Homes and buildings generate about 58 per cent of the greenhouse gas emissions in Toronto today, mainly from the burning of fossil fuels (primarily natural gas) for heating and hot water. Heat pumps are much more efficient and greener alternative to traditional heating systems. While some heat pumps can replace your furnace and air-conditioner, it is best to speak to your HVAC contractors and/or Energy Advisor first.

Heat pumps are:

  • Cleaner: Heat pumps generate far fewer greenhouse gas emissions than natural gas furnaces because electricity is a cleaner fuel in Ontario.
  • Efficient: In some cases, heat pumps can provide more than three times the heating energy output for the same energy consumption compared to furnaces and boilers.
  • Cost-effective: Due to carbon pricing, natural gas rates will continue to rise. With a heat pump, you’ll benefit from new electricity pricing structures, including expected reductions in some time-of-use rates. There are also many grants and incentives available to help with installation costs.
  • Trusted: More than 180 million are in use worldwide. As the climate crisis escalates and natural gas rates rise, heat pumps will become an even more important part of the climate solution.


In the summer, a heat pump acts like an air conditioner by extracting heat from the air inside your home. In the winter, the heat pump works in reverse to provide heating. A heat pump works the same as an air-conditioner or refrigerator, they’ve just been enhanced to allow for heating.

Both air-conditioners and heat pumps have:

  • a condenser, which rejects heat
  • an evaporator, which absorbs heat
  • a compressor, which increases the temperature

Unlike an air-conditioner, a heat pump also has a reversing valve that allows it to pump heat in either direction (into the home or out of the home) to provide heating as well as cooling.

For more information on how heat pumps work to cool and heat your home, visit Natural Resources Canada’s webpage.

Heat pumps are typically air-source or ground-source and there are a range of options.

Type Description
Centrally-ducted air-source heat pumps This type connects to the ductwork in a home in the same way as a furnace and central air-conditioner and they look similar to a furnace and air-conditioner. They normally have a back-up heating source, such as an electric resistance heating coil installed as a package with the heat pump. With a hybrid air-source heat pump system, a traditional furnace is used as a back up.

Image of air-source heat pump at exterior of building.
Air-source heat pumps look very similar to traditional air-conditioner units.
Ductless air-source heat pumps Ductless heat pumps are used when there is no existing ductwork inside the home. The indoor unit can be mounted to the wall, floor, or in the ceiling. Mini-split systems have one outdoor unit connected to one indoor unit. Each unit heats and cools one room or zone of a home. Multi-split systems have multiple indoor units connected to a single outdoor unit, which together provide heating or cooling for the entire house.

Images of ductless air-source heat pumps in the exterior and interior of a home.
This is a ductless multi-split air-source heat pump system. Refrigerant lines are run on the exterior of the building (top) and connect to wall-mounted ductless indoor fan coils (bottom).
Cold-climate air-source heat pumps These work in extreme cold conditions. They can be centrally-ducted, ductless, or even be used in hybrid systems, which include a traditional furnace. Conventional air-source heat pumps (i.e. not cold-climate ones) must revert to a back-up heating option when outdoor temperatures go below -15 degrees Celsius.
Hybrid systems: Air-source plus a furnace Hybrid systems are sometimes referred to as dual-fuel systems, and utilize both a traditional furnace and an air-source heat pump. The heat pump replaces the home’s air-conditioner and also provides most of the heating. Refer to the next section for more information.
Air-to-water heat pumps This type of heat pump heats water rather than the air inside a home. They can be used in homes that have radiant heating systems.

In a hybrid system, a heat pump is the main source of heat, with a furnace providing supplemental heat, if needed, during periods of extreme cold. Generally, the heat pump operates above a certain outdoor temperature. Once the outdoor temperature falls below, the system switches over to the traditional furnace.

Hybrid systems can be lower cost than all-electric (no traditional furnace) options because the heat pump does not need to operate in extreme cold nor does it need to meet the full heating requirements of the home. This means the heat pump can be relatively smaller and simpler – and as a result, it can also be a higher-end model.

Setting the switch-over temperature to as low as possible will maximize carbon reductions because the home will be heated with the heat pump for a greater portion of time. Lower switch-over temperatures are possible with larger heat pumps and larger heat pumps are generally better from a carbon reduction perspective.

Estimated gas savings for various switch-over temperatures
Switchover Temperature -8°C -6°C -4°C -2°C 0°C 2°C
Reductions in Natural Gas Use 84% 77% 69% 59% 47% 33%

A large portion of the annual heating requirements for a home occur at milder outdoor temperatures. This is why the hybrid approach can result in major natural gas savings and carbon reductions.

Smart control is another way to coordinate the heat pump and furnace in a hybrid system. A smart controller can connect to the web and choose to operate either the heat pump or the furnace based on whatever costs less at any point in time. This approach can generate some of the lowest energy bills.

For example, if Ontario moves forward with ultra-low nighttime electricity rates, a system that uses smart control to prioritize off-peak heat pump operation, this could result in hundreds of dollars of annual savings.

Planning for a Heat Pump

Most people will consider a heat pump when their furnace and/or air-conditioner is approaching end-of-life, but you should have a plan before your furnace or air conditioner breaks down. Steps you can take now to be ready for a heat pump installation in the future include:

  • Book a home energy assessment with a certified home energy auditor. This process will identify key actions you can take now to make your home more energy efficient before determining the size of your heat pump.
  • Learn about the types of heat pumps and decide which type would be best for your home. If a heat pump will be required soon, start selecting a contractor and get the conversation going.
  • If you plan to transition to a cold-climate heat pump system (which doesn’t use a traditional backup furnace), you may need to upgrade your home’s electrical service to 200 amps. This can be done before the heat pump installation and should be discussed with an installing contractor.

Key Considerations

Your home’s existing heating and cooling system (furnace, boiler, electric baseboards, etc.)

If there is no existing central ducting in the home, then a ductless air-source heat pump should generally be considered. If there is central ducting, then a central air-source heat pump, ground-source (geoexchange) system, or hybrid system is possible. However, the existing ductwork may constrain heat pump sizing. This must be evaluated by a qualified installer.

If there is an existing hydronic system (a boiler with radiators and/or radiant in-floor) then geoexchange or air-to-water heat pumps may be possible, as would a ductless air-source heat pump system. However, replacing a boiler system with a heat pump can be more complex because the temperatures provided by heat pumps are lower than the temperatures from a boiler.

This is generally not an issue with radiant in-floor systems, but can present an issue for existing radiators. Radiators may need to be upgraded to low-temperature versions. A multi-split ductless system may be a good heat pump option in this scenario but in older homes there can be hot-spotting and cold-spotting issues that need to be addressed. The ideal solution will vary with different homes.

The age of the existing heating system and existing air-conditioner (if present)

It is most cost-effective to replace a heating and cooling system when it is near its end-of-life. If you have a newer furnace and older air-conditioner, then a hybrid system can be considered. In a hybrid system, an air-source heat pump would replace the air-conditioner and be used with the existing furnace for heating. The heat pump would provide all the cooling and much of the heating in mild temperatures. Learn more about hybrid systems in the ‘Types of Heat Pumps’ section.

Your budget

Hybrid heat pump systems are the lowest cost, followed by all electric (cold climate) systems. Ground-source (geoexchange) heat pumps have the largest upfront cost. Some heat pumps are eligible for the Canada Greener Homes Grant, as well as incentives and low-interest financing through the City of Toronto’s Home Energy Loan Program.

Heat pumps are much more efficient than traditional furnaces. In the context of low- or no-interest loans, net monthly costs can be low and the total cost of ownership for a heat pump can be near that of traditional furnaces, or in some cases, lower.


Heating and cooling systems with the highest efficiency and that use the least amount of natural gas are the most environmentally friendly. Ground-source (geoexchange) heat pumps have the highest efficiencies and lowest electrical demand requirements. Premium high-performance air-source heat pumps are not far behind ground-source (geoexchange) in terms of efficiency. Hybrid systems can use high-efficiency or low-efficiency air-source heat pumps and they leave a natural gas option in place, but they can still generate substantial natural gas savings for a low upfront cost.

A heat pump must be sized correctly for your home. Natural Resources Canada has developed a toolkit to help installers size and select air-source heat pumps.

While the upfront costs of a heat pump are greater than traditional heating options, there are various sources of savings that can offset these costs, including government programs such as grants, rebates, carbon pricing, incentives and low-interest loans. Similar to electric vehicles, it useful to consider the total cost of ownership. Read this example case study showing a total cost of ownership calculation for a central cold-climate air-source heat pump.

Estimated upfront costs are provided below as a general reference point. For more accurate costing, homeowners are encouraged to get multiple quotes from qualified system installers in their area. Upfront costs will vary with the heat pump brand as well as the warranty, features, efficiency and heating capacity of the heat pump. It will also vary with installation-specific factors of different homes.

Note that the costs provided below do not include upgrades to ductwork that may sometimes be required. The costs also do not include upgrades of the electrical service of a home. Especially when systems are installed with full electric resistance back-up, an electrical service upgrade to 200A may be required and may cost an additional $3,500 to $5,000.

Type Costs
Ductless split air-source heat pumps Installed costs for a ductless mini-split air-source heat pump may range from $4,000 to $6,000 (pre-tax). However, a mini-split can only heat or cool one room or zone within a home. Multi-split systems may be able to heat or cool a whole home and may have a similar cost to an equivalent number of mini-splits. Ductless systems meeting eligibility criteria may qualify for up to $2,500 through the City’s Home Energy Loan Program incentives and/or rebates between $2,500 and $5,000 from the Canada Greener Homes Grant. Note that all qualifying systems must have multiple indoor heads or warm air supply outlets.
Centrally-ducted air-source heat pumps (all-electric) A centrally-ducted air-source heat pump system that qualifies for the Canada Greener Homes Grant may cost from $14,500 to $22,000 (pre-tax and pre-rebate) installed. At the lower end of that spectrum are smaller systems (i.e. 2-ton and lower). The higher end of the spectrum includes larger systems. Centrally-ducted systems may qualify for a rebate of either $4,000 or $5,000 from the Canada Greener Homes Grant and/or up to $2,500 through the City’s Home Energy Loan Program incentives.
Hybrid: Air-source heat pump plus a furnace For most homes, replacing an old central air-conditioner with a single-stage air-source heat pump may cost around $4,000 to $6,000 (pre-tax) installed. This may represent an additional cost of $1,000 to $3,000 over the cost of replacing an old air-conditioner with another traditional air-conditioner. Note that the Canada Greener Homes Grant and the City’s Home Energy Loan Program do not currently offer incentives or rebates for heat pumps used with existing furnaces.

A new furnace and new air-source heat pump that meets the eligibility criteria of the Canada Greener Homes Grant may cost $14,500 (pre-tax and pre-rebate) or more. A rebate of $4,000 or $5,000 may be received for these systems.

It is also possible to purchase a new furnace and new air-source heat pump that does not meet the eligibility requirements of the Canada Greener Homes Grant. In this category of equipment, a new furnace and new air-source heat pump (single- or two-stage) may cost $8,000 to $12,000 (pre-tax). Again, this may represent an additional cost of $1,000 to $3,000 versus a like-for-like replacement of a furnace-A/C system. See “Key Terms” for a description of single-stage and two-stage heat pump options.

Ground-source (Geoexchange) The last largescale market analysis for geoexchange in Canada was conducted in 2011. Based on that analysis, a homeowner might expect that a new closed vertical loop geoexchange system for an existing single-family home could cost on the scale of $30,000 for a single-home retrofit in a Toronto neighbourhood (assuming a system size of 3.5 to 4.0 tons). Utility-ownership of the geoexchange system may help to eliminate the upfront cost for homeowners in exchange for a more manageable monthly fee. Ground-source (geoexchange) heat pumps have the highest efficiencies and lowest electrical demand requirements. Systems meeting the eligibility criteria of the Canada Greener Homes Grant may receive a rebate of $3,000 or $5,000.

An electric heat pump will reduce or eliminate the use of a traditional home heating fuel, but it will also increase electricity consumption. The net utility bill savings of heat pump depends on:

  • Fuel that the heat pump is replacing: When offsetting propane, oil, or electric resistance heating, heat pumps should generally have a substantial annual utility costs savings for heating. When offsetting natural gas, there can be anywhere from a small increase to large decrease depending on the other factors listed below.
  • Utility rates: From 2022 to 2030, the carbon pricing schedule from the Federal Government could result in natural gas rate increase on the scale of 50 per cent. Carbon pricing is generally expected to make most heat pump systems (hybrid or all-electric) a lower cost option than traditional furnace-A/C relatively soon. At the same time, Ontario is currently considering an ultra-low nighttime electricity rate to be implemented by 2023. This may have significant beneficial impacts for all types of electric heat pump.
  • Heat pump efficiency: Higher efficiencies result in greater utility bill savings. Ground-source (geoexchange) has the greatest efficiencies and will produce the greatest savings. High-performance air-source heat pumps are not far behind. Hybrid systems typically avoid operating the heat pump during cold outdoor temperatures (when efficiency is low) and this helps achieve annual cost savings.
  • Control approach (only for hybrid systems): There are different ways to automatically coordinate the heat pump and furnace within a hybrid system, including approaches that optimize for lowest cost operation. For more information, see the “Types of Heat Pumps” section.

It is also important to understand that the utility bill is not the only source of savings. Homeowners may be able to reduce their property insurance by making the switch to a heat pump. No- or low-interest financing available for heat pumps will reduce the cost of financing compared to traditional equipment and rebates can reduce the upfront costs. Homeowners disconnecting from gas entirely can also save the fixed customer charge paid to the gas utility. Currently (2022), it is approximately $25 per month or $300 per year. Given the variety of factors influencing savings, it is helpful to look at case studies of actual retrofits. Please see the “Case Studies” section for more information.

Low-interest financing and incentives to help homeowners install heat pumps and other home energy improvement measures are available.

See a full list of energy efficiency grants & incentives for homeowners.

Case Studies

The City of Toronto is supporting the development of heat pump case studies documenting installations around the city prepared by The Sustainable Technologies Evaluation Program (STEP) of the Toronto and Region Conservation Authority (TRCA).

Case studies show the equipment installation costs, homeowner experience, utility savings and other helpful information.

Key Terms


The capacity of a heat pump describes its heating or cooling output. The heat pump’s rated capacity is also referred to as its size. It may be given in units of kilowatt (kW) or BTU/hour (sometimes just referred to as BTUs). The required heating and cooling capacity for a home will vary with its size, amount of insulation and air-tightness.

Coefficient of Performance (COP)

The COP describes the efficiency of the heat pump. It is the heat energy output divided by the energy it consumes. For example, a heat pump COP of 3 means that 3 units of heat energy are provided for every 1 unit of energy used to power it. A high-efficiency furnace can be thought of as having a COP near 0.95. COP changes with the outdoor air (or ground) temperature and is highest in warmer conditions.

Heating Season Performance Factor (HSPF)

The HSPF considers several factors to estimate the average efficiency of an air-source heat pump over a heating season. Heat pumps with an HSPF that has been independently determined by a third-party will have a seal that says “AHRI Certified” on the manufacturer information sheets. The HSPF may be near 8.0 on the low-end, to more than 11.0 on the high-end. A greater HSPF will mean lower electricity consumption (and utility bills).

Energy Efficiency Ratio (EER)

The EER describes the cooling efficiency of an air-conditioner in hot outdoor conditions. This contrasts with the SEER which provides an estimated average cooling efficiency over the course of a summer.

Seasonal Energy Efficiency Ratio (SEER)

The SEER is the estimated average cooling efficiency over the course of the summer. For an air-source heat pump, it may be near 13 on the low end to more than 18 on the high end. Higher SEER means lower electricity consumption for cooling.

Variable capacity, inverter-driven, single-stage, two-stage

These terms all describe the ability of a heat pump to adjust its heating output. A single-stage heat pump is either fully on or fully off. A two-stage heat pump has a high and a low setting. This is often better to promote even heating and to prevent heat pumps from being oversized for cooling. Inverter-driven variable capacity heat pumps can closely match the heat pump capacity to the needs of the home. These can achieve the best performance.

Other Resources