Heat pump economics · Canada
Heat pump vs furnace in Canada: how the costs compare in 2026
Whether a heat pump beats a furnace on cost turns mostly on one thing: the fuel the furnace burns. Against oil, propane and electric baseboards, a heat pump usually costs less to run. Against natural gas it is the closest call, and closer since the federal consumer fuel charge went to zero in April 2025. This guide compares what each costs to install, which rebates apply in 2026, how running costs differ fuel by fuel, and when keeping the furnace is the better decision.
An earlier version of this page showed 10-year cost totals. Those totals assumed a federal loan program that has since closed and carbon-price increases that will not happen, so they have been removed. The running-cost section explains how to make the same comparison with a home's own bills.
What each costs to install
Installed heat pump prices for a 2,000–2,500 sq ft home, from the same data as the cost guide:
| System | Installed |
|---|---|
| Ducted air-source (cold-climate) | $12,000–$19,000 |
| Ductless mini-split, single zone | $4,000–$8,500 |
| Ductless multi-zone | $8,000–$15,000 |
| Dual-fuel (heat pump + existing furnace) | $6,000–$10,000 |
| Geothermal (ground-source) | $20,000–$40,000 |
A dual-fuel system, at $6,000–$10,000, is the cheapest whole-home option because it keeps the existing furnace for the coldest days and lets the heat pump be smaller. A ducted system sized to heat the home on its own runs $12,000–$19,000.
This guide does not publish furnace prices, because the sources behind the site's cost data do not cover them. The fair comparison is still easy to set up: a heat pump heats and cools, so when the central air conditioner is near the end of its life, the heat pump quote should be weighed against a furnace plus a new air conditioner, not a furnace alone.
Rebates: heat pumps get them, furnaces mostly do not
The federal Greener Homes Loan and the Oil to Heat Pump Affordability program have closed, so heat pump rebates for households at market income are provincial until the federal National Heat Pump Rebate opens in early 2027 ($2,000, or up to $10,000 below the median income, not counted here). The table shows what a 2,000–2,500 sq ft home (3 tons) would receive today, depending on what it heats with now.
| Province | Gas furnace kept as backup (dual-fuel) | Oil furnace replaced (ducted) | Electric heat replaced (ducted) |
|---|---|---|---|
| Ontario | $1,500 | $3,750 | $3,750 |
| British Columbia | None | None | $4,000 |
| Alberta | None | None | None |
| Manitoba | $2,000 | $2,000 | $2,000 |
| Saskatchewan | None | None | None |
| Nova Scotia | $1,500 | $1,500 | $1,500 |
| New Brunswick | $1,000 | $1,500 | $1,500 |
| Newfoundland and Labrador | None | None | None |
| Prince Edward Island | None | None | None |
Alberta, Saskatchewan and Prince Edward Island have no heat pump rebate open at all. Saskatchewan is the reverse of the usual pattern: SaskEnergy's equipment rebate covers furnaces and water heaters but not heat pumps. Lower-income households in several provinces can get upgrades at no cost, in some programs including a heat pump; the rebate guide lists those programs.
Running costs, fuel by fuel
A furnace makes heat by burning fuel, and its efficiency rating (AFUE) is the share of the fuel's energy that ends up as heat: always below 100%. A heat pump moves heat from outdoors to indoors. Over a Canadian heating season, a cold-climate unit delivers roughly two to four units of heat for each unit of electricity, less on the coldest days. Whether that lowers the bill depends on the price of electricity against the price of the fuel it replaces.
Oil
Usually the clearest saving. Heating oil is among the most expensive ways to heat a Canadian home, and a full conversion also ends oil deliveries and, eventually, the cost of replacing an aging tank.
Propane
Usually a saving, for the same reason as oil. Rural homes on propane often keep the furnace as backup in a dual-fuel setup, which lets the heat pump carry most of the season while propane covers the coldest stretches.
Electric baseboard or electric furnace
The saving here is the most predictable, since the same electricity buys two to four times the heat. A ductless multi-zone system is the usual choice in homes without ducts. In British Columbia, this is the only kind of conversion the provincial rebate pays for.
Natural gas
The narrowest gap. Gas is cheap per unit of heat, and with the consumer fuel charge at zero since April 1, 2025, it is cheaper to burn than it was. A heat pump can still cost less to run where electricity is inexpensive relative to gas. Where it is not, the case usually rests on other grounds: an air conditioner that needs replacing anyway, a provincial rebate, or steadier, quieter heat.
Running the comparison with your own bills
Published averages say little about a particular house. A home's own bills give a better answer in four steps:
- Find last year's heating fuel use. Gas bills show cubic metres or gigajoules; oil and propane invoices show litres. For gas, subtract a summer month's use times twelve to take out the water heater and stove.
- Convert it to heat delivered. Multiply by the fuel's approximate energy content (about 10.5 kWh per cubic metre of natural gas, 277.8 kWh per gigajoule, 10.7 kWh per litre of heating oil, 7 kWh per litre of propane), then by the furnace's AFUE, which is printed on its label.
- Divide by the heat pump's seasonal efficiency. Using the low end of the range, about 2, gives a cautious estimate for a cold region. The result is the electricity the heat pump would use.
- Price it at the all-in electricity rate. Divide the total of a recent electricity bill, delivery and fees included, by the kilowatt-hours used, and compare the result with last year's fuel spending.
A dual-fuel system lands between the two figures, because the furnace covers the coldest hours. The cold-climate performance guide explains how efficiency falls as the temperature drops.
Keeping the furnace as backup
Dual-fuel is often the practical middle ground for gas and propane homes. The heat pump handles most of the season, the furnace takes over below a switchover temperature set on the thermostat, and the existing furnace saves the cost of sizing the heat pump for the coldest night of the year. Two rebate rules shape the choice. Ontario's Home Renovation Savings pays its gas-home tier with the furnace kept as backup. British Columbia's rebate does the opposite and pays only when no gas, oil or propane backup remains.
The furnace's age matters too. A furnace with years of life left is a reasonable backup; one near the end of its life is a reason to price a heat pump that can heat the home on its own.
When keeping the furnace makes sense
- The furnace and air conditioner both have years of life left. Replacing working equipment early gives up value already paid for. Adding a heat pump later, as dual-fuel, keeps the option open.
- Gas is cheap locally, electricity is not, and no rebate applies. In that combination the running-cost saving can be small or negative. The four-step check above shows which side of the line a home is on.
- The house loses heat quickly. In a drafty, poorly insulated home, air sealing and insulation shrink the heat pump that would be needed and often pay back first. The sizing guide covers how heat loss sets capacity.
Comparing quotes
Pricing both options at the same time gives the clearest answer. A heat pump quote should name the outdoor and indoor models, state the heating capacity at a cold temperature such as −15°C, confirm the unit is on any qualified-product list the provincial rebate requires, and show the rebate at the system's actual tonnage. The cost calculator gives a benchmark for the heat pump side by province, home size and current fuel.