Furnaces provide space heating through the delivery of forced warm air via ducts. They are the most common form of space heating in U.S. homes and are used to a lesser extent in commercial buildings. Residential furnace efficiency is rated in AFUE (Annual Fuel Utilization Efficiency). The higher the AFUE, the more efficient the furnace.

Decide Whether to Replace Your Existing System

If your furnace or boiler is older than 20 years, chances are it is a good investment to replace it with a high-efficiency model with the guidance of a good contractor. Also consider a replacement now if your system is one of the following:

Calculate Your Return on Investment

To determine savings from the table on the right, find the horizontal row corresponding to the old system's AFUE, then choose the number from that row that is in the vertical column corresponding to the new system's AFUE. That number is the projected dollar savings per hundred dollars of existing fuel bills.

For example, if your present AFUE is 65% and you plan to install a high-efficiency natural gas system with an AFUE of 90%, then the projected saving is $27 per $100. If, say, your annual fuel bill is $1,300, then the total yearly savings should be about $27 x 13 = $351.

Step 2: Calculate Return on Investment:

Condensing Models

ACEEE strongly recommends a condensing furnace (AFUE 90% or higher), unless you live in a warm climate (in this case, you may want to consider retrofitting your system with a heat pump instead).

High Electrical Efficiency

A furnace can use a significant amount of electricity - over 1200 kWh per year for some models - mostly to power the fan motor. Variable speed fan motors are generally more efficient than standard (“PSC”) motors and may save you hundreds of dollars per year.

Proper Sizing

Make sure the heating capacity of the furnace is not too high for your home. Most furnaces are substantially oversized.

Improve the Performance of Your Existing System

Clean or replace air filters regularly.

Clean registers. Warm-air supply and return registers should be kept clean and should not be blocked by furniture, carpets, or drapes. Keep baseboards and radiators clean and unrestricted by furniture, carpets, or drapes.

Bleed trapped air from hot water radiators. Follow prescribed maintenance for steam heat systems, such as maintaining water level, removing sediment, and making sure air vents are working. Check with your heating system technician for specifics on these measures and use caution: steam boilers produce high-temperature steam under pressure.

Tune up your system. Oil-fired systems should be tuned up and cleaned every year, gas-fired systems every two years, and heat pumps every two or three years. Regular tune-ups not only cut heating costs, but they also increase the lifetime of the system, reduce breakdowns and repair costs, and cut the amount of carbon monoxide, smoke, and other pollutants pumped into the atmosphere by fossil-fueled systems.

Seal your ducts. In homes heated with warm-air heating, ducts should be inspected and sealed to ensure adequate airflow and eliminate loss of heated air. It is not uncommon for ducts to leak as much as 15-20% of the air passing through them. And leaky ducts can bring additional dust and humidity into living spaces. Thorough duct sealing costs several hundred dollars but can cut heating and cooling costs in many homes by 20%.

Check for wasted fan energy. If your furnace is improperly sized or if the fan thermostat is improperly set, the fan may operate longer than it needs to. If you're getting a lot of cold air out of the warm-air registers after the furnace turns off, have a service technician check the fan delay setting.

Thermostats. Turn down the thermostat at night and when you're away from home. In most homes, you can save about 2% of your heating bill for each degree that you lower the thermostat for at least 8 hours each day. Contrary to some common myths, it won't take more energy to bring your home back to the desired temperature than it would to leave it at your optimum temperature all day. Turning down the thermostat from 70°F to 65°F, for example, saves about 10% ($100 saved per $1,000 of heating cost). Of course, you can use a good programmable thermostat to automate this process. If it is programmed properly you can expect to recover the cost of the thermostat in the first year or so. If you have a heat pump, be aware that you need a special "adaptive" thermostat that will bring the temperature up from the setback point in winter without calling for the inefficient "emergency" electric resistance heat.

Air Condinitioners

Residential air conditioning accounts for around 5% of the electricity consumed in the U.S. Residential air conditioning technologies include window air conditioners, central air conditioners, heat pumps, passive cooling, and alternatives to air conditioning (including fans). Air conditioner efficiency is rated using the SEER (seasonal energy efficiency ratio) and EER (energy efficiency ratio) metrics. The higher these numbers are, the more efficient the air conditioner.

Energy consumption for home air conditioning accounts for more than 8% of all the electricity produced in the U.S. for all purposes at a cost to homeowners of over $15 billion. This translates to roughly 195 million tons of carbon dioxide, an average of almost 2 tons per year for homes with air conditioning.

Central AC and Heat Pumps

Central air conditioners and air source heat pumps are both widely used in the U.S. and are the best option for maintaining comfort in areas that experience high humidity. Heat pumps can be used very effectively both for heating and cooling in southeastern states. Both central AC and air source heat pumps are rated according to seasonal energy efficiency ratio (SEER). This is the cooling output divided by the power input for a hypothetical average U.S. climate. The higher the SEER, the more efficient the air conditioner. To get the best performance and highest efficiency possible from your new system, consider the following:

Ductless Mini-Splits

Mini-split systems can be an attractive retrofit option for room additions and for houses using hydronic heat. Like conventional central air conditioners, mini splits use an outside compressor/condenser and indoor air handling units. The difference is that each room or zone to be cooled has its own air handler. Each indoor unit is connected to the outdoor unit via a conduit carrying the power, refrigerant and condensate lines.

The primary advantage is that, by providing dedicated units to each space, it is easier to meet the varying comfort needs of different rooms. By avoiding the use of ductwork, mini-splits also avoid energy losses associated with central forced-air systems.

The primary disadvantage of mini-splits is cost. They can cost 30% more than a typical central air conditioner of the same size. But, when considering the cost and energy losses associated with installing new central ductwork, buying a ductless mini-split may not be such a bad deal, especially considering the long-term energy savings.

Improve the Efficiency of Your Existing System

The compressor units of most air conditioners have an average lifetime of only 10 to 12 years. By carefully following proper maintenance procedures, a quality model may hold up twenty years, but don’t expect the kind of lifetime you get with boilers and furnaces. Reduce excessive use:


When you think about it, energy efficiency is not just about saving money on energy bills, it is really about using less energy to protect human health, assure comfort, and protect your house from damage. As air moves through your house, it removes pollutants that include odors, gases, particles, and (most surprisingly) moisture. But, it can also contribute to drafty walls and uncomfortable indoor temperature and humidity levels. Proper ventilation and air distribution play an important role in providing a safe, comfortable, and durable home as efficiently as possible. Here's how to improve your house's ventilation:

Control moisture. Moisture is one of the most important and least recognized indoor pollutants, affecting both human health and the health of the building. Where moisture collects, so do mold, mildew, and dust mites, which can cause asthma or allergies, destroy wood products, and accelerate the rusting of metal building components.

Consider sealed combustion. Combustion products from gas appliances should never mix with the indoor environment. The terms sealed-combustion, direct-vent, and power-vented appliances all refer to appliances that vent their combustion products to the outside through a sealed pipe. Sealed combustion furnaces and water heaters are widely available and should always be used whenever located inside the conditioned space.

Check the garage connection. If your house has an attached garage, hire a professional to make sure the connection between your garage and your living space (including rooms above the garage) is airtight to prevent car exhaust and other chemicals from entering your house.

Use safe household products. Use pesticides and cleaning agents wisely and store them safely. Chemicals used in cleaning supplies, rug and furniture finishes, and paints fall within the class of indoor air pollutants called "volatile organic compounds" or VOCs.

Get a radon test. Radon is a radioactive gas that is generated naturally in the soil and enters the house from the ground. Radon is the second leading cause of lung cancer in the U.S. and its concentration in buildings varies regionally.

Step 2: Ensure Efficient Local Exhaust (Bathrooms and Kitchens)

Bathrooms and kitchens generate the most indoor pollution (moisture and VOCs), so when showering or cooking use a powered exhaust system that vents directly to the outdoors. Opening a window is often not enough.

Look for an ENERGY STAR-rated ventilating fan. ENERGY STAR fans are energy-efficient and quiet. In the bathroom, fans should be 50 cfm for rooms 100 ft2 or less to provide adequate ventilation without wasting energy. Range hoods are available in many sizes, but typically an up-draft range hood should provide 100 cfm of ventilation for wall-mounted hoods and 150 cfm for island hoods. They should always have a ducted passage to the outside that is fitted with a damper to prevent infiltration.

Step 3: Filter Out Particulates

One advantage to a forced-air heating and cooling system is that you get a built-in air filtration system to deal with free particulates such as soot, dust and pollen. This filter should be cleaned or replaced monthly during the heating season. There are two types of filters you can install to maximize the efficiency of your air distribution system when it's time to replace

Mechanical filters. Mechanical filters trap particles like a sieve. The size of the smallest particles they trap well are measured by “MERV,” or “Minimum Efficiency Report Value.” MERV 4 or 5 is pretty characteristic of residential air filters. If you have allergies or other health concerns, you may want to consider MERV 8 or 9, but probably no higher: filters that remove finer particles cost more to purchase and have substantially higher resistance to airflow, requiring more fan energy.

Electrostatic filters. Electrostatic filters attract particles passing through the filter by electric charge. These are typically better than mechanical filters because they can trap very small particles without hindering air flow.

Step 4: Improve Whole-House Ventilation

It is recommended that houses always have some planned ventilation strategy that mixes stale air with new air and moves it through the house. Ideally, an energy-efficient and healthy house is able to carefully control the air that is coming in and going out, and to do so at just the right rate. Unfortunately, installing a well-balanced ventilation system is not feasible for most existing houses. The following strategies should help you understand how best to improve air quality throughout your house.

Opening windows. If it is cool or breezy enough outside, opening windows may induce enough fresh air into the house, forcing stale air out.

House fans. In a typical multi-story house during most of the year, air moves naturally upwards as it warms and rises. In mild climates, a fan placed in the ceiling or open attic will exaggerate or induce this "stack effect" when you open the windows, providing fresh air and cooling. Check with your nearest home improvement retail store about available products and correct installation.

Intermittent exhaust ventilation. If there isn’t much breeze and the air flow between inside and outside is static, operating a 100 cfm fan would continuously provide adequate ventilation for a 1,500 square foot house with 8-foot ceilings. This is an example of "exhaust-only ventilation." One downside is that exhaust-ventilation depends on uncontrolled infiltration to provide fresh air. In hot-humid climates, this strategy should not be used without careful supply air control. If hot and humid air is drawn into the building for months on end, condensation, mold, and damage are likely to develop.

Supply-only ventilation. Supply ventilation systems draw clean outside air into the interior living space, usually through a supply vent that feeds into the return duct of a forced air system. Aside from allowing incoming air to be carefully controlled and filtered, supply-only strategies tend to “pressurize” the house, which keeps moisture out in hot, humid climates but may induce drafts in cold climates as warm air escapes to the outside.

Air handler and duct maintenance. Approximately two thirds of U.S. houses use ducts to move heating and cooling energy from a central furnace, air conditioner, or heat pump around the house. This is not the same as ventilation - ducts control how air is distributed within the house, not how air enters and exits. But because virtually all duct installations leak, your air distribution system may be throwing off humidity levels and air infiltration rates in your house.

"Balanced" ventilation. Balanced ventilation is essentially a well-controlled combination of the exhaust and supply strategies, but it takes a very tight house and good engineering to get it right. Often, a balanced system involves a powered heat recovery or energy recovery ventilator (HRV or ERV) that improves efficiency and pressure balance by exchanging energy (from temperature and humidity differences) between the outgoing and incoming air streams. Unfortunately, it is rarely economical to install such a system into an existing house.

Stand-alone dehumidifiers. In hot climates on very humid days with moderate temperatures, air conditioners probably will not run enough to remove the moisture load.

Water Heating

After heating and cooling, water heating is typically the largest energy user in the home because it is necessary for so many domestic activities. Whether you’re replacing a worn-out, inadequate, or obsolete water heater or looking for the best model for a new house you’re building, it pays to choose carefully. Follow these steps to learn more.

Fuel Options

More U.S. households use natural gas to heat water than any other fuel source, and about 40% use electricity. A small percentage use propane or heating oil. Typical water heaters in the U.S. are electric resistance or atmospheric natural gas tank water heaters. Electric water heaters typically have Energy Factors (efficiency ratings) of about 0.9, while gas ones will be rated about 0.6.

The energy factor is based on site energy use, which is the amount of energy your water heater uses. However, it takes about three times as much source energy (this includes the energy needed to generate and distribute a fuel) to deliver a unit of electricity to the site as gas, since only about 1/3 of the fuel energy that enters the power plant reaches the house. The rest is lost due to inefficiency at the power plant and the power lines. Therefore, an electric water heater that appears to be 50% “better” than a gas one (0.9 Energy Factor versus 0.6 Energy Factor) actually uses much more source energy than the average gas water heater.

There is a lot of good news, though. Manufacturers are bringing many kinds of advanced water heaters to the U.S. market, with much higher efficiency. The big news for electricity users is the Heat Pump Water Heater, which (like any other heat pump) takes energy from the air to heat water. At the same time, the heat pump water heater dehumidifies the air, saving the cost of buying and operating a separate dehumidifier. This is especially beneficial when the water heater is located in a basement and/or in a humid climate. Heat pump water heaters use one-third to one-half as much electricity as conventional electric water heaters.

For natural gas, many customers are choosing tankless or instantaneous water heaters. These are very compact, and generally wall-hung. Their rated efficiency is higher than that of tank units, and some units are Energy Star rated. However, the delivered efficiency gains may be somewhat more modest in typical home use (see table below). And, they can be very expensive to install in retrofit applications, requiring special ductwork and upsizing the gas lines. Condensing gas water heaters are a very promising new entry to the residential market. A condensing gas water heater works like a normal tank-type water heater, except that before the combustion gases are vented outside, the heat in those gases is captured and used to help heat the water in the tank.

In general, most choices available for natural gas are also sold for propane.

Oil users have fewer choices. If you currently have an oil-fired boiler, your best options are to purchase an indirect tank that connects to your boiler (best if your boiler is relatively new), or an integrated unit that provides space heat and hot water in one.

Conventional electric water heaters (other than heat pump water heaters) are not recommended. If you don't have access to natural gas, you may want to consider a heat pump water heater.

Sizing a Water Heater

The capacity of a water heater is an important consideration. The water heater should provide enough hot water at the busiest time of the day. For a storage water heater, this capacity is indicated by its "first hour rating," which accounts for the effects of tank size and the speed by which cold water is heated. First hour rating is included in product literature and on the EnergyGuide label alongside efficiency rating.

Step 2: Compare Life-Cycle Costs

Lifecycle Costs

Life expectancy for water heaters is highly variable, largely dependent on water hardness, and on maintenance. Currently, there is too little data to accurately estimate life expectancy for tankless water heaters, but preliminary data shows that tankless water heaters could last up to 20 years. For all water heaters, life expectancy will depend on local variables such as water chemistry and homeowner maintenance.

Step 3: Select a New System

Think about replacement now. If you're like most people, you’re unlikely to go out looking for a water heater until your existing one fails, leaving little time to look for a modern, efficient water heater that better meets your needs. There are a lot of technologies available and the most efficient water heaters are also the hardest to find and the most expensive to purchase. So it pays to think about your options now:

Storage Water Heaters

These are by far the most common type of water heater in the U.S. today. Ranging in size from 20 to 80 gallons (or larger) and fueled by electricity, natural gas, propane, or oil, storage water heaters transfer heat from a burner or coil to water in an insulated tank. Because heat is lost through the flue (except in electric models) and through the walls of the storage tank, energy is consumed even when no hot water is being used.

New energy-efficient gas-fired storage water heaters are a good, cost-effective replacement option for your current water heater if you have a gas line in your house. They have higher levels of insulation around the tank and one-way valves where pipes connect to the tank, substantially reducing standby heat loss. Keep an eye out for the price to come down for newer super-efficient "condensing" and "near-condensing" gas water heaters, which save much more energy compared to traditional models but are currently niche products. For safety as well as energy efficiency, fuel-burning water heaters should be installed with sealed combustion ("direct-vented" or "power-vented). Sealed combustion means that outside air is brought in directly to the water heater and exhaust gases are vented directly outside, keeping combustion totally separate from the house air.

Demand Water Heaters

Tankless water heaters do not store hot water, unlike conventional North American water heaters. In tankless (also known as "demand" or "instantaneous") water heaters, a gas burner or electric element heats water only when there is a demand for hot water. Hot water never runs out, but the flow rate (gallons of hot water per minute) is limited. Eliminating standby losses from the tank reduces energy waste. Before rushing out to buy a demand water heater, be aware that they are not appropriate for every situation. Here are some of the factors to consider:

Consider your water distribution system. If the hot water uses in your home are relatively close together, with short hot water lines between them, a tankless system may work well for you. In many U.S. homes, water uses are widely spaced at opposite ends of the house. If this is the case in your home, a single tankless system with long distances between the system and the point-of-use can increase frustration, because each time you turn off the water, the next time you use the water again it will restart with a "slug" of cold water.

If your water lines are not too long, consult an experienced contractor to find out if your gas supply is adequate and proper venting is feasible.

Finally, residential wiring generally will not support a tankless electric water heater with large enough capacity to serve multiple uses. If you rely on electricity to heat your water, a tankless system is unlikely to meet your needs. However, an electric unit may be appropriate for small applications, such as a remote vanity or half-bath.

Heat Pump Water Heaters

If you currently have a standard electric resistance water heater, models that use a heat pump are more efficient because the electricity is used for moving heat from one place to another rather than for generating the heat directly. The heat source is outside air or air in the basement or room where the unit is located. Heat pump water heaters are not very common at this time, but their market share is growing. They are available with built-in water tanks called integral units, or as add-ons to existing hot water tanks. A heat pump water heater uses one-third to one-half as much electricity as a conventional electric resistance water heater. In warm climates they may do even better.

Indirect Water Heaters

If you use a boiler, ask your contractor about the feasibility of installing an indirect water heater. These use your boiler as the heat source by circulating hot water from the boiler through a heat exchanger in a well-insulated water heater tank. In the less common furnace-based systems, water in a heat exchanger coil circulates through the furnace to be heated, then through the water storage tank. An indirect water heater is one of the best options because it eliminates the tremendous flue losses associated with gas-fired storage water heaters but without the hassles and extra costs of tankless gas water heaters. When used with a modern, high-efficiency boiler, these energy savings hold true even in the summer when your boiler isn't needed for heat. These systems can be purchased in an integrated form, incorporating the boiler or furnace and water heater with controls, or as separate components. Gas, oil, and propane-fired systems are available.

The efficiency of a combination water and space heating system is indicated by its combined appliance efficiency rating (CAE). The higher the number, the more energy efficient. Combination appliance efficiency ratings vary from 0.59 to 0.90. Look for CAE of 0.85 or higher.

Integrated Water Heaters

These combined units feature a powerful water heater that provides space heating as a supplemental end-use. Heated water from the water heater tank passes through a heat exchanger in a central handler to heat air which is then blown into the home’s duct system. As with indirect water heaters, look for CAE of 0.85 or higher.

Solar Water Heaters

Technologies that use the sun to heat hot water have been around for decades. Solar water heaters can be a great investment because they offer a virtually cost-free and renewable energy source for one of your home’s top energy-users. But because the feasibility and benefits of a solar water heater will vary based on a number of variables, such as where you live, which way your roof is facing, and how many people live in your house, it takes some extra savvy to know what your costs and savings will be.

Solar water heaters are much less common than they were during the 1970s and early 1980s when they were supported by tax credits, but the units available today tend to be considerably less expensive and more reliable. Plus, federal and state tax incentives are available again. The initial cost of a solar water heater is still much higher than other competing technologies, but if you can make the upfront investment (which is easier with tax breaks and rebates), it can save 50-75% of your water heating energy over the long term. Areas that receive sun consistently for 3 or more seasons will not only save more energy, but consumers are likely to have more products to choose from at lower costs. Make sure you find a qualified installer who can properly design and size the back-up water heating system.

Step 4: Minimize Operating Costs (new and existing systems)

Even if you aren’t going to buy a new water heater, you can save a lot of energy and money with your existing system by following a few simple suggestions.

Conserve Water. Your biggest opportunity for savings is to use less hot water. In addition to saving energy (and money), cutting down on hot water use helps conserve dwindling water supplies, which in some parts of the country is a critical problem. A family of four each showering five minutes a day can use about 700 gallons per week - a three-year drinking water supply for one person! Water-conserving showerheads and faucet aerators can cut hot water use in half. That family of four can save 14,000 gallons of water a year and the energy required to heat it.

Insulate Your Existing Water Heater. If your electric water heater was installed before 2004, installing an insulating jacket is one of the most effective do-it-yourself energy-saving projects, especially if your water heater is in an unheated space. The insulating jacket will reduce standby heat loss - heat lost through the walls of the tank - by 25-40%, saving 4-9% on your water heating bills. Water heater insulation jackets are widely available for around $10. Always follow directions carefully when installing an insulation jacket.

Insulate Hot Water Pipes. Insulating your hot water pipes will reduce losses as the hot water is flowing to your faucet and, more importantly, it will reduce standby losses when the tap is turned off and then back on within an hour or so. A great deal of energy and water is wasted waiting for the hot water to reach the tap. Even when pipes are insulated, the water in the pipes will eventually cool, but it stays warmer much longer than it would if the pipes weren’t insulated.

Lower the Water Heater Temperature. Keep your water heater thermostat set at the lowest temperature that provides you with sufficient hot water. For most households, 120°F water is fine (about midway between the “low” and “medium” setting). Each 10°F reduction in water temperature will generally save 3-5% on your water heating costs. When you are going away on vacation, you can turn the thermostat down to the lowest possible setting, or turn the water heater off altogether for additional savings. With a gas water heater, make sure you know how to relight the pilot if you’re going to turn it off while away.