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If you’re a California homeowner and you’ve been feeling the cold this winter, there are plenty of reasons to go get a heat pump.
An all-electric, energy-efficient alternative to gas-fired furnaces, heat pumps are widely regarded as optional climate-friendly home heater.
They can do double duty as both home heaters and air conditioning units and are quite good at maintaining a constant temperature in the home without the blast and cool cycle typical of a furnace.
How about a guaranteed lower monthly utility bill? Not in California.
Call it the California heat pump conundrum.
On the one hand, California has overambitious goals to reduce greenhouse gas emissions in an effort to limit the worst effects of a changing climate. Most experts see building electrification — replacing furnaces, boilers, stoves and ovens that burn fossil fuels with appliances included in California’s an increasingly green electricity grid — as a necessary step towards achieving these goals.
California has built one of the most aggressive heat pump strategies in the country. The state aims to install six million heat pumps in homes by 2030. Lawmakers are also moving this year to boost heat pump adoption — proposing to streamline permits and make it easier to electrify homes.
On the other hand, California’s residential electricity prices are among the highest in the country—expensive even compared to equally expensive natural gas. That makes heat pumps a tough sell for many Californians.
A new Harvard University study maps exactly where that reality bites—and tries to explain why some places are better suited for heat pumps than others.
Society is “inundated with these kinds of plans now for decarbonisation:this by 2030this by 2050,” said Roxanne Chafier, an environmental policy researcher at Harvard University. “But then you scratch the surface a little more and look at things like electricity prices.”
Achieving those goals amid such high prices is a tough round, Chafie said.
Looking at residential energy costs, consumption and winter temperatures in every county in the United States, Chafier and Harvard environmental science professor Daniel Schrag found in a recent paper that typical households living in the American South and Pacific Northwest would likely see lower utility bills by switching to a heat pump.
Conversely, bills for average homes in northern Midwestern states would increase. That’s partly because heat pumps work by extracting heat from outside air, compressing it and piping it indoors, a thermal magic trick that’s harder to pull off in places with subzero winters. This is also thanks to the region relatively cheap gas.
Then there’s California: A surprisingly mixed bag.
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Although the state's temperate coast is ideal for heat pump adoption, high residential electricity prices can make replacing a gas furnace with a heat pump an expensive proposition. This is especially true in counties where homes tend to be larger, winters are colder, or electricity is expensive. .
Quentin Gee, a manager at the California Energy Commission, said the advantage of heat pumps comes down to thermodynamics. Unlike a gas furnace, which burns fuel to create heat, a heat pump compresses and expands a refrigerant, like a refrigerator in reverse. This moves heat from outside into the home - allowing it to deliver several units of heat for every unit of electricity it uses.
Even in PG&E territory, where electric rates can be some of the highest in the U.S., Gee said the efficiency can allow heat pumps to compete with — and in some cases beat — gas in terms of operating costs, depending on local rates and home characteristics.
In regions with lower utility costs like SMUD in Sacramento, he said heat pumps can be a clear financial win.
“Gas prices have also gone up over time — so both are tough when it comes to heat pumps versus, say, a gas furnace,” Gee said.
Between 2001 and 2024, average retail gas prices rose 80 percent in California, according to federal data. Retail electricity prices, supplemented by fire prevention costs and government welfare programs, have more than doubled.
Even in parts of California where the average home isn't likely to save with a heat pump, there are plenty of exceptions. Smaller, well-insulated homes can often stay warm with minimal heat pump output.
For some homeowners, solar panels have helped bridge the gap. Doug King, a green building consultant in San Jose, installed his first heat pump in 2021 along with a new rooftop solar system; these panels more or less covered the monthly cost of running the heat pump. A second unit installed last year increased his bills. "But that's fine, I don't mind," he said. "I was willing to pay a bit more to use electricity instead of gas anyway."
Homes that already use old-fashioned electric baseboards or heaters are guaranteed to save monthly costs by switching because it replaces an inefficient electric heating system that uses a lot of energy ("basically like heating your home with a toaster," Chafier said) with heat pumps that use up to 60% less.
But for all of California's reputation as a climate champion, most of its homes don't rely on electric heating. almost two-thirds use natural gaswell above the national average of 51%.
That's not surprising, said Lucas Davis, an energy economist at UC Berkeley.
Looking at 70 years of home heating data across the country, Davis' studies found that the best indicator of whether a household is using electricity to stay cozy in the winter is the cost of energy.
"Where do we see electric heating being most prevalent to date? All over the Southeast," Davis said. "What do we know about the Southeast? Cheap electricity."
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The consequences of expensive electricity extend far beyond any individual household's heat pump ambitions or its utility bill. Using fossil fuels to heat water, heat indoor air and cook food in homes and businesses is responsible for 13% of the nation's greenhouse gas emissions in 2022, according to US Environmental Protection Agency. Gas-powered cars and trucks used for personal use make up another 16%.
Focusing on upfront costs
Heat pumps are a a 19th century invention and began appearing regularly in American homes in the 1960s, but you'd be forgiven for mistaking them for new technology.
Fueled by concerns about climate change and policies designed to address it, heat pumps have outsold gas furnaces every year since 2021. according to the Rocky Mountain Institutea non-profit clean energy research organization. Demand saw a particularly sharp spike after 2022 thanks to the Inflation Reduction Act, the Biden-era law that provided rebates and tax credits to homeowners.
Installation costs can run into the tens of thousands of dollars, which is why most federal and state policies promoting heat pump adoption have focused on covering them. In California, the push goes through multiple agencies:
- The California Energy Commission is tightening building codes that steer new construction toward all-electric homes.
- The Public Utilities Commission sets rate rules and monitors them utility rebate programs.
- Utilities offer discounts and special rate plans.
- State and federal dollars lowered upfront costs, especially for lower-income households.
This year, state lawmakers are considering bills to speeding up the local permitting process for heat pumps and require gas companies to offer homeowners money to electrify their homes instead of replacing an old gas line.
Even as federal support wanes with President Trump's return to the White House, installation costs are "pretty competitively priced with traditional units, especially since in most cases you're installing two units for the price of one," said Madison Vander Kley, a California policy advocate for the Building Decarbonization Coalition, a national nonprofit that represents appliance manufacturers and utilities.
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This may not be the case for all homeowners.
Many homes need new wiring, larger breakers or a complete panel replacement, and some require a grid connection upgrade, said Matthew Friedman of The Utility Reform Network. Costs rise quickly when homeowners electrify more than just heating, he said.
Customers often underestimate how complicated and expensive this electrical work can be, he said, another uncertainty in addition to the potential for long-term interest savings.
Apart from installation costs, monthly electricity costs remain an obstacle.
Last year, the Office of the Legislative Analyst released a report warning that residential electricity prices in California are among the highest in the country — nearly twice the national average — and are rising much faster than inflation.
The report, compiled by LAO analyst Helen Kerstein, warned that these high rates could undermine the state's climate strategy by discouraging households from switching to electric cars and appliances such as heat pumps from gas-fired ones.
"If I'm a consumer, I'm going to think - not just 'is this good for the environment?' That's certainly one consideration, but also "can I afford this thing?" Kerstein said. "Unless people are saving money on operating costs, it's often not clear."
This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.