Electric Heat vs Oil vs Gas Heat: Which Is Cheaper?

Kiplingers ^ | 01/04/2024 | Ellen Kennedy

[SeekAndFind]

With energy bills putting a crunch on the U.S. this winter, comparing the costs of electric heat vs gas heat can be an important decision for homeowners looking to save money. 

When Kiplinger looked at this same question last year, we concluded that gas heat was the cheaper option. However, a new study found flaws in the way electric heating costs are accounted for, changing the cost outlook. Moreover, electricity costs vary substantially from one U.S. state to another. 

In this year’s winter fuels outlook, published by the Energy Information Agency (EIA), it’s forecasted that from November through March, heating-oil customers will pay $1,722; propane users, $1,328; electricity users, $1,072; and gas users, $611. However, according to a recent study from Rewiring American, published by The Guardian, the expected costs for electricity users can be misleading, as it doesn’t distinguish between older electric-resistance appliances and heat pumps. 

Heat pumps are highly efficient, and can cut electricity use by 50% when compared with electric resistance heating, according to the Department of Energy. Because of this, if you’re using a heat pump to warm your home, you’ll likely pay much less than forecasted by the EIA.

Additionally, Rewiring America says in the report that "the agency includes all uses of each fuel in its cost estimates, meaning cost projections for electricity customers include energy used to power other electric appliances such as refrigerators and electronics."

The following graphic was tweeted by the EIA illustrating the data. 

(Image credit: EIA)

Furthermore, there are three positive trends for residential heating customers this year. First, this winter will likely be milder than last winter. Forecasters predict a recurrence of the El Niño weather pattern, which tends to bring warmer, wetter weather for much of the U.S.

Second, the milder winter will mean lower demand - and thus lower costs - for energy. The U.S. Energy Information Agency (EIA) predicts that natural gas will be 21% less expensive this winter. That lower cost of natural gas will also help keep electricity prices from increasing, as more expensive coal-fired power plants are replaced by gas-fired plants.

Finally, newer, more efficient heating technologies continue to get cheaper, particularly as economies of scale and subsidies kick in at the state and federal levels.

Electric heat: cost to run

According to the EIA’s Electric Power Monthly report, the average cost of electricity in the U.S. is 16.21 cents per kilowatt hour or kWh. As stated above, the EIA projects that electric heating costs for U.S. homeowners will average $1,072 for winter 2023-2024. 

The Efficiency Maine Trust provides the following cost breakdown for electric heating systems: 

Swipe to scroll horizontally

Fuel Type (Units)	Cost per Unit Delivered	Heating System	Annual Cost
Electric (kWh)	0.23	Geothermal Heat Pump	$ 1,681
Electric (kWh)	0.23	Heat Pump (ductless)	$ 2,297
Electric (kWh)	0.23	Heat Pump (ducted)	$ 2,871
Electric (kWh)	0.23	Electric Baseboard	$ 6,202
Row 4 - Cell 0	Row 4 - Cell 1	Row 4 - Cell 2	Row 4 - Cell 3

According to the U.S. Department of Energy (DOE), installing a more energy-efficient electric heat pump can reduce energy usage in your home significantly, compared to traditional electric resistance heating such as furnaces and baseboard heaters. The most common type, ducted air-source heat pumps, reduces energy use by approximately 50%. More expensive options like geothermal heat pumps can reduce energy use by up to 60%. This type of upgrade saves you on a monthly basis, but you should include sizable upfront installation costs as part of your bill calculations.

However, the American Council for an Energy-Efficient Economy reports that heat pumps may not provide enough heat in especially cold northern regions, resulting in a need for alternative fuel sources and higher bills. In addition, many homeowners may not be able to use the most efficient geothermal heat pump type, which requires digging a large trench near or under your home, according to the DOE.

Gas heat: cost to run

According to the EIA’s Electric Power Monthly report, the average cost of gas heat in for U.S. homeowners will average $611 for winter 2023-2024.

The Efficiency Maine Trust provides the following cost breakdown for gas heating systems:

Swipe to scroll horizontally

Fuel Type (Units)	Cost per Unit Delivered	Heating System	Annual Cost
Natural Gas (therm)	2.04	Natural Gas Boiler	$ 2,267
Natural Gas (therm)	2.04	Natural Gas Room Heater	$ 2,317
Natural Gas (therm)	2.04	Natural Gas Furnace	$ 2,523
Row 3 - Cell 0	Row 3 - Cell 1	Row 3 - Cell 2	Row 3 - Cell 3

The verdict

The most common electric heat systems have higher monthly operating costs compared with the most common natural gas systems, based on the most recent U.S. government statistics.  

In some cases, geothermal electric heat pumps can save you money over the most cost-efficient natural gas boilers. They are generally more efficient than gas furnaces and use less source energy on average in moderate climates. However, they may not be sufficient to fully heat your home if you live somewhere with cold temperatures. Additionally, geothermal systems aren't even an option for homeowners without land for an underground trench. 

No matter your choice, you can also meaningfully lower your heating costs by doing a few important things.

• If you only use certain rooms in your home, try to use spot heating rather than running your whole home system. 
• Keep your thermostat setting at 68 degrees for the majority of each winter day.
• Consider getting a home energy audit to identify fixes that optimize efficiency and comfort. 
• Once you have the audit in hand, apply fixes like caulking, weather stripping, insulation, and air filter changes.
• Don't forget to claim the energy efficiency home improvement tax credits from the Inflation Reduction Act.

For more energy-saving content, check out our home savings hub.

[Red Badger]

If you wanna stay warm with your buds in the dorm,

PROPANE.

If you wanna get hot and not pay a lot,

PROPANE

It ain’t high! It ain’t high! It ain’t high!

PROPANE!..............................

[castlebrew]

“First, this winter will likely be milder than last winter.”

BWA HA HA HA HA!

[Jonty30]

Sweater.

[madison10]

Natural gas is the cheapest where we live.

[steve86]

Yeah, really. We’re 30 degrees under efficient temperature for air exchange heat pumps; you could almost hear all the systems switching over to resistance heating.

[madison10]

Not in Michigan. It will reach a HIGH of 6° tomorrow.

[cableguymn]

Won’t get above 0 in Minnesota tomorrow

[mass55th]

Gas heat.

[kiryandil]

Right now, it’s natural gas.

[lgjhn23]

Heat pumps down to about 35 degrees, then over to propane from there on down.
and FJB.....

[mass55th]

"Natural gas is the cheapest where we live."

National Grid is my utility company. I have a decent sized two bedroom apartment, with central air and dishwasher, electric stove and fridge I have lived here for 23 years. My utility bills are higher in the summer running the central air unit that is connected to my gas furnace in my bedroom closet. My gas and electric bill was $107.00 for November. For December, it was $137.00. This past July, the electric was $135.00, and in August, it was $176.00. Electric is more expensive.

[mass55th]

I should have added that September’s bill was $204.00 because the air conditioner was still running. In October it went down to $163.00.

[Theophilus]

Defrost cycle on my heat pump drives me nuts at night. I drop the setting to 62 or so, then set it back up to 68 later to drive the warm, quiet gas heat on.

When below freezing, there is no way the pump is more efficient.

[Reeses]

Using energy to produce things generates waste heat, very useful for warming a house but little else. Heating costs can be reduced by first using the energy to make something useful. For natural gas, it can be burned in a turbine to generate electricity. For copious amounts of electric heat, install a 3D metal printer and manufacture something. Just burning limited energy resources for heat is like burning money, is bad for the environment and economy.

[FrozenAssets]

Wood! Plus it warms you when you cut it. It warms you when you split it. It warms you when you stack it.

[dennisw]

Gas heat gets my vote

[Revel]

Very confusing. I can say this. You can’t link Heating oil and K1 into one category. The price is very different.

They are pushing heat pumps as if they are the cats meow. They don’t work good in cold climates. Without some other form of heat people will freeze.

Most people had normal electric heat which runs 3x that of natural gas.

[dennisw]

“Wood! Plus it warms you when you cut it. It warms you when you split it. It warms you when you stack it.”

It warms you when you when you jam onto your honey bunny after splitting it

[Tell It Right]

Heat pumps down to about 35 degrees, then over to propane from there on down. and FJB.....

Same here. I save a lot with a variable speed heat pump, supplemented with electric heat strips. It’d be cheaper to supplement with a natural gas furnace if I didn’t have solar and battery storage usually having enough charge to power the heat strips through most of the night.

During the warm half of the year I save more money by directing the cold air output from my hybrid water heater to an intake receiver of my central HVAC. This allows my variable speed heat pump to stay in low speed for more hours of the day.