Heat pumps have gotten a lot of attention in the last few years, partly because of efficiency incentives and partly because cold-climate models have improved. The sales pitch is simple: heat pumps move heat instead of burning fuel, so they're 2-3 times more efficient than furnaces. That sounds great until you run the actual numbers for your location and your utility rates.
The efficiency advantage of a heat pump is real, but efficiency is not the same as cost. A heat pump with a COP of 3.0 delivers three units of heat for every unit of electricity. If electricity costs $0.15/kWh, that's $0.05 per kWh of delivered heat. Propane at $2.50/gallon delivers heat at about $0.032/kWh equivalent, assuming 92% furnace efficiency. The furnace wins on cost, even though it's less efficient. This is the gap between thermodynamics and economics.
What COP Actually Means for Your Wallet
COP stands for coefficient of performance. It's the ratio of heat output to electrical input. A COP of 3.0 means the heat pump delivers 3 kW of heat for every 1 kW of electricity. The higher the COP, the less electricity you use per BTU of heat delivered.
But COP is not a fixed number. It changes with outdoor temperature. At 47°F, a typical cold-climate heat pump might have a COP of 3.5. At 17°F, the COP drops to 2.2. At -5°F, it might be 1.8. As the outdoor temperature drops, the heat pump has to work harder to extract heat from the cold air, and efficiency falls. This is why heat pump economics depend heavily on your climate.
To convert COP to cost: take your electricity rate in $/kWh, divide by the COP, then divide by 3,412 BTU/kWh. That gives you cost per BTU. Multiply by 1,000,000 for cost per MMBtu. At $0.15/kWh and COP 3.0, the cost is about $14.70 per MMBtu.
Compare that to propane at $2.50/gallon. Propane has 91,500 BTU per gallon. A 92% efficient furnace delivers 84,180 BTU per gallon. So the cost is $2.50 / 84,180 × 1,000,000 = $29.70 per MMBtu. The heat pump wins. But if propane drops to $1.80/gallon, the cost is $21.40 per MMBtu. The gap shrinks fast.
Cost = ($/kWh ÷ COP ÷ 3,412) × 1,000,000
Cost per MMBtu (propane):
Cost = ($/gal ÷ 91,500 ÷ furnace_eff) × 1,000,000
Cost per MMBtu (natural gas):
Cost = ($/therm ÷ 100,000 ÷ furnace_eff) × 1,000,000
The Switchover Temperature
The switchover temperature is the outdoor temperature at which the heat pump costs the same per BTU as your backup fuel. Above this temperature, run the heat pump. Below it, run the furnace. This number is the single most important factor in whether a heat pump saves you money.
To find the switchover temperature, you need to know how the COP changes with outdoor temperature. Most manufacturers publish data at 47°F, 17°F, and sometimes 5°F. You can interpolate between those points.
Worked example: You pay $0.15/kWh and $2.20/gallon for propane with a 92% furnace. At 47°F (COP 3.4), the heat pump cost is $12.90/MMBtu. Propane is $26.10/MMBtu. Heat pump wins easily. At 17°F (COP 2.3), heat pump is $19.10/MMBtu. Still winning. At 0°F (COP 1.9), heat pump is $23.10/MMBtu. Getting close. At -10°F (COP 1.7), heat pump is $25.90/MMBtu. Almost even.
The switchover for this scenario is around -5°F. In Chicago or Minneapolis, you spend a lot of winter above 0°F, so the heat pump saves money most of the time. In northern Maine or North Dakota, you spend weeks below 0°F, and the savings shrink.
Mini-Split Efficiency & Cost Calculator
Is your mini-split cheaper than propane right now? Enter your electric rate and fuel prices to find the exact outdoor temperature where your heat pump stops saving money and your backup heat wins.
When Propane Wins
Propane wins when electricity is expensive, propane is cheap, or the climate is very cold. In some parts of the Northeast and upper Midwest, electricity costs $0.20/kWh or more. In rural areas, propane can drop below $1.80/gallon in the summer. In that scenario, propane costs about $21/MMBtu. A heat pump at $0.20/kWh and COP 2.5 costs about $23/MMBtu. Propane is cheaper.
The other situation where propane wins is when the COP drops below 2.0. At COP 2.0, a heat pump still beats electric resistance, but the margin over a good furnace gets thin.
A third scenario: when the upfront cost of the heat pump is very high. A ducted cold-climate system costs $15,000-20,000 installed. If your propane furnace is already paid for and working fine, the payback period might be 10-15 years.
The honest answer: heat pumps are not a slam dunk in every situation. They work best in moderate climates (zones 4-5) with reasonable electricity rates and expensive fossil fuels. In cold climates with cheap propane or expensive electricity, the math is closer. Run the numbers for your specific situation.
Running the Numbers With Your Bills
The best way to model heat pump savings is to use your actual heating bills and heating degree days (HDD). Collect 12 months of fuel bills, look up HDD for each period, and use regression to isolate your heating load. Once you know your BTU/HDD, you can model what a heat pump would cost month by month.
The process: Plot gallons (or therms) vs HDD. The slope is your fuel consumption per heating degree day. Multiply by BTU per gallon (91,500 for propane) and furnace efficiency to get BTU/HDD of delivered heat. For example, 800 gallons of propane over 6,000 HDD is 0.133 gal/HDD. At 91,500 BTU/gal and 92% efficiency, that's 11,200 BTU/HDD.
Then model the heat pump. For each month, take monthly HDD × BTU/HDD to get heating load. Divide by the average COP for that month's outdoor temperature. That gives you kWh. Multiply by your electricity rate for monthly cost. Sum the year and compare to your current propane bill.
This method accounts for your actual usage, climate, and fuel prices. It's more accurate than generic savings estimates. If you're considering a $15,000 investment, an hour of spreadsheet work is worth it.
Heat Load from Bills Calculator
What size furnace or heat pump do you actually need? Skip the $300 Manual J — estimate your home's BTU/hr heat load from your gas, propane, or electric bills. See how your home compares by age and climate zone.
The Manual J Question
Manual J is the ACCA standard for calculating heating and cooling loads. It accounts for insulation, window area, air leakage, orientation, and internal heat gains. A full Manual J costs $300-500. The result is a room-by-room load calculation that tells you exactly what size heat pump you need.
The alternative is a rule of thumb: 30-40 BTU per square foot for heating in cold climates, 25-30 in moderate climates. For a 2,000 sq ft house, that's 50,000-80,000 BTU/hr. Fast and free, but can be wrong by 20-30% in either direction.
A bills-based estimate gets you closer. If you know your annual heating load and design temperature, you can estimate peak load. It's better than guessing, but a Manual J is still the gold standard for new construction or major renovations.
For a $15,000-20,000 heat pump installation, spending $400 on a Manual J is 2% of the project cost. It's cheap insurance against undersizing or oversizing. If you're doing a DIY mini-split install for $3,000, a bills-based estimate is probably enough.
Heating Bill ROI Calculator
Will a heat pump pay for itself? Enter 12 months of heating bills to see payback period, annual savings, and NPV analysis. Uses HDD regression and real COP curves for accurate projections.