can be cheaper or pricier than gas depending on climate and rates.
Should I switch from gas to electric?
If: your furnace is old (next 5 years), your utility offers high incentives, you value air quality/environmental impact, and electricity rates are moderate-yes. If: your gas furnace is new and efficient, your electricity rates are very high, your climate is extremely cold-probably not yet. Incentives are improving, so this calculation changes year-to-year.
How much do conversion costs add to the equation?
Converting from gas furnace to heat pump: $3,000–$5,000 labor + equipment. Rebates might cover $2,000–$5,000. Net cost: $0–$3,000 after incentives. Operating savings: $200–$400/year. Payback: 5–15 years. Reasonable if you're replacing soon anyway.
Can I use a heat pump for heating in a very cold climate?
Modern cold-climate heat pumps (rated for -15°F) perform well down to 0°F, then degrade. Below 0°F, supplemental electric heat engages (expensive). For climates with frequent sub-zero temperatures, gas is typically more economical. Cold-climate heat pumps are improving but aren't universally the answer yet.
What if I have both gas and electric options available?
Compare operating cost using this calculator, add incentive values, and choose based on total cost of ownership. Also consider: preferred cooking style, backup heat (heat pumps need backup in extreme cold), and future grid decarbonization (electric appliances become cleaner over time as grids shift to renewables).
How much do induction cooktops cost to operate?
Negligible. Cooking 1 hour daily uses ~10 kWh/month, or $1.50/month at $0.15/kWh. Gas stoves cost ~$6/month. Difference: $4.50/month or $54/year-too small to factor into the decision. Buy based on preference and upfront cost.
Related Calculators
Use the Electricity Cost Calculator to understand electricity rates and consumption. The Heat Loss Calculator helps you estimate annual heating loads needed to compare furnaces and heat pumps. The Electricity Bill Calculator forecasts your total electricity cost if converting to all-electric appliances.