Economy - What do I need to know?

  • Operating Costs & Efficiency Ratings
  • EPA’s Energy Star program

Comparing Efficiency

Comparing energy efficiency of different brands of heating and cooling equipment is relatively easy. Although the rating systems are standardized, allowing you to make a fair comparison, there are three different rating systems used. Each rating is used for a specific type of product(in other words, all furnaces use the same system, heat pumps use a different system, an so on). They are:

  • AFUE (gas heating)
  • SEER (cooling)
  • HSPF (heat pump heating)

AFUE (gas heating)

The efficiency of a furnace is measured in a rating known as AFUE (Annual Fuel Utilization Efficiency). A lot like your car’s miles per gallon rating, AFUE tells you how efficiently the furnace converts fuel (gas or oil) into heat. An AFUE of 80% means that 80% of the fuel is used to heat your home, while the other 20% basically goes up the chimney.

The government mandated a minimum AFUE rating for furnaces installed in new homes is 78%. (In contrast, many furnaces manufactured before 1992 had AFUE ratings as low as 60% so nearly half the fuel was being wasted.) Furnaces with AFUE ratings of 78% to 80% are considered “mid-efficiency”; those with ratings of 90% or higher are known as “high efficiency.” The maximum furnace efficiency available is around 96.6%.

In general, a higher efficiency furnace usually means two things:

  • higher price
  • lower monthly operating cost

If you have an older furnace (with an AFUE of about 60%), you could save up to 60% on your heating bills by replacing it with a new high-efficiency furnace. So the cost to replace your old, inefficient furnace is paid back through lower utility bills.


If you live in a cold climate, you could see a payback in a few short years. If you live in a moderate climate, it might make more sense to purchase a mid-efficiency furnace. Your dealer can use heating data from your area to help you determine about how long it would take you to recover the additional cost of a high-efficiency model in energy savings. (Of course, after the payback, you continue to save on your energy bills for the life of the system.)

SEER (cooling)

Cooling efficiency for air conditioners and heat pumps is indicated by a SEER (Seasonal Energy Efficiency Ratio) rating, which tells you how efficiently a unit uses electricity. The higher the number, the greater the efficiency.

The typical SEER rating of units manufactured prior to 1992 is about 6.0.Now, the government mandated minimum is 14.0 SEER. High-efficiency units have a SEER of at least 14.0; the SEER ratings can go into the 20s.

HSPF (heat pump heating)

Heating Seasonal Performance Factor (HSPF) is a heating efficiency rating for heat pumps. The higher the rating, the more efficient the heat pump. A more efficient heat pump will result in less energy use and increased energy savings over the life of the system, compared to a less efficient heat pump.

Generally, you should look for heat pumps with a HSPF rating of between 8 and 10. Heat pumps with a rating of at least 8.2 HSPF are awarded the ENERGY STAR® label by the U.S. EPA. However, for a heat pump to have the ENERGY STAR label, it must also have a Seasonal Energy Efficiency Ratio (SEER) rating of 12 or greater.


Higher efficiency in heat pumps and air conditioners usually means higher cost but lower utility bills. If you live in a warm and/or humid climate, you will probably see the higher cost of a high-efficiency air conditioner or heat pump paid back (through lower utility bills) in a few short years. Ask your dealer to help you determine about how long it would take you to recover the additional cost in energy savings. Of course, after the payback, you continue to save on your energy bills.

Matching Your System for Optimum Efficiency

There’s one other factor that affects the efficiency of your air conditioning or heat pump system: the indoor coil. (Your heat pump or air conditioner is a “split system,” which means that there is an outdoor unit, or condenser, and an indoor unit, or evaporator coil.) If your condensing unit is not matched with the proper indoor coil, it may not give you the stated SEER and/or HSPF ratings and could even develop performance problems. (It’s kind of like putting two new tires on one side of your car and leaving the old, worn-out ones on the other side. You’d probably be disappointed with both the performance and the miles per gallon you get.) When you’re replacing an existing system, make sure you replace both units so your new condensing unit will give you optimal performance, efficiency and comfort.

EPA's Energy Star Program

The U.S. Environmental Protection Agency (EPA) promotes residential energy efficiency because household energy use contributes to air pollution, including:

  • 20 percent of all U.S. carbon dioxide emissions
  • 26 percent of all U.S. sulfur dioxide emissions
  • 15 percent of all U.S. nitrogen oxides emissions

By using more energy-efficient appliances and heating and cooling equipment, and constructing more energy-efficient homes, we can reduce this pollution and 151; and save money at the same time!


Why is EPA promoting energy-efficient furnaces?

Think of your furnace as the heart of your home. In the winter, it’s essential to radiating warmth. During the summer, it plays a vital role in moving refreshing, conditioned air from your cooling system. And all year long, your furnace could provide constant air circulation to keep you more comfortable. Not only that, but many of our furnaces do it all so efficiently your own heart might skip a beat when you see how low your utility bill is.

What is EPA doing about it?

Industry-leading furnace manufacturers have signed agreements with EPA to produce and promote high-efficiency furnaces that are 90% efficient or greater. These high-efficiency gas furnaces squeeze energy savings from furnaces using an advanced “condensing” technology. Products qualifying for this EPA program will be identified by the EPA Energy Star logo.

How do you purchase an Energy Star furnace?

Purchasing energy-efficient products is easy – simply ask for Energy Star models when working with a contractor to select a new furnace. Most of the major furnace manufacturers have decided to participate in the EPA program.

How much money can my Energy Star furnace save?

Over 10 years an Energy Star furnace could save:

  • $1,700 relative to an old furnace.
  • $920 relative to a new standard furnace.

*Savings based on $732 average annual heating bill from a 1993 American Gas Association survey for the Middle Atlantic region. EPA estimates for old furnace AFUE = 66%; standard furnace = 78%; and Energy Star = 92%. Actual savings for individual homeowners will vary based on geographical area of the country, local gas rates and the age and size of the home.

Air conditioners and heat pumps

About half of all energy used by households goes to heating and cooling the home. Over 7% of all homes are heated and cooled with heat pumps and 24% of new homes are built with them.

  • Seventy-seven percent of new homes are now built with central air conditioning, up from 43 % in 1972.
  • Over 40% of all existing homes now have central air conditioning.
  • In 1994, over 1 million air-source heat pumps and almost 4 million central air conditioners were shipped from manufacturers, the most ever.

By increasing the efficiency of new heat pump and air conditioning units being installed, we can dramatically reduce the nation’s energy consumption and resultant pollution. This will also help utilities offset their peak loads and avoid having to construct costly new power plants. More efficient equipment has the added benefit of helping consumers save money on their energy bills.

What is EPA doing about it?

EPA has formed a new Energy Star program with air conditioner and heat pump manufacturers. The Energy Star heat pump and air-conditioner program is a voluntary partnership between manufacturers and EPA to stimulate the market for high-efficiency products. The Energy StarSM logo is a symbol that consumers can look for to identify heat pumps and air conditioners that save energy and prevent pollution. Energy Star air conditioners are 20 percent more efficient than ones currently meeting the federal government standards. Energy Star air-source heat pumps and central air conditioners could save consumers over $350 million per year by the year 2000 in heating and air conditioning bills. Consumers will easily recognize the new, more efficient products because they will be identified by the EPA Energy Star logo shown above.

Purchasing Energy Star Heat Pumps and Air Conditioners

Utilities all over North America are promoting high-efficiency heat pumps and air conditioners because they help reduce peak demand and provide higher customer satisfaction. Energy Star heat pumps and air conditioners also produce a variety of other benefits:

  • Energy bills are dramatically reduced.
  • All units come with a manufacturer’s warranty.
  • Pollution is reduced through the use of high-efficiency products.

In addition to asking for Energy Star when purchasing heat pumps and air conditioners, consumers should consider the following:

  • Make sure the unit is properly sized and installed to ensure maximum comfort and efficiency.
  • Contractors should be well trained in the proper installation of air-source heat pumps and central air conditioners.
  • The duct work should be installed properly, since an improperly installed system can dramatically reduce efficiency.

How Much Money Can My Energy Star Unit Save?

EPA Energy Star heat pumps and air conditioners can save users a great deal of money by reducing electricity bills. Look for the Energy StarSM logo when purchasing these products, to be sure of lowering you energy bill.

This information courtesy of the U.S. Environmental Protection Agency.