What’s the best option? It depends…

If you’re trying to save energy, understanding the most efficient home heating options is a great start. Households in temperate climates spend a hefty share of their energy budget on keeping their homes warm.

If you are serious about overhauling your current heating system, or building a new home with the most efficient home heating possible, you should start by understanding what different kinds of heating systems are available.

What are the most efficient home heating options?

The most efficient home heating option is to make sure your home is as well insulated and air-sealed as possible to prevent heat escape, and to use as efficient, cheap, or low-carbon a source of energy as possible. Let’s assume you already know how important proper sealing and insulation is, and that you’re going to take care of that no matter what. What are the most efficient home heating choices, in terms of new systems you can install?

Here are the main choices, from most efficient home heating system, to least efficient:

  1. Solar heating
  2. Geothermal heating
  3. Wood heating
  4. Heat pump (non-geothermal)
  5. Natural gas heating
  6. Oil heating
  7. Electric heating

Note that when we talk about the most efficient home heating choices, we could be talking about efficiency from the point of view of financial cost, environmental cost (greenhouse gas emissions plus other pollutants), or the efficiency of conversion of the original energy source into heat inside your home.

For financial cost we can consider lifetime costs (installation plus yearly energy costs) or just installation or yearly costs.

For energy conversion efficiency (what most people are really interested in when asking about the most efficient home heating system), we can start from the assumption that solar is free, and geothermal is almost free, since up to 4 times as much heat energy is extracted from the ground as the energy in the electricity that pumps the heat out.

Here again are the heat sources above; this time I’ve reordered them, for each of these three categories, from most efficient home heating source to least efficient. Note that this ordering is not completely scientific – it’s a mixture of research I’ve done, calculations based on energy output of different fuels, and my own opinion.


Financial cost (install and operate) Environmental cost Conversion efficiency
Solar Solar Solar
Natural gas Geothermal Geothermal
Wood Wood Heat pump
Heat pump Heat pump Natural gas
Oil Natural gas Oil
Geothermal Oil Wood
Electric Electric Electric

Solar heating is the most efficient home heating system on all three criteria, and electric is the least efficient and least affordable. If you want to know why electric heating is so inefficient and expensive, or how to save on electric heating, see my Energy efficient electric heaters page.

Solar heating is ranked as the cheapest in terms of installation plus operation because you don’t actually have to buy any specialized equipment, you just need a home designed and built to take advantage of sunlight’s ability to be converted into heat once it passes through closed, sun-facing windows, a home that will hold that heat inside through proper sealing and insulation.

Once the system is set up, there are no operating costs – the energy is free, except at times when lack of sunlight and very cold temperatures require you to supplement with some other source of heat. But I know several people whose homes are heated almost entirely with solar power, and the homes didn’t cost any more to build than a conventional home, they just look different. Solar really is the most efficient home heating option all around – if you can find a way to make it work for you.

Note that you can build features of solar heating into your home regardless of heating system type.


Geothermal is the next most efficient home heating source in terms of its environmental costs, because the energy used to heat your home is actually extracted from the ground. (Geo means earth, and thermal means heat.)

A geothermal system uses the same kind of compressor/evaporator system that extracts heat from a refrigerator. It does use some electricity, which may have been produced by burning coal or other fossil fuels, but even so geothermal will release far fewer greenhouse gases or other pollutants than heating with natural gas, oil, or electric heat.

Geothermal heating systems can be a great way to save on both heating and cooling costs – but the installation cost can be prohibitive, especially if you live in a densely packed neighborhood like mine, where the only option is to drill a geothermal bore hundreds of feet straight down! A few years back I was quoted $35,000 for installation of a system for my 1,300 square foot city home. Check out my Energy saving geothermal page for more information on geothermal heating and cooling.

Wood heat can be very low-cost if you have access to free firewood, or if you cut your own from your woodlot. And burning wood is kind of carbon neutral. After all you’re not releasing CO2 from millions of years ago. On the other hand, if everyone switched to wood, we’d have to chop down all our forests to heat our homes, and the end result would be a lot more CO2 in the air. So wood only works from a carbon neutral perspective if harvested sustainably.

Also, wood heat is only energy-efficient if you have an energy efficient woodstove, wood pellet woodstove, or fireplace insert, and it is only environmentally benign if your woodstove or insert burns cleanly. If you try to heat your house with an open fireplace, there’s a good chance you’ll actually make it colder rather than warme, because the open fireplace combined with heat from the fire will pull a lot of air from inside your house up the chimney, because hot air rises. That in turn will pull cool air in through leaks in your windows, doors, and exterior walls.

Even if you don’t use your fireplace to heat your house, there’s a good chance that if you have one, it is a net energy drain on your home energy bill. Fireplaces typically have a flue damper, which should be closed except when a fire is burning. Make sure you have one, and if you do, keep it closed. Otherwise, hot air from inside, given its tendency to rise, will flow straight up the chimney even without a fire burning.


In fact, even fireplace chimneys that do have a flue damper often do not prevent hot air from escaping, because just a few really hot fires burned over the lifetime of the chimney can cause the metal of the damper to warp, preventing it from giving a good seal. If you wet your finger and hold it by the fireplace, and feel a draft pulling air into the chimney flue, or you feel cold air falling out of your fireplace in winter, your flue damper is probably not providing a good seal. You can solve this problem with a draft stop plug balloon, which you push up the chimney from the fireplace until just below the damper; you then inflate it. It can be easily removed as well, and reused later. It provides a proper seal and may significantly cut your heating bills.

We should add other biofuels to the wood category. Some people, especially farmers, heat their homes with corn kernels in pellet stoves. But while this might seem energy efficient – after all, the corn came from the sun – you have to factor in the fossil fuels that were used in the production of that corn. And unless that corn was grown using only organic fertilizers, and the disc and plough and planter and harvester were all pulled by horses or oxen, there were fossil fuels involved in the production of that corn. Just to grow and harvest a bushel of corn takes between a third and a half gallon of fossil fuels. Of course, there is probably more heat in that there bushel of corn than in a half gallon of Number 2 heating oil, but the corn story suddenly isn’t as compelling.

Heat pumps (ones that extract heat from the outside air, not geothermal heat pumps) are a special case: their energy efficiency depends on how cold the climate is. In a very moderate climate they can be very efficient at converting a given amount of the energy source, electricity, into a given amount of heat (but still not as effective as energy saving geothermal heat. In a climate with very cold winters, their efficiency will be considerably lower. For the table above I’m assuming a moderate climate, where winter temperatures don’t usually drop below -5C or 23F.

Natural gas has traditionally been the cheapest conventional heating fuel – substantially cheaper than electricity, and often cheaper than home heating oil, although fluctuating prices for both commodities can put oil prices lower than natural gas for several months or years at a time.

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Oil is falling in popularity because of the need for a storage tank, the environmental and health risks of having a storage tank, the unpleasant odors that often come from an oil furnace or oil tank, and the fact that some home insurers will not insure a house that has an oil tank (even one that is no longer in use) when the house changes owners. Oil based heating systems have the added inconvenience that you have to remember to fill up the tank.

In terms of cost per unit of heat, comparisons are difficult. Heating oil prices are more directly tied to the price of crude oil, so that spikes and dips in the price of crude oil can make oil seem much more expensive than natural gas, or a better deal, depending on the whims of the market. As of October 10, 2008, using prices in terms of BTU output (British Thermal Units, a measurement of heat energy), here’s how heating oil and natural gas compare in terms of commodity exchange markets:

  • One gallon of heating oil produces 138,500 BTU. A barrel consists of 42 U.S. gallons, and costs $86.50, so a gallon costs $2.06. 138,500 BTU for $2.06 means 67,000 BTU per dollar.
  • Natural gas is sold in units of 1,000,000 BTU at a current cost of $6.58, which is 151,975 BTU per dollar.

This suggests that natural gas should provide more than twice as much heating power per dollar as oil, at wholesale prices. Retail prices are quite different due to the different distribution costs, taxes, and retailer markups for natural gas and heating oil.

As for the question of which is the most energy efficient home heating system between natural gas and oil, the two systems are pretty close at the high end – there are systems that convert up to 96% of the heat available in natural gas, and 94% of the heat available in heating oil, into heat for your home. But there are far more natural gas furnaces in the 92-95% efficiency range than oil furnaces, where only a handful in the ENERGY STAR list go over 86%.

In terms of CO2 emissions per BTU, natural gas and number 2 heating oil are very comparable – per BTU of heat output you’ll get about the same CO2 emissions. Still, the case for natural gas looks pretty compelling in the short term.

Electric is almost always the most expensive heating choice, except in areas where electricity rates are artificially subsidized.

Electricity produced from heat involves the production of steam, then the conversion of that steam to mechanical work moving a turbine, then conversion of that motion to electricity in a generator. Steam can be produced by burning coal, natural gas, oil, other fossil fuels, or biofuels, or by nuclear, solar, or geothermal energy. But the maximum efficiency of conversion of the original heat energy into electricity has a hard limit, at around 40% (a few designs can theoretically reach 48% but few actual such systems exist). So if the original energy source is heat, you are probably losing around 60% of the energy to waste heat at the power plant. 3-6% of what’s left disappears as transmission losses on its way from the power plant to your home, so you could be left with as little as 37% of the original heat energy available to heat your home.

Unless you have an unlimited source of renewable electric power that no one else can use, heating with electric heat is going to be both expensive and environmentally wasteful. But if that’s what you’re stuck with, there are still options – see my Energy efficient electric heaters for the full details.

Heat distribution systems

We also need to consider the energy efficiency of different heat distributions such as:

  • Forced air
  • Hot water or steam rads
  • Single heat source with natural airflow
  • Radiant floor heating
  • Individual room heating

To a considerable extent, the type of heat distribution is dependent on the heating source involved:


Distribution type Typical heat sources
Forced air Natural gas, oil, geothermal, heat pump
Radiators Natural gas, oil, geothermal
Natural airflow Solar, wood stove
Radiant floor heating Natural gas, oil, electric, geothermal
Individual room heating Electric, passive solar



Forced air: This is the preferred heat distribution system by most North Americans. Forced air does tend to distribute heat more evenly and quickly around a room than radiator heat, so may be more efficient for homes where a programmable thermostat is used. You can even obtain individual room control for forced air heating systems using a programmable heating register. These battery-powered heating registers, available in sizes to fit most heating registers, can be programmed to open or close at specific times, so that you can shut off the heat (or air conditioning) to particular rooms at certain times. For instance, if you need a warm living area during the evening but only use the home office during the day, you could program the home office vent to shut off at 6pm and come back on at 8am.

Radiators: Radiators are common in older homes but many people with allergies or dust sensitivity are also moving from forced air to radiator (or radiant floor) heating because radiators operate without stirring up dust or allergens. Radiators do not distribute heat as quickly as forced air. Another possible drawback of radiator systems is the noise from the water circulation pump, if the water does not flow by convection. Steam-filled radiators found in some older homes, such as the one I lived in for three years in Ohio, can be extremely noisy as well as letting off steam into the house every so often.

Natural airflow: This isn’t so much a heat distribution system as a challenge to overcome when there is no heat distribution system. How do you get the heat from your living room woodstove or the spread of south-facing windows to the rest of the house? There are several solutions: increased use of ceiling fans; running your forced air system on fan-only (if you have one); for woodstoves, using the woodstove fan. The other solution to restricted natural airflow is opening up the home interior more. If you produce some of your heat with a wood stove or pellet stove or solar heat, removing interior walls can help distribute that heat more evenly.

Radiant floor heating is a more energy efficient way to distribute heat than forced air or radiators, because heat rises slowly from the floor rather than being blown straight up from a heating vent.

Individual room heating, which is usually accomplished using energy efficient electric heaters, can be more energy efficient if the amount of energy you save by restricting energy to certain rooms makes up for any added expense of the individual-room energy source. Many people argue that you can cut your heating bills by heating individual rooms with electric heaters, and turning the central heat down or off. While this will save you energy in terms of total heat emitted in your home, it will almost certainly cost you more if your central home heating is done with any source other than electricity, because electric heating is so much more expensive.

You’re stuck with what you’re stuck with

In real life, few of us have the luxury of being able to choose between seven different types of heating systems. We have to choose the most efficient home heating system for the house we already have, which usually means upgrading our current system to a similar but more efficient system, or supplementing a less efficient system with the most efficient home heating system we can afford (like installing a fireplace insert).

If upgrading to the most efficient home heating system is an option you’re still considering, remember:

  • Factor in the total cost of ownership of each choice – not just the installation cost, but the maintenance cost of the equipment, plus the energy cost of the heating for the next twenty years. And remember Rule number 1: that energy prices keep rising faster than we expect, even when we factor in Rule number 1!
  • When people do payback calculations, to figure out how many years it will take for the energy savings of a purchase to cover the cost of the purchase, they are usually too conservative. They typically overestimate the up-front costs, and under-estimate the energy costs. So payback periods on the most efficient home heating systems are typically shorter than payback estimates.
  • No matter what type of system you buy, your habits after the system is installed can have as big an impact on energy savings as the energy efficiency rating of the heating system
    itself.

Just one example: In 1997 I upgraded my oil furnace to a 94% efficient natural gas furnace, the most efficient home heating system I could find that worked for my house. It cost me something like $4,300 to install – which was a ton of money back then. I did a payback analysis and found that the 83% efficient furnace, at only $2,800, would have had a shorter payback period. But I had other reasons to go for the most efficient. And in the long run, my incorrect choice proved to be the better one – because natural gas prices have risen more than I, or most other people, could have predicted. The payback on my decision to purchase the most efficient home heating system I could find was probably only four or five years – not the twelve I had originally predicted.

If you do decide you need a new furnace, my advice is: go with the lowest capacity, highest efficiency furnace you can find. Energy efficient HVAC design starts with an assessment of your heating needs. If you have a smaller house and don’t mind it taking a little longer for the heat to come up to your comfort level, you’re better off buying the lower BTU model, to save money up front, but the higher efficiency model, to cut costs down the line.

There are even solar heating tips you can use in a more conventional home – like opening the window coverings in southern-exposure rooms in the morning, and shutting them in the evening, or planting deciduous trees on the side of your house that gets the most sunlight (usually south in the northern hemisphere). The leaves provide cooling shade in the summer, and fall off in the winter to let in the sun!

Higher end options for home heating include the zero energy home, which produces as much energy as it consumes. They are building zero-energy homes all over Germany now, homes that heat themselves entirely through passive solar.

Choosing the most efficient home heating system

Once you have decided what types of heating systems you’re able or willing to chose from, you’ll need to find out where to find the most efficient home heating equipment for your heating source.

For oil and natural gas heating systems, see the US-based ENERGY STAR or Canadian-based Office of Energy Efficiency websites. On the ENERGY STAR site you can find spreadsheets listing all ENERGY STAR qualified manufacturers of oil or natural gas systems, which can help you narrow down your search to manufacturers and models that meet your efficiency criteria. From there you can contact the prospective manufacturers, by phone, email, or by checking out their website, so that you can find contact information for the local authorized vendors of their products. Then call the authorized vendors and ask for a quote.

This process is described in considerable detail in my Energy saving air conditioners page, in the section Hire the right HVAC contractor – when buying a new unit.

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