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Texas natural gas is cheap — about $1.10/therm, among the lowest in the US. Not every homeowner will save money switching from gas to a heat pump on heating alone. But here is what most comparison sites miss: a heat pump replaces both your furnace AND your AC. When you factor in cooling savings, the math changes significantly.
Combined heating + cooling savings: $600-1,000/year for most Texas homeowners replacing aging systems. This page gives you the honest numbers — including when gas wins.
Last updated: February 2026
2026 Update: The federal Section 25C energy efficiency tax credit (previously up to $2,000 for heat pumps) expired December 31, 2025. It is no longer available. Texas utility rebates (Oncor, Austin Energy, CPS Energy) and pending HEAR federal rebates are the remaining incentives.
Before we compare, you need to understand why Texas is different from every other state in this conversation.
of TX homes heat with natural gas
per therm (vs $1.85 in MA, $1.90 in CT)
annual gas heating cost (mild winters)
of TX HVAC cost is COOLING, not heating
Texas gas is among the cheapest in the US thanks to Permian Basin production. Annual heating costs are low because winters are mild. The real savings story is not about replacing your furnace — it is about upgrading your AC at the same time.
In Texas, you are not just replacing a furnace. You are replacing your furnace AND your AC with a single, more efficient system. Heating savings alone are modest ($300-500/year). But when you add cooling savings from upgrading a SEER 13-14 AC to a SEER2 16-20 heat pump — in a state where you run AC for 6-7 months — total savings reach $600-1,000/year.
Enter your current fuel type, usage, electricity rate, and AC age. The calculator shows both heating AND cooling savings — the full picture for Texas homeowners.
In Texas, a heat pump replaces both your AC and furnace with a single system. Savings come from both more efficient cooling AND eliminating gas heating.
Current price: $1.10 $/therm
$0.140/kWh (TX avg: $0.14/kWh — varies by REP)
SEER 13 (older units: 10-13, newer: 14-16)
Heating: $550
Cooling: $517
Heating: $629
Cooling: $395
Based on TX energy prices as of February 2026 (gas $1.05/therm, propane $2.75/gal). Heat pump assumes COP 3.0 for heating, SEER2 17 for cooling. Cooling estimate based on a typical 2,000 sq ft TX home (~48M BTU annual cooling load). Actual savings depend on home size, insulation, climate zone, and usage patterns.
Gas furnace at 92% AFUE vs heat pump at COP 3.5 for heating. Old SEER 14 AC vs heat pump at SEER2 16-20 for cooling. Typical 2,000 sq ft Texas home at $0.14/kWh.
| Metric | Gas Furnace (92% AFUE) | Heat Pump (COP 3.5) |
|---|---|---|
Annual heating cost TX uses far less gas than NE states — mild winters | $500-900 | $200-460 |
Heating savings Moderate savings on heating alone | — | $300-500/yr |
| Metric | Old AC (SEER 14) | Heat Pump (SEER2 16-20) |
|---|---|---|
Annual cooling cost (old AC SEER 14) This is where Texas savings add up | $1,200-1,800 | $900-1,300 (SEER2 16-20) |
Cooling savings Efficient heat pump cooling vs aging AC | — | $300-500/yr |
Based on replacing gas furnace + aging AC with a single heat pump system. TX average electricity rate of $0.14/kWh.
Your payback timeline depends entirely on what you are replacing. Here are the three most common situations for Texas homeowners.
Your AC is 10+ years old and your furnace is nearing end-of-life. A heat pump replaces both with one system. Instead of paying $3,000-5,000 for a new AC plus $3,000-5,000 for a new furnace, you pay $8,000-14,000 for a heat pump. Net incremental cost is only $0-6,000.
You need a new AC anyway. A heat pump costs about the same as a high-efficiency AC ($4,000-8,000 vs $3,500-6,000). You get cooling plus heating capability for a small premium. Your gas bill drops and you have backup heating if the furnace fails later.
Ripping out functioning equipment does not make financial sense. Your existing systems are efficient and have 10-15 years of life remaining. Wait until one needs replacement, then choose a heat pump at that time.
Texas utility rebates reduce upfront costs by $600-3,000 depending on your utility. Austin Energy offers the best package (~$3,000 plus 0% financing). Oncor provides up to $600 per unit. When HEAR rebates launch in Texas (pending), income-qualified households could receive up to $8,000 in additional direct rebates.
In deregulated areas (about 85% of Texas), you choose your retail electricity provider (REP). Your electricity rate is the single biggest variable in heat pump economics. Lock in a good rate and the numbers look great. Overpay and savings evaporate.
| Electricity Rate | HP Heating | HP Cooling | HP Total | Verdict |
|---|---|---|---|---|
| $0.10/kWh | ~$350 | ~$700 | ~$1,050 | Excellent heat pump economics |
| $0.12/kWh | ~$420 | ~$840 | ~$1,260 | Strong savings vs gas + old AC |
| $0.14/kWh (TX avg) | ~$490 | ~$980 | ~$1,470 | Moderate savings — still positive |
| $0.16/kWh | ~$560 | ~$1,120 | ~$1,680 | Savings shrink — consider rate shopping |
| $0.19/kWh | ~$665 | ~$1,330 | ~$1,995 | Marginal — switch REP first |
Heat pump costs assume COP 3.5 for heating and SEER2 17 for cooling. Gas + old AC baseline: ~$700 heating + ~$1,500 cooling = ~$2,200/year. Annual costs for a typical 2,000 sq ft TX home. Actual costs vary by home size, insulation, and climate zone.
We believe in giving you the truth. Sometimes sticking with gas makes more financial sense. Here is when.
Both systems are efficient and have 10-15 years of life remaining. There is no financial case for early replacement. Plan for a heat pump when one system needs replacing.
If you are locked into gas at under $0.80/therm, heating savings from a heat pump nearly disappear. Some TX homeowners get gas at $0.70-0.90/therm through favorable contracts.
In co-op or municipal utility areas with high fixed rates, heat pump operating costs climb. If you cannot choose your retail electricity provider, the math may not work.
DFW and the Panhandle see occasional single-digit temperatures. If you are uncomfortable relying solely on a heat pump in rare extreme cold events, consider a dual-fuel hybrid system that keeps your gas furnace as backup.
For the majority of Texas homeowners, the heat pump is the better long-term choice — especially at these trigger points.
This is the best time to go heat pump. You are already spending $4,000-7,000 on a new AC. For a similar or slightly higher price, you get a system that also heats — eliminating or supplementing your furnace.
If both your AC and furnace are nearing end-of-life, a heat pump replaces two aging systems with one modern, efficient unit. This is the strongest financial case.
Austin Energy ($0.12/kWh), CPS Energy ($0.125/kWh), and some co-ops offer stable, low rates. At these prices, heat pump operating costs are very attractive.
A heat pump is a single system that heats and cools. One unit to maintain, one service contract, one system to monitor. Simplicity has value beyond the dollar savings.
A heat pump removes all combustion from your heating system. No gas leaks, no carbon monoxide risk, no pilot light. Particularly valuable for families with children or elderly residents.
Most new Texas homes are built with heat pumps, not gas furnaces. Builders have recognized that in a cooling-dominant climate, a single heat pump system is more cost-effective than separate AC + furnace.
If your AC or furnace needs replacement in the next 2-3 years, choose a heat pump. If both systems are under 5 years old and working well, wait. The best time to switch is when you would already be spending money on HVAC replacement — the heat pump becomes an upgrade, not an added expense.
Rebates vary dramatically by utility territory in Texas. Here is a summary of what is available to offset your heat pump cost.
The federal Section 25C energy efficiency tax credit (previously up to $2,000 for heat pumps) expired December 31, 2025. It is no longer available for any installations in 2026. Texas utility rebates and pending HEAR rebates are the remaining incentives.
Utility-specific rebates: Oncor, Austin Energy, CPS Energy
Read guideRegional pricing: Houston, DFW, Austin, San Antonio
Read guideOne system replaces two — detailed TX comparison
Read guideERCOT deregulation explained, REP shopping for heat pump owners
Read guideTDLR licensing, Manual J, red flags to watch for
Read guideAll Texas heat pump, utility, and energy guides
View all guidesNuWatt Energy helps Texas homeowners make the right decision about switching from gas to a heat pump. Get a free assessment with personalized savings based on your electricity rate, home size, and current HVAC equipment.