Electric Heat vs Oil vs Gas Heat: Which Is Cheaper?

With energy bills putting a crunch on the U.S. this winter, comparing the costs of electric heat vs gas heat can be an important decision for homeowners looking to save money.

When Kiplinger looked at this same question last year, we concluded that gas heat was the cheaper option. However, a new study found flaws in the way electric heating costs are accounted for, changing the cost outlook. Moreover, electricity costs vary substantially from one U.S. state to another.

In this year’s winter fuels outlook, published by the Energy Information Agency (EIA), it’s forecasted that from November through March, heating-oil customers will pay $1,722; propane users, $1,328; electricity users, $1,072; and gas users, $611. However, according to a recent study from Rewiring American, published by The Guardian, the expected costs for electricity users can be misleading, as it doesn’t distinguish between older electric-resistance appliances and heat pumps.

Heat pumps are highly efficient, and can cut electricity use by 50% when compared with electric resistance heating, according to the Department of Energy. Because of this, if you’re using a heat pump to warm your home, you’ll likely pay much less than forecasted by the EIA.

Additionally, Rewiring America says in the report that "the agency includes all uses of each fuel in its cost estimates, meaning cost projections for electricity customers include energy used to power other electric appliances such as refrigerators and electronics."

The following graphic was tweeted by the EIA illustrating the data.

(Image credit: EIA)

Furthermore, there are three positive trends for residential heating customers this year. First, this winter will likely be milder than last winter. Forecasters predict a recurrence of the El Niño weather pattern, which tends to bring warmer, wetter weather for much of the U.S.

Second, the milder winter will mean lower demand - and thus lower costs - for energy. The U.S. Energy Information Agency (EIA) predicts that natural gas will be 21% less expensive this winter. That lower cost of natural gas will also help keep electricity prices from increasing, as more expensive coal-fired power plants are replaced by gas-fired plants.

Finally, newer, more efficient heating technologies continue to get cheaper, particularly as economies of scale and subsidies kick in at the state and federal levels.

Electric heat: cost to run

According to the EIA’s Electric Power Monthly report, the average cost of electricity in the U.S. is 16.21 cents per kilowatt hour or kWh. As stated above, the EIA projects that electric heating costs for U.S. homeowners will average $1,072 for winter 2023-2024.

The Efficiency Maine Trust provides the following cost breakdown for electric heating systems:

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Fuel Type (Units)	Cost per Unit Delivered	Heating System	Annual Cost
Electric (kWh)	0.23	Geothermal Heat Pump	$ 1,681
Electric (kWh)	0.23	Heat Pump (ductless)	$ 2,297
Electric (kWh)	0.23	Heat Pump (ducted)	$ 2,871
Electric (kWh)	0.23	Electric Baseboard	$ 6,202
Row 4 - Cell 0	Row 4 - Cell 1	Row 4 - Cell 2	Row 4 - Cell 3

According to the U.S. Department of Energy (DOE), installing a more energy-efficient electric heat pump can reduce energy usage in your home significantly, compared to traditional electric resistance heating such as furnaces and baseboard heaters. The most common type, ducted air-source heat pumps, reduces energy use by approximately 50%. More expensive options like geothermal heat pumps can reduce energy use by up to 60%. This type of upgrade saves you on a monthly basis, but you should include sizable upfront installation costs as part of your bill calculations.

However, the American Council for an Energy-Efficient Economy reports that heat pumps may not provide enough heat in especially cold northern regions, resulting in a need for alternative fuel sources and higher bills. In addition, many homeowners may not be able to use the most efficient geothermal heat pump type, which requires digging a large trench near or under your home, according to the DOE.

Gas heat: cost to run

According to the EIA’s Electric Power Monthly report, the average cost of gas heat in for U.S. homeowners will average $611 for winter 2023-2024.

The Efficiency Maine Trust provides the following cost breakdown for gas heating systems:

Swipe to scroll horizontally

Fuel Type (Units)	Cost per Unit Delivered	Heating System	Annual Cost
Natural Gas (therm)	2.04	Natural Gas Boiler	$ 2,267
Natural Gas (therm)	2.04	Natural Gas Room Heater	$ 2,317
Natural Gas (therm)	2.04	Natural Gas Furnace	$ 2,523
Row 3 - Cell 0	Row 3 - Cell 1	Row 3 - Cell 2	Row 3 - Cell 3

The verdict

The most common electric heat systems have higher monthly operating costs compared with the most common natural gas systems, based on the most recent U.S. government statistics.

In some cases, geothermal electric heat pumps can save you money over the most cost-efficient natural gas boilers. They are generally more efficient than gas furnaces and use less source energy on average in moderate climates. However, they may not be sufficient to fully heat your home if you live somewhere with cold temperatures. Additionally, geothermal systems aren't even an option for homeowners without land for an underground trench.

No matter your choice, you can also meaningfully lower your heating costs by doing a few important things.

If you only use certain rooms in your home, try to use spot heating rather than running your whole home system.
Keep your thermostat setting at 68 degrees for the majority of each winter day.
Consider getting a home energy audit to identify fixes that optimize efficiency and comfort.
Once you have the audit in hand, apply fixes like caulking, weather stripping, insulation, and air filter changes.
Don't forget to claim the energy efficiency home improvement tax credits from the Inflation Reduction Act.

For more energy-saving content, check out our home savings hub.

There are too many variables to provide a definitive answer
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True... but here is one answer.

The cheapest energy is the energy you don’t need to buy. I have a bungalow that is about 2,800 square feet... about half of it is an addition that I put on and when it was built, I went significantly beyond what was required for insulation and the overall heating bill only went up 10% when I was done with it, even though the house square footage doubled. Mind you, I also increased the attic insulation in the original part of the house when I put the addition on.

About 15 years ago, I decided to increase the insulation of the original part of the house.... the entire house has a full 8 foot high basement and while the exterior of the foundation on the addition I put on was insulated (polystyrene), the original part of the house only had some insulation on the inside of the foundation to accommodate some finished basement rooms. As a summer project, I dug up the entire foundation wall for the original part of the house right down to the footings and insulated it with 5 inches of polystyrene... managed to snag an excellent deal on some factory seconds that had a ripple in them but were perfect for what I wanted. This was not a small undertaking but I worked on when I could and over a couple of months, it was done. The top of the insulation is covered with some formed aluminum flashing and caulked to the top of the foundation wall about one inch below the bottom row bricks. This has made a huge difference... not just the drop in energy costs but due to the amount of thermal mass on the inside of the insulation, it enables the house to ‘ride through’ periods of no heat (in the event of a power outage) without a serious (rapid) drop in temperature.

As good as this has been, my next house will be better... it will be completely off grid for everything.

Just as a side note, I recommend folks see the interview that Tucker Carlson did the other day with Dennis Quaid. Quaid has made it a bit of a mission to warn folks about the possibility of a complete electric grid failure due to a Carrington Event.... https://twitter.com/TuckerCarlson/status/1746215532833947700

Don’t know what a Carrington Event is? It’s a geomagnetic storm....
https://en.wikipedia.org/wiki/Carrington_Event B

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