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Energy prices are skyrocketing. According to the Energy Information Administration's October 7, 2008 forecast, heating fuel expenditures for the average household using oil as its primary heating fuel are expected to increase by $449 over last winter. Households using natural gas to heat their homes can expect to pay $155 more this winter, on average, than last year, and those using propane can expect to pay $188 more. Households heating primarily with electricity can expect to pay an average of $89 more. That’s a lot of money resulting solely from rising heating expenses.

You may long for the "good old days," but when it comes to heating systems, think again. Most heating systems produced today are far more efficient than those of a couple of decades ago. If your furnace, boiler, or heat pump is 20 years or older, even if it works properly, it may make economic sense to replace it with a modern high efficiency one. The higher efficiency models available today could save you a lot. The nonprofit American Council for an Energy-Efficient Economy offers advice on replacing your existing heating system.

Most U.S. homes with central heating use either a furnace, a boiler, or a heat pump. This blog will focus on these systems.

Furnaces and Boilers

Look at the annual fuel utilization efficiency (AFUE) on the yellow EnergyGuide label when shopping for a new central furnace or boiler.  AFUE is the measure of how efficient the appliance operates over the course of a typical year. The Federal Trade Commission requires new furnaces or boilers to display their AFUE so consumers can compare heating efficiencies of various models. The minimum allowed AFUE rating for a non-condensing fossil-fueled, warm-air gas furnace is 78% (75% for mobile home furnaces); the minimum rating for a fossil-fueled boiler is 80%. A condensing furnace or boiler condenses the water vapor produced in the combustion process and uses the heat from this condensation. The AFUE rating for a condensing unit can be much higher than for a non-condensing furnace, by more than 10 percentage points in some cases. Although condensing units cost more than non-condensing units, the condensing unit can save you money in fuel costs over the 15- to 20-year life of the unit. Selecting a condensing unit is a particularly wise investment in cold climates.

The efficiency of older furnace and boiler systems ranges from 56% to 70%. Modern heating systems, on the other hand, can achieve efficiencies as high as 99%, converting nearly all the fuel to useful heat for your home. Home energy efficiency upgrades and a new high-efficiency heating system can often cut your fuel bills and your furnace's pollution output in half.

In mild climates with low annual heating costs, it may be hard to justify the additional expense of a high efficiency heating system with 90% or higher efficiency. But before you make up your mind, calculate your annual energy savings and your payback period, remembering that you’ll save year after year with higher efficiency equipment.

When shopping for high-efficiency furnaces and boilers, look for the ENERGY STAR® label.

ENERGY STAR-qualified oil and gas furnaces have minimum AFUE ratings of 83% and 90%, making them up to 15% more efficient than standard models.  ENERGY STAR-qualified oil and gas boilers have a minimum AFUE rating of 85% and use about 6% less energy than a standard boiler. They achieve greater efficiency with improved features, including:

  • Electric ignition, which eliminates the need to have the pilot light burning all the time
  • New combustion technologies that extract more heat from the same amount of fuel
  • Sealed combustion that uses outside air for combustion, reducing draft and improving safety.

Specify a sealed combustion furnace or boiler, which will bring outside air directly into the burner and exhaust flue gases (combustion products) directly to the outside, without the need for a draft hood or damper. Furnaces and boilers that are not sealed combustion units draw heated air into the unit for combustion and then send that air up the chimney, wasting the energy that was used to heat the air. Sealed combustion units avoid that problem and also pose no risk of introducing dangerous combustion gases into your house. Backdrafting of combustion gases can be a serious problem with non-sealed combustion units.

If you live in a cold climate, it usually makes sense to invest in the highest efficiency system, so check out the Consortium for Energy Efficiency, Inc. (CEE) list of qualifying gas furnaces and boilers. In many cases, CEE-member utilities offer rebates for this equipment. The CEE efficiency specification for boilers coincides with the ENERGY STAR qualifying level. CEE furnace specifications, however, contain an electricity use option in addition to the AFUE specification, something ENERGY STAR specifications don’t have. Gas furnaces meeting this optional CEE specification take electricity consumption of the air handler into account. Power use for air handling represents 70%-80% of the electricity drawn by furnaces. Improved air handling systems can include motors with greater efficiency and fans that are more aerodynamically efficient. In addition, other available technologies offer both higher energy efficiency as well as other non-energy benefits, such as better temperature control and quieter operation.

High-efficiency sealed combustion units generally produce an acidic exhaust gas that is not suitable for old, unlined chimneys, so the exhaust gas should either be vented through a new duct or the chimney should be lined to accommodate the acidic gas.

Heat Pumps

Every residential heat pump sold in this country has an EnergyGuide Label, which features the heat pump's heating and cooling efficiency performance ratings, allowing you to compare it to other available makes and models. The heating seasonal performance factor (HSPF) measures how efficiently the heat pump provides heat over a typical heating season. A heat pump is really an air conditioner when operating in the cooling mode. A heat pump’s seasonal energy efficiency ratio (SEER) measures how efficiently the heat pump provides air conditioning over a typical cooling season.

The HSPF rates both the efficiency of the compressor and the electric-resistance elements. Heat pumps must have a minimum 7.7 HSPF. The most efficient heat pumps have an HSPF between 9 and 10. Look for a high SEER also if you use a lot of air conditioning.

Sizing and Installing Your System

When buying new heating and cooling equipment, sizing and installation are as important as product quality and efficiency. If your existing unit is old, there is a good chance that it was oversized, perhaps by as much as two to four times, especially if you’ve made energy efficiency improvements to your home since the unit was first installed. Be sure your HVAC contractor sizes the system properly; don’t let the contractor simply propose a system of the same size as your old unit. An oversized furnace, boiler, or heat pump, even if it keeps you warm, will start up and shut down frequently, experiencing needless wear and tear and causing it to operate inefficiently. A well sized, efficient system will tend to operate at a constant level during much of its operation. Though high efficiency units typically cost more than less efficient models, you may save if your HVAC contractor determines that you need a smaller unit compared to your old one. Remember also that any cost difference will be paid back over time through lower energy bills.

Find a quality installer. Proper installation can be as important as proper design and sizing.

Heat Distribution

AFUE and HSPF do not include the heat losses of the duct system or piping, which can be as much as 35% of the energy output of the furnace or heat pumps when ducts are located in unheated spaces. Consequently, it is very important to seal and insulate ducts in attics and crawlspaces. Also, have your HVAC contractor check airflow and make any necessary corrections. For heat pumps and central A/C units, proper refrigerant charging is also critical.


Many energy efficiency tax incentives were extended as part of the financial rescue package passed by Congress and signed by President Bush in early October, including an extension of the tax credit for efficient furnaces, boilers, air conditioners, water heaters and insulation and window upgrades to existing homes (covering improvements installed in 2009, but not 2008).

Visit the Tax Incentives Assistance Project Web site for the latest tax incentives developments. Not all ENERGY STAR products qualify for the incentives.

Low-income residents struggling to pay their heating bills should contact the Low-Income Home Energy Assistance Program. The U.S. Department of Health and Human Services' Low Income Home Energy Assistance Program (LIHEAP) provides funds to State and local Governments to help low-income households pay utility bills. Some electric and gas utilities, churches, and social services organizations may have emergency financial assistance programs, so low-income residents should also contact those organizations in their area.

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