With winter approaching and the federal Oil to Heat Pump Affordability Program closed to new applications as of July 31, 2026, many Canadian homeowners are weighing the same question: is a heat pump actually cheaper to run than a natural gas furnace or electric baseboards? The answer depends heavily on your province, because it depends on your electricity and gas rates. Here is the comparison with current figures.
Key takeaways
- Heat pumps typically win on running costs in B.C., Quebec, and Ontario, where electricity is relatively cheap, but natural gas still wins in Alberta, where gas is cheapest.
- Electric baseboards are almost always the most expensive option to run; they convert electricity to heat at a 1:1 ratio while heat pumps move 2–5 units of heat per unit of electricity.
- The federal Oil to Heat Pump Affordability Program closed July 31, 2026, check provincial and utility programs, which vary widely.
- Upfront, a cold-climate heat pump costs more than a gas furnace, but it also replaces your air conditioner, which changes the payback math.
- Estimates below are as of October 2026 and assume average rates; your actual bills depend on your home's insulation, the equipment model, and your utility's pricing.
How the three systems work
- Heat pump: Runs on electricity but doesn't burn fuel. Instead, it moves heat from outdoor air (or the ground) into your home. Efficiency is measured as COP (Coefficient of Performance): a COP of 3.0 means three units of heat delivered per unit of electricity, roughly 300% efficient. Modern cold-climate models work down to about −25°C.
- Natural gas furnace: Burns natural gas to heat air blown through ducts. Efficiency is measured as AFUE (Annual Fuel Utilization Efficiency): a 96% AFUE furnace converts 96% of the gas's energy into heat. Unaffected by outdoor temperature.
- Electric baseboards / electric resistance: Converts electricity directly to heat at 100% efficiency (COP of 1.0). Nothing is wasted, but nothing is amplified either, so all the heat you get is exactly what you pay for in electricity.
The cost comparison (2026 estimates)
The table below uses 2026 operating-cost estimates for a 2,000-square-foot home with average insulation, based on published rate data as of 2026. These are estimates, not quotes, treat them as directionally accurate, not exact.
Province | Electricity rate (est.) | Gas rate (est.) | Heat pump (annual) | Gas furnace (annual) | Cheaper to run |
|---|---|---|---|---|---|
Ontario | ~$0.12–0.16/kWh | ~$0.39/m³ | ~$1,150 | ~$1,300 | Heat pump |
Alberta | ~$0.17/kWh | ~$0.85/therm | ~$1,550 | ~$1,050 | Gas |
British Columbia | ~$0.10/kWh | ~$1.20/therm | ~$950 | ~$1,250 | Heat pump |
Quebec | ~$0.07/kWh | ~$1.10/therm | ~$650 | ~$1,150 | Heat pump |
Source for annual figures: 2026 regional operating-cost comparison published by minihomehub.online (figures in CAD). Gas figure for Ontario corroborated by contractor guidance citing ~$0.39/m³ as the 2026 Ontario average.
Electric baseboards do not appear in that regional table, but British Columbia data from Clean Energy Canada's More for Less report (December 2025) found that B.C. households switching from electric resistance heating to a heat pump saved about $1,039 per year, and households switching from natural gas heating plus a standalone air conditioner saved about $358 per year. The pattern holds nationally: where cheap hydroelectricity is the norm (B.C., Quebec, Manitoba), heat pumps win by a wide margin; where gas is cheap and electricity is expensive (Alberta), gas furnaces still run cheaper.
Upfront costs: the part people underestimate
A heat pump's operating advantage comes with a bigger sticker price. Published estimates from 2022–2025 found average installation costs of roughly $6,600 for a smaller conventional air-source heat pump and about $16,000 for a cold-climate model for a larger single-family home (before tax and rebates), per Clean Energy Canada. A natural gas furnace plus a separate central air conditioner typically costs less to install than one cold-climate heat pump, but remember the heat pump replaces both systems, and if your aging air conditioner needs replacing anyway, the incremental cost of the heat pump narrows to roughly $2,000–$4,000 in Ontario contractor estimates.
A few hidden costs to budget for:
- Electrical panel: Larger heat pumps in homes over 1,500 sq ft often require 200-amp service. Upgrading from 100 amps runs roughly $2,000–$4,000 in Ontario estimates.
- Cold-climate rating matters: A standard heat pump installed to save money upfront will underperform below about −5°C and will not qualify for most rebates. Verify the HSPF2 rating and a rated operating range of −25°C or colder before signing.
- Insulation first: Heat pumps perform best in well-insulated, reasonably airtight homes. A subsidized energy audit will tell you exactly where your home loses heat, and better attic insulation can shrink the size of heat pump you need, saving $1,000–$2,000 on equipment.
Rebates and programs: what's open in October 2026
The incentive landscape changed significantly in 2026. Verify current details with the program administrator before making any decision, program statuses below are as of October 2026.
- Oil to Heat Pump Affordability Program (federal): Closed to new applications as of July 31, 2026. Applications submitted before the deadline continue to be processed, and approved applicants have until January 31, 2027, to complete work and submit receipts. The grant was up to $10,000 toward switching from oil heating to an eligible heat pump (plus up to $5,000 more in participating provinces).
- Canada Greener Homes Affordability Program (federal): Being introduced through participating provincial and territorial partners, providing no-cost home energy retrofits (which may include heat pumps) for eligible low- and median-income homeowners and tenants. As of October 2026, household applications are open in British Columbia, Manitoba, Nova Scotia, Prince Edward Island, and Quebec. The federal government does not accept household applications directly, and more provinces will be added as their programs launch, so if you are in Ontario or another province not yet listed, there is currently no CGHAP household route for you.
- Provincial and utility programs: Ontario's Save on Energy Energy Affordability Program is open and accepting applications, advertising no-cost cold-climate heat pumps, including installation and a 10-year parts and labour warranty, for eligible electric- or oil-heated homes. B.C.'s CleanBC heat-pump programs are also open: CleanBC revised its terms on July 6, 2026, and BC Hydro is offering a $1,000 bonus on eligible air-source heat pump purchases made by October 31, 2026. Do not install on the assumption of later reimbursement, confirm eligibility and approval first.
Which system suits your home?
Choose a heat pump if: you live in B.C., Quebec, or Ontario with average or cheap electricity rates; your air conditioner is aging and needs replacing anyway; your home is reasonably insulated; you want cooling and heating in one system; and you can access rebates to soften the upfront cost.
Choose a natural gas furnace if: you live in Alberta, where gas remains the cheapest heating fuel by a clear margin; you have an existing ducted system in good shape; or upfront budget is the deciding factor and cooling is already handled.
Replace electric baseboards if: you have them and can afford the change. Baseboards are the most expensive system to run almost everywhere in Canada, switching to a ductless heat pump typically cuts heating electricity use by half or more.
Consider dual-fuel: a heat pump paired with a gas furnace as backup for extreme cold gives the best of both worlds in provinces like Ontario, the heat pump handles most of the winter at lower running cost, and gas takes over in deep cold when the heat pump's efficiency drops.
Next steps before winter
- Get a home energy audit, it is often subsidized and tells you whether insulation upgrades should come before equipment.
- Get quotes from at least three licensed HVAC contractors; ask each for a cold-climate model quote with the HSPF2 rating and −25°C operating range in writing.
- Check your province's and utility's current rebate programs before signing anything, and get approval in writing where required.
- If you're keeping your furnace, schedule its fall maintenance now (see our fall home maintenance checklist).
The bottom line
In most of Canada, a cold-climate heat pump costs less to run than a gas furnace or electric baseboards, Alberta being the clear exception where cheap gas still wins. The real question is whether the higher upfront cost pays back in your situation, which depends on your rates, your insulation, and which rebates are open in your province right now. Verify programs before you commit, and never install on the promise of retroactive reimbursement.
Sources
- EcoFlow CA, Heating Home Options in Canada: Find the Right Solution for Cold Weather
- The Cooldown, Homeowner shares heat pump savings in Ontario
- Clean Energy Canada, More for Less report (Heat Pumps in B.C., Dec 2025)
- Natural Resources Canada, Oil to Heat Pump Affordability program
- Natural Resources Canada, Eligibility criteria for the Oil to Heat Pump Affordability program
- AirZone HVAC, OHPA applications closed: what oil-heated homeowners should do next (Sep 2026)
- Custom Contracting, Heat Pump Cost in Ontario: 2026 Pricing, Rebates
- Mini Home Hub, Heat Pump vs Gas Furnace: 2026 Cost Guide
Quick answers
Frequently asked questions
01
Do heat pumps work in −30°C Canadian winters?
Cold-climate models are rated to operate down to −25°C or even −30°C, and efficiency drops as it gets colder. In extreme cold snaps they may rely on backup heat (electric or gas). This is normal and should be part of the system design.
02
Will a heat pump raise my electricity bill?
Your electricity bill will rise, but your total energy bill typically falls, because you're eliminating or sharply reducing gas or oil spending. Ask contractors for a net-bill estimate using your actual rates.
03
Is the federal $10,000 heat pump grant still available?
No, the Oil to Heat Pump Affordability Program closed to new applications on July 31, 2026. Existing applications are being processed. New federal support is coming through the Canada Greener Homes Affordability Program via provincial partners, with details varying by province.
04
Can I keep my gas furnace and add a heat pump?
Yes, this is called a dual-fuel or hybrid system. The heat pump handles mild and moderate cold; the furnace takes over below a set temperature. It is a popular option in Ontario.
