Heating and Cooling: Heat Pumps

Why a heat pump?

Two Appliances in One. An electric Heat Pump heats AND cools your house, so it replaces both your air conditioning system and furnace or boiler. 

High Heating Efficiency. A heat pump is far more efficient than a gas and propane furnace or an electric-resistance heater because it does not generate heat. It only collects and moves existing heat from one place to another via a refrigerant circulating in a closed loop. Hard as it is to believe, even in winter, there is heat to be gathered from the outside and brought in! Some heat pumps can be  operated down to -31°F. While the best gas furnaces operate with efficiencies shy of 100%, heat pumps can top 400% (technically, its efficiency is measured by a “coefficient of performance,” which can be as high as 4 or 5, while gas COP is less than 1). For every 1 kilowatt-hour (KWh) of electricity spent running it, a heat pump delivers 2-4 KWh worth of heat energy into your home!

High Cooling Efficiency. An air conditioner is a heat pump that only operates in one direction, collecting heat inside your house and expelling it outdoors. Advanced heat pumps are more efficient because they continuously fine-tune the temperature, moving smaller amounts of heat, without repeatedly cycling between full on or off. Heat pumps typically use 50% less electricity than air conditioning window units and are substantially more efficient than standard central AC systems. Plus they warm the house too! Heat pumps are more efficient than swamp coolers too.

Efficiency Means Savings. Heating costs for heat pumps are substantially lower than heating with propane, fuel oil or electric resistance (baseboard heating).  Wood pellet stoves are also more expensive to operate than heat pumps. Usually methane (natural) gas heating costs are less expensive to run than heat pumps, but are subject to volatility, and there are health and climate reasons to make the switch. Recent spikes in methane gas prices have made heat pumps more affordable to operate than gas in some areas at some times, eg, Edgewood, NM residents paid $2.53/therm in Feb. 2023.  

The average New Mexico household will save $992 a year by switching from propane to a heat pump and $997 a year by switching from electric resistance heating, according to a 2017 study.  Rewiring America estimates on average, New Mexicans can save $171 a year by switching from natural gas, $432/year from propane and $242 year from electric resistance. 

HOW TO DO YOUR OWN CALCULATION. Your savings will depend on where you live (especially how cold winters get), the cost of your current heating fuel and the cost of electricity. New Mexico electricity prices vary widely from $0.087/kilowatt-hour (kwhr) in Lovington, NM to Union County where some residents pay $0.262/kwhr. Use this calculator to compare the cost of fuels per unit of energy (MMBTUs or millions of British Thermal Units) where you live.
Try to use your actual utility, gas and other fuel bills including the service charges.  If you have an online account you may be able to download that information on a spreadsheet to make your calculations easier. Add up how much you’ve spent over at least a year and divide by the total units of energy you’ve used over that time to get an average cost per energy unit.
For example, one Albuquerque NM Gas company customer spent $1661.50 over 36 months for 1,285.9 therms of methane (natural gas).

  • Dividing $1661.50 by 1,285.9 results in a cost of $1.29 per therm.
  • His gas furnaces had an efficiency of 92% when he bought them. If you don’t know what yours is, enter 90%, the number used by Energy Information Agency for a typical gas-fired furnace.
  • Entering $1.29 and 92% into the calculator results in a cost of $13.98 per million BTUs.
  • His PNM electricity rate is 14.45 cents per kilowatt-hour (kWh). Electric resistance heating is 100% efficient. So if he had baseboard heating it would be costing him $42.35 per million BTU. Very expensive.
  • To find out what a heat pump would cost to run, he divides this number by 3 because a heat pump is about 3 times more efficient than electric heating, on average.  This gives him a cost of $14.12 per million BTUs.
  • Conclusion: Based on actual bills, running a heat pump costs about the same as a gas furnace in this case.

Here is a hypothetical cost comparison example for the Albuquerque/East Mountains area based on commodity prices, not actual bills.

Notes. The graphs come from the Northeast Energy Efficiency Partnerships (NEEP) Air Source Heat Pump Guide.  (For these graphs, the lower and higher prices used are $1.20 – 1.75/therm for gas; $0.14 – 0.20/kWh for electricity; $2.75 – 3.75/ gallon for oil; and $2.50 – 3.60/gallon for propane.  In New Mexico in 2022, Natural Gas ranged from 0.6 to $1.32/ therm; average NM electricity’s 15.34 c/kWH; propane was  $2.67/gal national average at the end of 2022.)

When should I get an Electric Heat Pump?

Regardless of its condition, if you are using propane, electric-resistance, heating oil or wood pellets for heating, chances are it makes economic sense to replace this system with a heat pump as soon as it fits into your electrification plan. 

If your natural gas system is aging* (16-25 years), needs expensive ventilation remediation to prevent indoor pollution, or you want to make changes for the sake of the climate, now is a good time to plan for an electric heat pump. You’ll get efficient air conditioning too. *Signs it’s time to replace my natural gas system.

If you are thinking of replacing or updating your swamp coolers (10-12 year average lifespan) or refrigerated air (11-25 years), a heat pump may cost only a little more but will provide heating as well as cooling. 

Financial incentives can impact timing. Check out the Rewiring America Calculator to see if you qualify for low-income rebates. If so, you might want to wait until these point-of-sale discounts (100% of the cost of a heat pump up to $8,000) are rolled out at the end of 2024 by New Mexico.  If you don’t qualify, read about the financial incentives in the next section, being mindful of federal caps and rules on combining heat pump tax credits with those for electrical panel upgrades, solar energy systems and heat pump water heaters. For example, water heaters and heat pump credits are capped at $2,000 if installed in the same year. 


Whenever you get a heat pump, you’ll be in good company. In 2022, more people in the U.S. bought heat pumps than gas furnaces.



What kind of Heat Pump should I get?

(Note: none of the rebates mentioned in this video apply to  New Mexicans)


The kind(s) of heat pump that is best for your residence depends on many factors. These are the primary ones to consider.

  • DUCTS. If you have central air conditioning or forced-air heating with ductwork that comes through ceiling, wall or floor registers then you can install a Ducted System (also called a Split System).  The heat pump is “split” in two parts, with one outside and a second inside, typically located in the basement, attic or closet where an existing furnace or AC unit may be located  This centrally ducted system could serve the whole house or many rooms, often with no duct expansion required. Cold-climate heat pumps may require enlarging ductwork.  A variant called compact-ducted uses smaller inside units and short duct pathways to heat/cool only a few rooms. 
  • If you have ducts but they are in the garage or attic and leak energy, you might be better off going for ductless (see below)
  • NO DUCTS. If you have baseboard heaters, electric space heaters, radiators, wall or window units or do not have viable ductwork in your home or in specific rooms or additions, you will probably want Ductless or Mini-Split heat pumps.  A Mini-Split system consists of one outdoor unit and up to ~8 indoor air handlers or “heads.”  You can have a mini-split system heat/cool just one room or an entire house. A typical house has 4 or 5 indoor air handlers, each independently controlling the temperature in its “zone.”  If  you want your air handler to heat/cool an area larger than one room, either careful about leaving doors open to maintain air flow or have the contractor add vents over doorways to encourage air flow or install a short-ducted run from an air handler to other rooms.

 A mini-split can also be a good choice for additions where it is too expensive to extend your existing HVAC system. The NEEP guide suggests a ‘start small’ approach by trying out a 1- or 2-zone mini split where it can lower energy bills  (e.g., large, open great room) if your existing HVAC system still has some life in it. Usually seen mounted high up on a wall, the “heads” can be installed low or even in the ceiling.  

  • If you have radiant floor heating, an hydronic (air-to-water) Heat Pump for radiant floor or wall heating and cooling can be installed. Water carries more thermal energy per volume than air so these units have the potential to be more efficient than air-to-air heat pumps. Hydronic heat pumps can also be retrofits for radiators/boilers and ducts/ductless systems and be used for pools and hot tubs.  If you are building a new house, install narrower loops, spaced closer together than standard when installing the floor tubing; that configuration will afford the highest efficiency match to a heat pump.  It is our understanding that hydronic heat pumps do NOT yet qualify for IRA tax credits or rebates.
  • Renters may be interested in portable ​​window heat pumps. Wirecutter suggests these are best in places that have a warmer year-round climate. However are not expected to be approved for IRA rebates until 2024/2025, according to Rewiring America.
  • New Mexico straddles climate zones 3-5 (higher numbers are colder). Consumer Reports says “modern heat pumps in a properly designed system can provide all the heat a home will need up through Zone 6.
  • However, in its recent analysis, the Southwest Energy Efficiency Project (SWEEP) concludes the most practical and common retrofit scenario for Albuquerque and Zone 4/5 residents for the next 5-7 years will be to install a 2stage heat pump paired with an efficient gas furnace (either existing or new) for backup heating when temperatures fall below ~25℉. More expensive alternatives to a heat pump/backup gas furnace or wood pellet stove combo include the installation of a cold-climate heat pump,  or 1- or 2- stage heat pump with an electric strip. The former could require expanded ductwork, and the latter scenario would significantly increase electricity costs on cold days, erasing some of the heat pumps economic advantages.
  • To see Zone 4 & 5 scenarios for different house sizes and existing heat systems, visit the bottom of Loveelectric.org’s  webpage.

  • If you live in warmer, southern New Mexico in Zone 3, no backup is needed. 
  • In general, the more you spend on equipment now, the less you’ll spend on electricity later.  
  • According to Carbon Switch which conducted a survey, heat pump installations range from $3,500 to $20,000, depending on the size of the home, with a $14,000 average cost after rebates (mostly from states). For ductless mini splits, the site reports, expect a range of $7,000 to $25,000 depending on the number of zones.

Heat pumps that collect heat from air are less expensive to install than heat pumps that harvest it from the ground. Air-source heat pumps are the most common heat pump, with nearly 4 million sold in 2021. The advantage of ground-sourced or geothermal heat pumps is that ground temperatures are more constant throughout the year, and during the winter, the earth is warmer than the air while in summer the ground is cooler.  These systems cost much more than air-source units but the extra cost may be recouped in energy savings in 5-10 years, according to the Department of Energy. About 50,000 geothermal heat pumps are installed in the U.S. annually. Water-source heat pumps are less expensive than ground-source because they get their heat from the bottom of a pond. 

  • Hybrid heat pumps may combine air, water and/or ground sources, integrate solar panels or package an electric heat pump with a gas or electric furnace. Packaged heat pump units lump all the components together inside one box outside. They are found outside mobile homes, apartment buildings and commercial buildings.
  • Prices also vary according to how well the equipment is able to adjust the temperature with the least amount of energy. One-stage, or one-speed, heat pumps have the least finesse and lower efficiency, and generate the most noise. They run at all on or all off.   More expensive two-stage heat pumps switch between 70% and 100% compressor speed to adjust the temperature. The most expensive upfront cost belongs to highly efficient, quieter inverter or variable compressor speed heat pumps that work like cruise control on a car, constantly adjusting needed heating or cooling by operating between 40%-100% capacity in 1% increments. Variable heat pumps are the most efficient, so they have the lowest electricity cost, but often the highest upfront and repair costs.

Paying for your Pump

Remember to weatherize first! Check out financial resources for insulation etc. on our  weatherize and resources for low-income residents pages!

If you qualify for low-income Federal up-front discounts of 100% off the cost of a heat pump up to $8,000  (the approximate installation cost for a 1,500 square foot house) it pays to wait until these rebates are available by the end of 2024. (These rebates will be administered by New Mexico and applied when you buy the heat pump through a contractor or retailer). There will not be any mid-income rebates for single family homes available.

To see how three families at different income levels might use incentives to install heat pumps, click this example for Edgewood, NM.

Other sources of financial assistance available now include:

  • Federal Tax Credits. 25C provides a 30% tax credit for heat pumps and heat pump water heaters, capped at $2,000 per year. The credit resets each tax year, effectively becoming available again for additional projects. However it cannot be carried forward to subsequent years. 25C also includes a 30% tax credit up to $600 for an electrical panel upgrade, but only if it’s upgraded in conjunction with another upgrade covered by 25C (like a heat pump). So it might be advantageous to do both at once. ENERGY STAR lists models of ducted and mini split heat pumps that are eligible for the Federal Tax Credit.  See  ENERGY STAR Air Source Heat Pump Tax Credit webpage  for more information (New Mexico is in the South HVAC region). You can also search for a specific model’s eligiblity  here.
  • Note that utility and possibly other rebates you receive towards the heat pump must be subtracted from the cost of the heat pump before you apply the 30% tax credit (See IRS). State incentives do not have to be subtracted.
  • Unlike air-source heat pumps, the 30% (25D) federal tax credit for geothermal or ground-source heat pumps does not have a cap. According to Rewiring America,  geothermal installations average around $24,000, so typical tax credits are about $7,200. 
  • NM State Tax Credit. Receive up to  $1000 or $2000 depending on income for air-source heat pumps. (thru 2027 and retroactive to 2021). A renewed geothermal heat pump tax credit program goes through Dec. 31, 2033. Applications are expected to be available on the EMNRD website by summer 2024.
  • Nusenda offers loans for energy-saving products and works with selected partners. That might be a way to not only finance a project, but to find an installer.
  • Clean Energy Credit Union also offers loans on EVs, solar, geothermal heat pump systems and green home improvements.

What size heat pump do I need?

Choosing the correct size or capacity of a heat pump system for a whole house is critical.  Bigger is not always better. Higher efficiency, variable speed heat pumps compensate better for over estimated capacity. (Mini-split calculations for individual rooms are less critical).  Accounting for insulation, skylights, windows, high ceilings and altitude is very important, and why weatherizing first is a great idea. 

These calculators will give you a ballpark estimate for your initial research. 

This article describes an estimation method using smart thermostat data. This Sizing Guide for Cold Climates outlines the strategies for different kinds of heat pumps and HVAC configurations. But an experienced contractor is the best way to go if you can afford it and find one. Your contractor should use a tool called Manual J and calculate the load (electricity usage of your appliances) in your house. This EnergySage article is very good on sizing and what to expect from a quality contractor.

  • Altitude – Air-source heat pumps have less air to work with at high altitudes so your contractor should increase the capacity or size of a ducted heat pump system accordingly. Mini-splits installed to heat or cool a room only should be less of a problem.
A condenser is the part of a heat pump that releases heat.  It is called a condenser because when vapor inside the refrigerant loop condenses into a liquid it gives off heat. Air conditioner condensers are always outside, so some people still call the outdoor portion of a heat pump a condenser, but technically that is only true in the summer.
An evaporator pulls heat from the air into the refrigerant making it boil and turn from a liquid to vapor.
compressor pressurizes the refrigerant and moves it through the heat pump. Heat pumps with inverter technology allows the compressor to run a variable speeds and continually adjust to small temperature differences, saving more energy than a one- or two-step system.
COP.  Coefficient of Performance is a measure of heating efficiency. It is the ratio of how much heat energy a pump delivers compared to the amount of energy used to run the heat pump. The higher the COP, the greater the efficiency and the lower the power consumption and operating costs.  Typical air to air heat pump COPs are in the 2 to 4 range.
EER. Energy Efficiency Ratio measures cooling efficiency.
HSPF2. The Heating Seasonal Performance Factor measures how efficiently a heat pump heats your home when it is cold. The higher the HSPF2 rating, the more efficient the heat pump.
SEER2. The Seasonal Energy Efficiency Ratio measures how efficiently a heat pump cools your home when it is summer.  HSPF2 and SEER2 are new metrics based on a new testing system instituted by the Department of Energy on Jan. 2023.   Energy Star requirements for Air Source Heat Pumps including cold-climate.


How to Find A Contractor

photo of technical using a meter to look at heating system with red and blue pipesWirecutter advises buying a heat pump from a reliable manufacturer with good customer service.  It notes that Daikin, LG HVAC, Mitsubishi/Trane, Carrier and Rheem have warranties of 10+ years. However it’s more important to find a knowledgable local contractor who understands how heat pumps work best in New Mexico’s climate and who has a relationship with a manufacturer who provides parts and service to this region of the country. As mentioned above, your contractor must know how to accurately size your heat pump to your house at high altitude.

  • Ask for recommendations from friends and neighbors, HOAs,  community social media like Next Door, Facebook etc.
  • If you want a heat pump, say so. Many contractors have more experience with gas furnaces, and it’s usually faster, less expensive and less work to replace an old or broken gas furnace with a new one. It may take more time to design a heat pump replacement. Your contractor may be more geared to pitching fast turnover and least expensive options rather than thinking about long-term energy savings, according to a Canary Media show on  How to get contractors on board with heat pumps and electrification.  In fact, your contractor may not be familiar with the financial incentives available to both customers and contractors that lower upfront electrification costs.
  • Get quotes from several contractors and expect detailed proposals in writing. A contractor who does a home visit, suggests a few scenarios (eg., ducted versus mini-splits, only a furnace versus heat pump for both AC and heating, Cold Climate heat pump versus 2-stage heat pump + backup), knows about rebates and tax credits available from a variety of sources, checks out the amperage on the circuit breaker, and suggests weatherization first has your best interests in mind. Will the project require an electric panel upgrade? Will the outdoor units be too noisy to be put under bedroom windows? What software is the contractor using to size the system?  Bigger is not better. Can the contractor run an energy audit first or suggest a company to do so?
  • Can the contractor help with getting rebates or financing? Does the contractor’s preferred brands align with incentive programs from your utility or other sources?  Expect the process to take weeks to months. This is a big purchase that will stay with you for a long time.
  • One way to find a heat pump contractor is to visit heat pump manufacturer pages and search a dealer in your area.  We are not endorsing any of these manufacturers, just listing their webpages for your convenience:  American Standard  Bosch Bryant  Carrier  Daikin GREE  LG HVAC Lennox   Mitsubishi Rheem  Rudd  Trane  York
  • Be an educated consumer. You may be the first to tell contractors about the Coop and  IRA benefits for them and to dispel myths.
  • ENERGY STAR 10 Tips for Hiring a Heating and Cooling Contractor

Heat Pump Myths Busted

There is a lot of misunderstanding about heat pumps. Older technology and historic popularity in the southeast US where winters are mild gave them a wimpy reputation for cold climates. But advanced tech and record adoption in the Netherlands, Alaska and Maine is blowing that idea out of the snow. The  name “heat pump” is confusing, and frankly, save perhaps for indoor mini-split heads, they don’t exactly sport an Apple or EV-type sleek design that will impel people to look more deeply. But bravo! If you are reading this you’re intrigued enough to find out the facts for yourself, like these to the left, so well laid out by Philip P. Simpson for the City of Las Cruces, or the video below.


How a Heat Pump Works

NOVA shorter version of how a heat pump works

This Old House less scientific explanation