Natural gas is one of the most important energy sources in the US, widely used for heating and electricity generation. Natural gas was used to generate 38.3% of US electricity last year, according to the Energy Information Administration (EIA), and 47.6% of homes use gas-fired heating systems according to the US Census Bureau.
A new gas furnace can help you reduce your home heating costs, especially if you choose an ENERGY STAR unit with a high Annual Fuel Utilization Efficiency (AFUE).
Here we will discuss how much you can expect to pay when installing a new gas-fired heating system, while giving some technical recommendations to achieve top performance. We will also discuss pros and cons of gas furnaces, providing a comparison with other home heating options.
Contrary to what the word “natural” might suggest, natural gas is a fossil fuel – it’s not considered a renewable energy source.
However, natural gas has much lower emissions than other fuels. For example, coal-fired power plants produce 2.23 lb of CO2 per kilowatt-hour generated, petroleum-fired power plants produce 2.13 lb CO2 per kWh, and gas-fired power plants only produce 0.91 lb CO2 per kWh (according to US EIA data).
How Much Does a New Gas Furnace Cost?
The cost of a natural gas furnace depends on many factors, including the rated heating capacity and energy efficiency (AFUE). As the square footage of your home increases, the heat input required to keep a suitable temperature also increases.
The heating capacity of a gas furnace is measured in BTU per hour of MBH (thousand BTU per hour); for example, 60,000 BTU/hour is equivalent to 60 MBH.
On average, you can expect to pay between $4,500 and $8,500 for a new gas furnace in the US, including installation costs, but not including the cost of new ducts. If your ducts are in good condition, you may be able to replace the existing furnace with minimal modifications to other HVAC components.
On the other hand, if your existing ducts require major modifications or you need a complete system for a new home, this can add around $5,500 – $15,500 to your budget.
The Inflation Reduction Act (IRA) introduced new tax credits and rebates for home energy efficiency. Natural gas furnaces don’t qualify for most of the incentives since they depend on fossil fuel combustion.
However, a home energy upgrade that includes a high-efficiency furnace may qualify for the HOMES rebate program (Homeowner Managing Energy Savings). The rebate amount is determined by the percentage energy savings achieved:
- $2,000 for home retrofits that reduce energy consumption by at least 20%.
- $4,000 for home retrofits that reduce energy consumption by at least 35%
- In both cases, the maximum rebate amount is limited to 50% of project costs.
- The HOMES rebate can be doubled up to $8,000 for households below 80% of the area median income.
According to studies carried out by the EIA, space heating represents 43% of energy consumption in the typical US home. This means a high-efficiency heating unit can greatly reduce your total consumption, helping you qualify for the energy efficiency rebate.
Unfortunately, a new gas furnace does not qualify for the 30% Clean Energy Property Tax Credit and the High Efficiency Electric Home Rebate, which were also introduced by the IRA.
Natural gas produces half the emissions compared with coal and fuel oil, but it’s still a fossil fuel at the end of the day.
Did you now? A new gas furnace will operate more efficiently if you also improve your home insulation and seal any air leaks found around your doors and windows.
Your home will be able to keep heat indoors more effectively, reducing the workload on your heating system.
You will also save on space cooling during summer – outdoor heat gain is also reduced, and your air conditioner consumes less electricity.
Natural Gas Furnaces: Pros and Cons
When natural gas is used for space heating, it offers several advantages over other fossil fuels:
- Natural gas is delivered by pipe as a utility service, while other fuels like heating oil and propane must be delivered by truck. When using a natural gas furnace, you don’t need to worry about running out of fuel, since it will continue flowing through the service connection. With other fuels, you need to be extra careful with scheduled deliveries, so you don’t run out in the middle of winter.
- Natural gas generally has a lower heating cost. If you compare the operating costs of several furnaces with the same heating capacity, but using different fuels, the gas furnace will generally have the lowest cost per BTU delivered. This is especially true if you purchase an ENERGY STAR gas furnace.
- Natural gas offers reliable space heating. If your heating system uses a fuel that must be delivered by truck, the supply can be cut short during emergencies. This includes extreme weather, supply chain issues, and even health emergencies like COVID-19. Disrupted deliveries are not an issue when using a natural gas furnace, since the energy input arrives via underground pipes.
- Natural gas has a lower carbon footprint than other fossil fuels. Although natural gas is not a clean energy source strictly speaking, it has lower emissions than other fossil fuels. For example, when upgrading from an oil furnace to a gas furnace, emissions can be expected to decrease by around 30% or more.
Natural gas furnaces also have a much lower operating cost than electric resistance heaters in most cases. Only electric heat pumps can match the heating cost of gas furnaces, and both options are available with the ENERGY STAR label if you want to ensure high efficiency.
Gas furnaces also have some limitations you need to be aware of: Some states and cities have started to introduce climate mandates that limit the use of combustion heating systems, and this includes gas furnaces.
Compared with electric heat pumps, natural gas furnaces also tend to get fewer financial incentives from government and utility programs.
For example, the Inflation Reduction Act has one tax credit and two rebate options for heat pumps, but only one rebate for high-efficiency gas furnaces (not a dedicated incentive, but actually a broader rebate program for home energy efficiency).
Natural gas furnaces tend to have lower operating costs than other heating systems most of the time, but they are susceptible to price volatility in the international fossil fuel market. This is exactly what happened last year, where natural gas prices spiked by more than 30% (according to the latest inflation data).
Advantages of an ENERGY STAR Natural Gas Furnace
When purchasing a new natural gas furnace, an ENERGY STAR unit is strongly recommended to ensure high efficiency. An ENERGY STAR gas furnace meets the following performance requirements:
- At least 90% Annual Fuel Utilization Efficiency (AFUE) for gas furnaces sold in southern states, and 95% AFUE for units sold in northern states.
- Having an electronically commutated fan motor (ECM), which offers speed control and much higher efficiency than a traditional fan motor.
- The maximum air leakage allowed is 2.0%. Air leakage represents a waste of heating power and fan power, which means a low leakage percentage saves energy.
You can check the ENERGY STAR product criteria for natural gas furnaces for more information about these performance requirements. Their website also provides a list of the states classified as US North and US South.
For example, the US EPA requires an AFUE of at least 95% to approve the ENERGY STAR label for a gas furnace sold in New York, but the minimum efficiency requirement drops to 90% for a unit sold in Florida.
A higher efficiency is required for northern states, to compensate for the longer and colder winters.
An old gas furnace can have an AFUE below 70% or even below 60%, especially if maintenance has been deficient.
When upgrading from a 60% AFUE furnace to a modern 95% AFUE unit, your gas consumption for space heating purposes can be expected to drop by over 33%.
- Before upgrading to a high-efficiency furnace, make sure your home is properly insulated and airtight.
- You can identify poorly insulated areas and hard-to-find air leaks by getting a professional home energy audit.
Pro Tip: Even greater savings are possible with smart thermostat use. According to the US Department of Energy, you can save up to 10% on your heating costs by setting back the thermostat 7-10°F, during 8 hours per day.
Comparing Gas Furnaces with other Space Heating Systems
As mentioned above, the low operating cost of gas furnaces is one of their key advantages compared with other types of heating systems.
The EIA analyzed the typical heating costs for US households in last winter, finding that natural gas was the most economic option. The following table summarizes their findings:
|Heating Energy Source
|Percentage of Homes
|Winter 2022 Heating Cost
As you can see in the table above, natural gas was the cheapest heat source for US homes last year.
Homes using natural gas saved $522 compared with homes using electricity, $1,043 compared with homes using propane, and $988 compared with homes using heating oil.
- Switching from propane or oil to natural gas heating is often an excellent investment.
- If you invest $5,000 when upgrading to a gas furnace, you can expect a payback period of around five years based on the figures above.
If you want to use fully electric heating, only a high-efficiency heat pump can match the operating cost of a natural gas furnace.
According to a study by Carbon Switch, a heat pump can potentially save $105 per year compared with a gas furnace, and $199 per year compared with a gas boiler.
As you can see in the study, the potential savings of heat pumps are much higher when compared with other types of furnaces:
- $815 when replacing an electric resistance furnace
- $855 when replacing a propane furnace
- $947 when replacing a fuel oil furnace
When comparing a gas furnace and a heat pump, you need to consider local electricity tariffs and gas prices.
The furnace will likely be more expensive to use in places where gas prices are relatively high, and the same will happen with a heat pump in places with expensive electricity.
If you’re also considering a solar panel system for your home, it can achieve synergy with a heat pump. — In such a case, you’d be less dependent on the grid electricity, and your solar array can be sized to offset the electricity consumption of your heat pump system. Thus, you can expect greater savings with respect to a gas furnace since you’re generating electricity onsite.