Homeowners are realizing it makes sense to replace an AC with a full heat pump. Chart from Canary Media.

An air conditioner is a heat pump that only operates in one direction, collecting heat inside your house and expelling it outdoors.  An air conditioner and a heat pump will have the same cooling efficiency if they have the same Seasonal Energy Efficiency Ratio (SEER2).  The higher the number the more efficient, which means lower energy bills.

The most efficient models have variable, inverter technology to continuously fine-tune the temperature, operating on low instead of blasting full on and off (single stage). A 2-stage alternates between off, ~65% capacity and 100%. 

This calculator shows how much you can save by upgrading to a higher SEER2.

So should you just replace an aging AC with another AC or a heat pump? A heat pump is usually the smarter upgrade, per this EnergySage discussion based on real market experiences.  With a heat pump, you get heating too for just a little more upfront cost, access to more financial incentives, sometimes better technology and lower emissions.

If you can afford it, replacing a swamp cooler with a heat pump is a better choice too.  As temperatures rise, evaporative coolers have trouble keeping their pads wet at temperatures over 95°F, and during monsoon season the higher humidity prevents the coolers from keeping inside conditions at safe and comfortable levels. Heat pumps can also filter out wildfire smoke, allergens and pollution, while swamp coolers cannot.  Plus they don’t use water. (High-efficiency residential evaporative coolers use an average of 5,100 gallons of water per year, about 3% of average annual residential water use.)

Another option is a dual fuel system (heat pump + natural gas backup). It takes advantage of higher heat pump efficiencies for cooling and lower natural gas prices for heating. The system can be programmed to changeover from gas to heat pump at a specific temperature. If you increase the changeover temperature 10°F, from 30°F to 40°F, for example, you can reduce heating costs of the heat pump by about 10%. This SWEEP Calculator estimates annual bill savings and greenhouse gas reductions resulting from installing a heat pump or specific dual fuel system as compared to an existing gas furnace and a standard air conditioning unit.

This calculator from Nate Adams’s website produces a ton of useful information for comparing heating costs (see graph below) but may take some study to understand.  It is best to enter you own energy costs from at least a year’s worth of bills (total you paid divided by the amount of energy you used), adjusted for any planned increases you know of.  Otherwise, you can look up final bundled electricity prices on Find Energy. Remember to lower these if you are enrolled in a time-of-day, time-of-use or Community Solar rate or have rooftop solar.

Natural gas prices are harder to find if you don’t have access to bills. The Energy Information Agency lists New Mexico average prices here.  Prices in 2024-May 2026 have been less than a $1.00/therm, but they have been as high as $1.21/therm in the past, and it is uncertain how the war in Iran will affect future prices. NM Gas Company prices will rise 7.1% October. 1, 2026. Our calculation puts the new average prices around $1.20/therm.

Nate Adams’ calculator compares energy costs for different heating technologies. This Santa Fe scenario for an average leaky home and 2 “tons” of heating load indicates that natural gas or natural gas plus heat pumps cost the least to operate compared with propane or electric heat. Heat pump only with electric resistant strips for backup (not shown) would cost between $597 to $788 a year for heating depending on the heat pump efficiency. Assumes $0.16/kWh & $1.20/therm (after Oct. 1).

• 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 the “condenser” outside and an “air handler” 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 be 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 into. 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.  

It you plan on using a NM HEAR low-income rebate for mini-splits, you will likely have to install mini-splits all at once to heat the entire residence or to replace an existing fossil fuel system.  It may not be possible to string out several different mini-split installations over several years. Check with the program when it is implemented.

• If you have radiant floor heating, a 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.  The state tax credit does not apply to air-to-water heat pumps, but it does cover water-to-water, and Heat Pump Water Heaters.
• Renters may be interested in portable ​​window heat pumps. Wirecutter suggests these are best in places that have a warmer year-round climate.  Renters will also be eligible for the NM HEAR non-window heat pump rebates.

• 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.”
• Standard heat pumps (Tier 1 or 2) must work harder as the temperature falls below 25-30°F.  Depending on how cold your winters are, your contractor or manufacturer may add electric heat strips to kick in extra heat at a designated cold temperature. This will increase your electricity bill so make sure you have optimized your settings to balance comfort with energy costs. Note that “emergency heat” means that only the heat strips are working.
• One alternative is a Cold Climate Heat Pump. Millions of cold climate models keep houses warm in Maine (Climate Zones 6-7), Alaska (6-8) Canada (4-8) and northern Europe (4-6) at subzero temperatures. Provided they are correctly sized and installed they should certainly work in New Mexico without backup. The downside is that they are more expensive and might require expanding your ductwork. If heat strips are added a recommended switch over temperature is -5°F.
• A more affordable option is to backup a standard heat pump with an existing wood stove or gas furnace for the coldest days.
• A Southwest Energy Efficiency Project (SWEEP) analysis concludes the most economically practical and common retrofit scenario for Albuquerque and Zone 4/5 residents for the next few years will be to install a 2–stage heat pump paired with an efficient gas furnace (either existing or new) for backup heating when temperatures fall below ~25℉. Check out their  Think Heat Pump Calculator for projected energy bill and gas emission savings for different energy retrofits. See their complete system recommendations for different climate zones.
• More backup or alternative ideas.

• 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. 

• Prices can depend on your home size, heat pump type and size, how drafty your home is, home architecture and myriad other factors. In general expect to pay ~$6,000 per mini-split head/zone and from $11,000 to $30,000 for a ducted system. Panel upgrades, duct sealing and modifications, removing old equipment and capping gas lines will cost more.
• If you do not qualify for a limited-income program, and you have an old or drafty house, get quotes for upgrading your “envelope” – insulation, air leaks, upgraded windows. You may save more energy this way in the long run. If you don’t get a heat pump now, this first step will lower the size and price of the heat pump you need later. If you have a small living space, see if a window heat pump could meet your heating/cooling needs. They are not cheap, but they cost less than a whole house system.
• System Size. Heat pump size is measured in “tons;” a 1 ton heat pump can remove or add 12,000 BTUs (suitable for a small studio apartment) to your living space.  Most homes require total heat pump system sizes between 2-5 tons.
• System Type. Ground-sourced 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.
  
• System Efficiency. Fixed-speed 1- and 2- stage heat pumps are generally less expensive than variable speed heat pumps that use an inverter-driven compressor that continuously adjusts its speed in 1% increments.  The upfront and repair costs of lower efficiency models are less, but your energy bills will be higher.
• Based on multi-state marketplace data EnergySage estimates average project prices and cost per ton for different systems below. (Hybrid is heat pump + gas furnace). If you have ducts already a ducted system offers the greatest value unless your ducts need a lot of remediation for leaks.  Ductless or mini-split prices depend on how many zones you need to cover. (Homes generally have between 2-8 zones. Add zones for separate floors, isolated rooms or an open living spaces). If your budget is small and you do not qualify for the HEAR program, you might consider adding a  mini-split or two in priority zones as a start.
• Note that some system designs will combine ducted and mini splits.
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• Home size. Rewiring America modeled how prices vary with house size. They estimate single zone heat pump will cost $5,400 – $8,500 (median $6,600).
• For New Mexico specific data, The HVAC Project Cost
• Remember incentives.

• 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.