Heat Pump vs Gas Furnace in Ontario: What Does It Really Cost?
A worked 2026 comparison of annual heating costs for a heat pump vs a gas furnace in Ontario, with clear assumptions and the carbon charge removal.
Key takeaways
- Removing the federal carbon charge on 1 April 2025 made gas cheaper and narrowed the running-cost advantage of heat pumps.
- With our default 2026 assumptions, a heat pump costs roughly the same to run as a high-efficiency gas furnace, give or take a few hundred dollars a year.
- Heat pumps win clearly against electric baseboard, oil and propane, and when you can drop the gas connection entirely.
- Upfront cost, AC replacement timing and rebates usually decide the case more than operating costs.
For most of the past decade, the pitch for heat pumps in gas-heated Ontario homes included lower running costs. That case changed on 1 April 2025, when the federal consumer carbon charge on natural gas was removed. Gas bills went down, and the gap between gas and electric heating narrowed.
This guide walks through a transparent, worked comparison using 2026 Ontario prices so you can see exactly where the numbers come from, then adjust them for your own home with our heat pump vs furnace calculator.
The assumptions
Every cost comparison depends on its assumptions. Here are ours, all stated as estimates.
| Input | Value used | Notes |
|---|---|---|
| Gas used for space heating | 2,200 m³/year | Typical Ontario home uses ~2,000–2,600 m³/year in total, including water heating |
| Gas price (all-in variable) | 45¢/m³ | Typical Enbridge range roughly 35–50¢/m³ including supply, transportation and delivery; varies by rate zone and quarter |
| Energy in gas | 10.35 kWh per m³ | About 37.3 MJ per m³ |
| Furnace efficiency | 95% AFUE | Minimum for new furnaces sold in Canada |
| Heat delivered to the home | ~21,600 kWh/year | 2,200 × 10.35 × 0.95 |
| Electricity price (all-in average) | 17¢/kWh before the OER | Typical Toronto-area all-in TOU average is roughly 15–19¢/kWh |
| Ontario Electricity Rebate | 15.7% | Effective 1 November 2026 |
| Heat pump seasonal COP | 2.5, 2.75 and 3.0 | Typical Southern Ontario range for a cold-climate unit |
What we leave out: HST (13%) on both fuels, fixed monthly charges (both the gas customer charge and electricity fixed delivery charges), and water heating. If you keep gas for a water heater or stove, the gas fixed charge does not go away.
The worked annual comparison
| Heating system | Energy used per year | Annual cost before OER | Annual cost after 15.7% OER |
|---|---|---|---|
| Gas furnace, 95% AFUE | 2,200 m³ | $990 | $990 (OER does not apply to gas) |
| Heat pump, seasonal COP 2.5 | ~8,640 kWh | ~$1,469 | ~$1,238 |
| Heat pump, seasonal COP 2.75 | ~7,855 kWh | ~$1,335 | ~$1,125 |
| Heat pump, seasonal COP 3.0 | ~7,200 kWh | ~$1,224 | ~$1,032 |
| Electric baseboard or furnace (COP 1.0) | ~21,600 kWh | ~$3,672 | ~$3,096 |
How we calculated the heat pump rows: heat delivered (21,600 kWh) ÷ COP = electricity used, then × 17¢, then × 0.843 for the OER. All figures are rounded estimates for illustration, not a quote or a prediction of your bill.
What this shows: at our default prices, a heat pump in a gas-heated home costs roughly $40 to $250 a year more to run than a high-efficiency gas furnace. Against electric resistance heat, it saves roughly $1,850 to $2,050 a year.
How sensitive is the result?
Small changes in prices move the answer either way.
| Scenario | Gas furnace | Heat pump, COP 2.75, after OER | Which is cheaper |
|---|---|---|---|
| Default (45¢/m³, 17¢/kWh) | $990 | ~$1,125 | Gas, by ~$135 |
| Higher gas (50¢/m³) | $1,100 | ~$1,125 | About even |
| Lower gas (35¢/m³) | $770 | ~$1,125 | Gas, by ~$355 |
| Lower electricity (15¢/kWh) | $990 | ~$993 | About even |
| Higher electricity (19¢/kWh) | $990 | ~$1,258 | Gas, by ~$268 |
| Drop gas service entirely | $990 + fixed charge | ~$1,125 | Often heat pump, once you avoid the gas customer charge |
Note: Before 1 April 2025 the carbon charge added about 17.6¢ per m³ to gas (the rate in effect from April 2024). On 2,200 m³ that was about $390 a year before HST. Its removal is the main reason the comparison shifted. Read more in our blog post on carbon charge removal and heat pump economics.
Rate plans and timing
Most heating happens on winter weekday mornings and evenings, when Time-of-Use on-peak (7–11 a.m. and 5–7 p.m.) is 18.9¢. Overnight and weekend heating is at 9.1¢ off-peak. Under Ultra-Low Overnight, 11 p.m.–7 a.m. is just 3.7¢, but weekday 4–9 p.m. is 37.7¢, which is when a heat pump often works hardest. ULO can still work if your home holds heat well and you pre-heat before 4 p.m., but test it carefully. Our electricity price plan calculator helps compare.
On the Tiered plan, a heat pump home can exceed the 1,000 kWh winter threshold and pay Tier 2 (13.2¢) on the excess.
Beyond running costs: the full picture
Operating cost is only one part of the decision. A heat pump also cools, so the fair comparison is often heat pump vs new furnace plus new air conditioner.
| Upfront scenario (estimates) | Gas furnace + central AC | Ducted cold-climate heat pump |
|---|---|---|
| Typical installed cost | $5,000–$9,000 furnace + $5,000–$9,000 AC | $12,000–$25,000 (may include new air handler or reuse the furnace as backup) |
| Typical HRS rebate (gas-heated home) | None for furnace or AC | $500/ton, up to $2,000 |
| Cooling efficiency | Depends on AC SEER2 | Typically high SEER2 with variable speed |
| Gas fixed monthly charge | Continues | Ends only if all gas appliances are removed |
| Emissions | Higher | Much lower on Ontario's mostly low-carbon grid |
If your AC has failed and your furnace is 15+ years old, the upfront gap often narrows to a few thousand dollars after rebates. If your furnace and AC are both young and working, replacing them for operating savings alone rarely pays off today.
When a heat pump clearly wins
- You heat with electric baseboards, oil or propane.
- You need to replace both furnace and AC within a few years.
- You plan to remove gas entirely (including water heater and stove) and stop paying the fixed charge.
- You qualify for a larger rebate tier or an income-qualified program.
When gas still makes sense
- Your furnace is newer and your AC is fine.
- You live in a colder region with many hours below −15 °C and electric backup heat.
- Your electrical service would need a costly upgrade.
Many homeowners land in between, with a hybrid dual-fuel system that uses the heat pump most of the year and the furnace on the coldest days.
How to run your own numbers
- Find your annual gas use on your Enbridge bills or online account. Subtract roughly 300–500 m³ if you also have a gas water heater (estimate).
- Divide your total gas charges (excluding the fixed customer charge and HST) by m³ to get your actual variable rate.
- Find your all-in electricity cost per kWh: total bill before the OER and HST, divided by kWh used.
- Multiply your heating m³ by 10.35 and by your furnace efficiency to get heat delivered.
- Divide by a COP of 2.5–3.0 (lower in Ottawa and the north) and multiply by your electricity price.
Or use the heat pump vs furnace calculator, which does the arithmetic for you. Our guides to understanding your gas bill and hydro bill explain where to find each number.
Frequently asked questions
Why do some contractors still promise big savings over gas?
Many sales materials were written when the carbon charge applied, or they compare against older 80% furnaces. Ask any contractor to show their assumptions in writing, including gas price, electricity price and seasonal COP.
Does the Ontario Electricity Rebate apply to heat pump electricity?
Yes. The OER appears on most residential electricity bills and is 15.7% effective 1 November 2026. It applies to the bill as a whole, so it lowers heat pump operating costs too.
Could the carbon charge come back?
Policy can change, but we do not speculate on future pricing. A heat pump reduces your exposure to gas price swings of any cause, and a hybrid system lets you switch fuels based on whichever is cheaper.
Is a heat pump worth it if it costs more to run?
It can be, if it replaces an air conditioner you would buy anyway, earns a rebate, and you value lower emissions and efficient cooling. If the only goal is lowering this year's heating bill in a gas home, it often is not.
About this page. Written and reviewed by the Energy Efficiency Ontario editorial team using official sources including the Ontario Energy Board, Save on Energy (IESO), Enbridge Gas and Natural Resources Canada. Figures are estimates unless attributed. Program terms change — confirm with the administrator before you buy. Our editorial standards · Report an error
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