High-Efficiency Furnaces: How Much Will They Actually Save You?

cat on radiator

January 10, 2018


On paper, high-efficiency furnaces seem like a good investment both in terms of energy bills and the environment. Still, there are a few things to consider before committing to a furnace upgrade. First of all, high-efficiency furnaces can have a higher price tag than standard models. The higher cost can lead homeowners to either opt for a less efficient (but cheaper) replacement or to stay with their older furnace for a few more years.

Ultimately, a furnace replacement is not a simple decision. Here is what you should be thinking about before deciding to buy and install a high-efficiency furnace.

What are the Current Options?

In general, efficiency standards for appliances have improved in recent years. Furnace efficiency is measured in AFUE (annual fuel utilization efficiency), which determines how efficient the appliance is in converting fuel to heat.

Furnaces that are a couple of decades old have an AFUE rating of around 60 percent – meaning that 60 percent of the fuel becomes heat, and 40 is lost. Many older models lose heat because of their pilot lights and the way exhaust gas is released up a chimney. Since the pilot light is always on, the furnace is burning energy without heating the home. Also, they do not have the heat exchangers found on newer models that can capture and reuse some heat from the exhaust.

Currently, the U.S. Department of Energy (DOE) requires new furnaces to have a minimum AFUE of 80 percent. Therefore, even a basic new furnace will beat most older models in terms of efficiency. Most of these “mid-efficiency” furnaces are set up in a way that is similar to older furnaces, but they possess certain traits – dual heat exchangers (which draw in surrounding warm air to lower reliance on the pilot light) and variable speed blowers – that increase efficiency to meet the 80 percent threshold.

High-efficiency furnaces feature impressive AFUE numbers, ranging from 90 to 98.5 percent. These ratings are achieved with electric or hot surface igniters, meaning they do not rely on a pilot light. They also have state-of-the-art heat exchangers that draw warmth from the exhaust. Together, these traits only allow the most efficient models to lose 1.5 percent of their energy during the heating process. 

What About Energy Star Furnaces?

Energy Star certification for gas-powered furnaces varies from region to region. In the southern half of the U.S., Energy Star models can be 10 to 12 percent more efficient than baseline models. However, to receive the Energy Star label in the northern half of the Lower 48, furnaces must be a minimum of 15 percent more efficient than the 80 percent AFUE baseline.

This highlights a crucial point for anyone considering a new furnace: the more you have to rely on your furnace, the more important efficiency is. If the furnace is operating heavily for four months of the year and occasionally for seven or eight months of the year, then homeowners have more time to benefit from the energy efficiency. This also means that the time to recoup costs will be lower for a furnace in a cold climate than for a similar furnace in a warmer climate.

All Energy Star certified furnaces in the U.S. have an AFUE of more than 90 percent, so they are all considered “high efficiency.” In the South, the minimum qualifying AFUE is 90 percent. In the North, it is 95 percent. Furthermore, in order to be certified, these furnaces must minimize air leakage and have a state-of-the-art adjustable speed fan with a magnet motor. When shopping around, be sure that you are looking at furnaces certified for your region.

How Much Can a New Furnace Save?

Since the AFUE is in percentage form, it is easy to estimate savings. The cost of natural gas will fluctuate from year to year, the weather will change, and different variables within the home can affect overall furnace performance. However, homeowners should be able to get a ballpark estimate for future savings with a simple calculation.

Heating costs will differ depending on the season, so the best strategy is to review monthly bills of the most recent 12 months. Add the cost of heating for all 12 months together. 

Next, subtract the average AFUE for your current furnace from the high-efficiency furnace you would like to buy. (Use the standard 90 to 95 percent Energy Star minimums as a default if needed.) Next, multiply the resulting percentage by the total cost over the 12-month period. The answer will be the expected annual savings brought on by the upgrade.

Other Efficiency Improvements

The DOE also recommends other efficiency improvements that can lower heating and cooling costs. For example, sealing air leaks and placing weatherstripping around doors can lower costs by 10 to 20 percent for the average household. The DOE also recommends turning the thermostat back by 7° to 10°F every day (that means turning it cooler in the winter and warmer in the summer) for at least eight hours. This could save an additional 10 percent on heating and cooling costs each month.

Finally, regardless of how well the furnace performs, heat can leak out of improperly insulated ductwork. Homeowners can wrap insulation around exposed ductwork to increase efficiency by an additional 10 percent. 

Efficiency improvements demonstrate that you do not necessarily have to replace your major appliances to lower your monthly energy bills. However, homeowners who do invest in high-efficiency furnaces will still be saving money compared to older furnaces regardless of what other efficiency improvements they make. By controlling the thermostat, decreasing air leakage, improving ductwork, and installing a high-efficiency furnace, homeowners could potentially cut their heating costs in half.

How Do I Pay for my New Furnace?

The biggest drawback to high-efficiency furnaces is their upfront cost. PACE, which stands for property assessed clean energy financing, helps cover the upfront costs associated with efficiency improvements. Since the best furnaces offer an efficiency improvement of 30 to 38.5 percent compared to older furnaces, there is a good chance that a furnace upgrade qualifies for PACE financing.

PACE programs help homeowners make energy-saving improvements to their homes for no upfront costs. Instead, the amount financed is paid back over time, through an addition to your annual property tax bill.

If you rely on your furnace heavily during the wintertime, then you may benefit from upgrading to an ultra-efficient model. Setting your thermostat according to the recommendations, while sealing any major air leaks can help you maximize energy savings.