On running cost alone, a gas furnace beats a heat pump in Tennessee, but not by a landslide. Both cost far less to operate than electric baseboard. The gap narrows or flips when a house has no gas line, needs air conditioning, or already owns a furnace with years left. Equipment and installation prices sit outside this comparison.
The short answer for Tennessee
The figures below come from EIA residential prices, ENERGY STAR efficiencies and EIA energy conversions. They price one million Btu of heat delivered into the house. A gas furnace at 95% AFUE comes to $12.02. A heat pump at 8.1 HSPF2 (seasonal COP about 2.4) comes to $17.12. Electric resistance such as baseboard comes to $40.65. The gas furnace is the cheapest to run here, at $5.10 less per million Btu than the heat pump.
Read that as a running cost on the same unit of heat, nothing more. It is not a yearly bill, because a yearly bill depends on the size, insulation and air leakage of a particular house. It is not the price of the equipment either. A leaky house will multiply every number in the list, and the ranking stays put while the dollar gap widens.
The mechanism is simple. Electricity at 13.87 cents per kWh is an expensive way to make heat directly, which is why baseboard lands so far behind. A heat pump rescues that price by moving heat instead of creating it, delivering roughly 2.4 units of heat for each unit of electricity over a season. Gas needs no such rescue, since a modern furnace turns nearly all of the fuel into heat at a lower price per Btu.
One detail favors the heat pump. The $17.12 figure uses the ENERGY STAR minimum for a ducted system, so a unit rated above that floor runs cheaper than the number shown. If you already have gas service, gas is the cheaper fuel to burn; if you don’t, the heat pump is the cheaper way to heat with electricity, by a wide margin.
What each option costs to run in Tennessee
| System | Efficiency used | Cost per million Btu delivered |
|---|---|---|
| Natural gas furnace | 95% AFUE | $12.02 |
| Heat pump | 8.1 HSPF2 (seasonal COP about 2.4) | $17.12 |
| Electric resistance (baseboard) | 100% efficient | $40.65 |
The electricity price behind the table is 13.87 cents per kWh, the average residential price year to date through July in the U.S. Energy Information Administration’s Electric Power Monthly, Table 5.6.B. It is a statewide average. Your utility and rate plan may land above or below it, so use it to compare fuels, not to predict your bill.
The gas side works the same way. The $12.02 is built from EIA’s average residential natural gas price for the state, converted at about 1,037 Btu per cubic foot. I’m not quoting the underlying gas price here, because what you pay depends on your gas utility’s current rate. Your own gas bill will show it.
Efficiency matters as much as the fuel price because the two multiply. One kWh carries 3,412 Btu, so resistance heat wastes nothing yet still costs the most per Btu. A heat pump’s seasonal COP of about 2.4 means each kWh produces about 2.4 times the heat that baseboard would. A 95% AFUE furnace sends 95% of the gas’s energy into the house. Compare cost per million Btu delivered, not a price per kWh against a price per cubic foot.
The efficiency rating behind the heat pump row deserves a look. ENERGY STAR sets the HSPF2 floor at 8.1 for ducted and packaged systems but 8.5 for non-ducted ones, because a ductless unit has no duct losses and must do better to earn the same label. What HSPF2 Measures, and Why Ductless Asks for More explains the rating in full. Compare the same letter on two spec sheets: HSPF2 measures heating, SEER2 measures cooling.
How cold it gets, and what that does to a heat pump
Nashville, the reference city for these numbers, logs about 3,364 heating degree days a year (base 65°F), according to NOAA’s 1991-2020 climate normals. That figure adds up, day by day, how far the average temperature sat below 65°F. It turns a climate into a fuel bill, since twice the degree days means roughly twice the fuel for the same house.
In the coldest month, the average daily low is 30.1°F, just under freezing. A typical January night is a few degrees below freezing, and an average hides the nights that fall well below it. This is one station, too. A mountain county in the same state can run far colder, so treat the Nashville numbers as the reference city, not a statewide rule.
The $17.12 heat pump figure rests on a seasonal efficiency, an average across a whole winter. On mild days a heat pump performs better than that average. In deep cold its efficiency drops, and the coldest nights are carried by a backup, either electric resistance strips or a furnace. Backup heat is priced like the $40.65 baseboard row (strips) or the $12.02 furnace row (gas), so how often it runs matters.
For Nashville-type winters, the heating season is long enough to matter but mild enough that a heat pump spends much of it in comfortable operating range. That is a different story from a place with a brutal January. How Cold Is Too Cold for a Heat Pump covers what happens when temperatures fall further. Budget for a backup source for the coldest nights, whichever system you choose as the main one.
What homes in Tennessee already heat with
The Energy Information Administration’s 2020 Residential Energy Consumption Survey (RECS) says 52% of Tennessee homes use a furnace as main heating equipment, and 35% use a central heat pump. By fuel, electricity heads the list at 60%, natural gas follows at 35%, and propane sits at 3%. The furnace share is larger than the gas share, which suggests some furnaces run on electricity.
That shapes the choice. A house in the 60% heating mainly with electricity probably has no gas line to plug into, and in that case the comparison that matters is heat pump versus baseboard or electric furnace. Against $40.65 for resistance heat, the heat pump’s $17.12 is the obvious move. Without a gas line, the gas furnace’s $12.02 is a figure you can’t reach unless the utility runs service to the house, and that cost is outside this comparison.
Boilers need a different conversation. The survey does not publish a figure for steam or hot-water boilers, or for fuel oil and kerosene, because those estimates were suppressed as unreliable. That is not the same as zero, and some Tennessee homes certainly have them. A radiator house has no ducts, so a conversion usually means ductless units, which Ductless or Central walks through.
These are state shares from a national survey, not a count of your county. They tell you what builders installed, and so which fuel was cheap and available when the houses went up. They are not a recommendation. Check which fuel and distribution system your house is already set up for before you price anything. More local context is in Heating a Home in Tennessee.
When the other choice wins
A gas furnace wins on running cost, but running cost is only one input. The first exception is the obvious one: no gas service. If the nearest main doesn’t reach the house, or the utility’s connection terms don’t make sense, the heat pump is the cheaper running option available.
The second is cooling. Nashville records about 1,873 cooling degree days a year, a sizable summer load. A heat pump handles heating and cooling with one machine, while a gas furnace heats only and still needs a separate air conditioner. A house that needs a new air conditioner anyway can fold both jobs into one purchase. Air conditioning need can tip the choice toward a heat pump even though gas is cheaper to run.
Dual-fuel setups split the difference. A heat pump runs through the mild stretches, when its seasonal efficiency is at its best, and a gas furnace takes over on the coldest nights. It keeps both machines in the house, so it costs more to install, but it pairs each fuel with the conditions where it is cheapest to run.
The last exception is an old system with life in it. A furnace that still works and still passes inspection doesn’t owe you a replacement, and a $5.10 difference per million Btu doesn’t justify scrapping it early. The repair-versus-replace question has its own math, laid out in Repairing a Furnace or Replacing It.
Common questions
Is a gas furnace always cheaper to run than a heat pump in Tennessee?
Not always. At average state prices the gas furnace costs $12.02 per million Btu against $17.12 for a heat pump at the ENERGY STAR minimum. A better-rated heat pump runs cheaper than that figure, and local rates can differ from the statewide average.
Is a heat pump cheaper than electric baseboard?
Yes, by a wide margin. Baseboard comes to $40.65 per million Btu, and the heat pump comes to $17.12 at the same prices.
Does a heat pump still work on the coldest Tennessee nights?
It works, but less efficiently. The seasonal figure is an average, and in deep cold the efficiency drops while backup heat covers the gap. In Nashville the coldest month averages a low of 30.1°F, and colder spots exist in the mountains.
Does a ductless heat pump need a higher rating than a ducted one?
For the ENERGY STAR label, yes: 8.5 HSPF2 for non-ducted systems and 8.1 HSPF2 for ducted ones. The ductless unit has no duct losses, so the label asks it to perform better.