March 2, 2023
Heat Pump System Diagram

By Brian Gray

If you do a Google search for the phrases "How much does a heat pump cost?" or "Will I save money with a heat pump?" you'll probably get a long list of links from companies you never heard of asking you to fill out a contact form. Bottom line is, the short answer to both of those Google search questions is, "It depends."


There are three types of heat pumps: air-to-air, watersource, and geothermal. They collect heat from the air, water or ground outside your home and concentrate it for use inside. The most common type of heat pump is the air-source heat pump, which transfers heat between your house and the outside air. The air sourced heat pump is what we are discussing here.

There are two types of air sourced heat pumps, ducted and ductless.

  • Ducted units provide heating and cooling throughout the entire house
  • Ductless (or mini-split) units provide heating & cooling in a smaller section of the house.

Installing a heat pump is one of the best ways to reduce your household's heating & cooling costs, fossil fuel use and your carbon footprint. A few quick facts:

  • Heat pumps are super-efficient and use the ambient air and electricity to generate heating and cooling for your home. If the electricity used to power the heat pump is generated by solar, wind, hydro or any other method of renewable energy than you have offset the use of fossil fuels.
  • When you install a heat pump, your fossil fuel use (and cost) will go down, but your electricity use (and cost) will go up.
  • One heat pump will both heat and cool the area it covers in your home.
  • Heat pumps are also called "air sourced heat pumps", "cold-climate heat pumps" and "mini-splits"
  • Heat pump technology has improved significantly over the past 10 years. They are now capable of operation down to -13 degrees Fahrenheit.


Saving money with a heat pump largely depends on the fuel you are currently using to heat your home. If you heat with propane, fuel oil or kerosene, the savings can be significant. If you are currently heating your home with natural gas or wood a heat pump may not lower your overall heating bills. (But you'll still reduce your carbon footprint.)

Another way to analyze your savings is to compare costs per MMBtu of different fuels. This chart shows the cost per MMBtu of various fuels in Vermont as of April 2023.

Cost of fuels per MMBTU

Based on the above fuel costs, the cost to operate a heat pump per MMBtu is 17% less than heating oil, 40% less than kerosene and 29% less than propane.

Fluctuations in fossil fuels prices are a variable factor in how much you can expect to save. If fuel prices go very low, you may not actually save money when you install a heat pump.

Another variable is how much fossil fuel you can offset using a heat pump. Ducted heat pumps can offset nearly all your fossil fuel use because they are connected to your home's central heating and cooling system.
Ductless units target one area of your home and are often used to supplement an existing central heating system. They perform best in homes with open floor plans. Depending on how open your floor plan is, you could expect a fossil fuel displacement of between 40% and 70%.

No matter what the savings, there a few other compelling reasons to install heat pumps:

  • To cut your fossil fuel use and reduce your carbon footprint.
  • To keep your home cool and comfortable all summer long.
  • To protect your family from future spikes in fossil fuel prices. Paired with solar panels, a heat pump can help make your home more energy independent.


There's no doubt that the initial installation cost of a heat pump ($4,000-$15,000) can be an obstacle for many homeowners. In Vermont, there are a variety of low-cost loans, rebates and tax incentives that may be able to help with that. Our website has links to the latest rebates and financing programs.

If you finance the cost of your heat pump with a Home Energy Loan you may find that your low monthly payments will be more than offset by the fuel cost savings of using a heat pump.


If your primary goal is to save money on your heating costs and you currently utilize natural gas, a heat pump may not be a good investment. Of course, if you are using natural gas for heating your home a heat pump can be a nice addition to cool your home in the summer months.

If you have not weatherized your home by sealing up air leaks and adding insulation to poorly insulated walls and attics, then weatherizing your home may be the first step you should consider completing before adding a heat pump as it may have a bigger impact on energy savings than installing a heat pump.


Need some advice? With a few short questions about your home, the Energy Co-op can tell if you should consider scheduling a site visit to get a formal quotation. Our cost estimates are always without obligation, so the only thing you have to lose is some fossil fuel and your hard-earned dollars!