Gas Furnace vs. Electric Heat: Which is Cheaper in NJ? [2025 Cost Analysis]
Choosing between gas and electric heat is one of the biggest decisions facing New Jersey homeowners. With natural gas rates jumping 15.8% this winter and modern heat pump technology advancing rapidly, the traditional wisdom about which heating system costs less has completely changed.
In this comprehensive 2025 cost analysis, we'll break down the real numbers for Union County homeowners. You'll learn exactly what each system costs to run, install, and maintain over 10 years. We'll use current 2025 New Jersey energy rates and provide examples for a typical 2,000 square foot home.
By the end of this guide, you'll know which heating system makes the most financial sense for your specific situation. No guesswork, no sales pressure, just the facts you need to make an informed decision before winter arrives.
Current NJ Energy Rates (2025)
Natural Gas Rates
Natural gas prices have increased significantly for New Jersey homeowners this heating season:
- Average NJ rate: $1.20-$1.50 per therm
- Union County average: $1.35 per therm
- Increase from 2024: 15.8% higher
- Price stability: Variable, fluctuates with market conditions
Gas rates vary by utility company (New Jersey Natural Gas, PSE&G, Elizabethtown Gas) and change seasonally. The $1.35 per therm rate we're using represents the average delivered cost including supply and delivery charges for Union County.
Electric Rates
Electricity rates in New Jersey remain relatively stable compared to natural gas:
- Average NJ rate: $0.16-$0.18 per kWh
- PSE&G Union County: $0.165 per kWh
- Price stability: More stable than gas
- Time-of-use options: Peak/off-peak pricing available
Understanding Energy Conversion
To compare costs fairly, you need to understand energy equivalency:
- 1 therm of natural gas = 100,000 BTU of energy = 29.3 kWh of electricity (energy content)
- BUT efficiency matters: The system efficiency determines how much of that energy actually heats your home
Heating Cost Calculator: Real Numbers for Union County
Let's calculate actual heating costs for a typical Union County home using current 2025 rates:
Example Home Specifications
- 2,000 square feet
- Located in Union County, NJ
- Average insulation (typical for 1980s-2000s construction)
- Moderate winter climate
- 7-month heating season (October through April)
- 50 million BTU heating requirement per season
Gas Furnace Operating Costs
Gas furnace efficiency is measured by AFUE (Annual Fuel Utilization Efficiency). Here's what different efficiency levels cost to operate:
High-Efficiency Gas Furnace (95% AFUE)
This is the sweet spot for new gas furnace installations - balancing efficiency with reasonable upfront cost.
- Fuel needed: 526 therms per season
- (50 million BTU ÷ 0.95 efficiency ÷ 100,000 BTU per therm)
- Season cost: 526 × $1.35 = $710
- Monthly average: $101
Mid-Efficiency Gas Furnace (80% AFUE)
Many homes built before 2010 have furnaces in this efficiency range.
- Fuel needed: 625 therms per season
- Season cost: 625 × $1.35 = $844
- Monthly average: $121
- vs. High-Efficiency: +$134 per year (+19%)
Electric Heat Operating Costs
Electric Resistance Heating (100% efficient)
Baseboard heaters, wall heaters, and space heaters. Very inefficient for primary home heating.
- Energy needed: 14,663 kWh per season
- (50 million BTU ÷ 3,412 BTU per kWh)
- Season cost: 14,663 × $0.165 = $2,419
- Monthly average: $346
- vs. High-Eff Gas: +$1,709 per year (+241%)
NOT RECOMMENDED for primary home heating due to very high operating costs.
Air Source Heat Pump (300% efficiency / COP 3.0)
Modern heat pumps are 3x more efficient than electric resistance heating. They move heat rather than generate it.
- Energy needed: 4,888 kWh per season
- (14,663 kWh ÷ 3.0 COP efficiency multiplier)
- Season cost: 4,888 × $0.165 = $807
- Monthly average: $115
- vs. High-Eff Gas: +$97 per year (+14%)
BONUS: Also provides air conditioning in summer. Real COP varies by temperature but 3.0 is conservative average for NJ climate.
Cost Comparison Table
| System Type | Efficiency | Season Cost | Monthly Avg | vs. Best |
|---|---|---|---|---|
| High-Eff Gas | 95% AFUE | $710 | $101 | LOWEST |
| Mid-Eff Gas | 80% AFUE | $844 | $121 | +19% |
| Heat Pump | 300% COP | $807 | $115 | +14% |
| Electric Resistance | 100% | $2,419 | $346 | +241% |
Winner for Operating Costs:
High-efficiency gas furnace is cheapest to operate at $710 per heating season. Heat pump comes in second at $807 (just $97 more per year), while electric resistance should be avoided at $2,419.
But Wait - Consider These Factors
Operating cost is only part of the story. Smart homeowners also consider installation costs, maintenance, cooling needs, environmental impact, and total cost of ownership. Let's examine each factor.
1. Installation Costs
Gas Furnace
- Equipment: $2,500-$5,000
- Installation: $1,500-$3,000
- Total: $4,000-$8,000
- Gas line: +$500-$2,000 if not present
Most affordable if gas line already exists.
Electric Resistance
- Equipment: $500-$2,000
- Installation: $500-$1,500
- Total: $1,000-$3,500
Cheapest upfront but very expensive to operate.
Heat Pump
- Equipment: $4,000-$8,000
- Installation: $2,000-$4,000
- Total: $6,000-$12,000
- Rebates: -$4,500 available
- Net: $5,500-$7,500
Includes both heating AND cooling (2-in-1).
2. Cooling Costs
Most New Jersey homes need both heating AND cooling. This changes the math significantly:
- Gas furnace: Requires separate AC system ($3,000-$6,000 additional)
- Electric resistance: Requires separate AC system ($3,000-$6,000 additional)
- Heat pump: Provides both heating and cooling in one system (no additional cost)
When you account for cooling needs, heat pump total installation cost becomes competitive with or even cheaper than gas furnace + AC combination.
3. Environmental Impact
- Gas furnace: Burns fossil fuel directly, produces CO2 emissions. Most carbon-intensive option.
- Electric systems: Emissions depend on power source. NJ electrical grid is approximately 50% natural gas, 40% nuclear, 10% renewables. Cleaner than burning gas directly in your home.
- Heat pump: Most efficient option, uses 66% less energy than electric resistance. As electrical grid becomes greener, heat pumps automatically become cleaner without any upgrades needed.
4. Maintenance Requirements
| System | Annual Service | Complexity |
|---|---|---|
| Gas Furnace | $99-$150/year | More components, combustion system |
| Electric Resistance | Minimal | Very simple, few moving parts |
| Heat Pump | $150-$200/year | Refrigeration system, both seasons |
5. Lifespan Expectations
- Gas furnace: 15-20 years with proper maintenance
- Electric resistance: 20-30 years (simple design, fewer failures)
- Heat pump: 15-20 years with proper maintenance
All three options have similar lifespans when properly maintained, so lifespan isn't a major differentiator.
6. Safety Considerations
- Gas furnace: Requires carbon monoxide detectors, annual safety inspections, proper venting. Small risk of gas leaks or CO exposure if not maintained. Very safe when properly maintained.
- Electric systems (resistance and heat pump): No combustion means no carbon monoxide risk, no gas leak potential, no flame. Inherently safer design.
Total Cost of Ownership: 10-Year Analysis
Now let's look at the complete financial picture over 10 years for a typical Union County home that needs both heating and cooling:
Gas Furnace + Separate AC
- Installation: $7,000 (furnace) + $4,000 (AC) = $11,000
- Heating costs: $710 × 10 years = $7,100
- Cooling costs: $300 × 10 years = $3,000
- Maintenance: $125 × 10 years = $1,250
- Total 10 years: $22,350
- Per year average: $2,235
Heat Pump System
- Installation: $9,000 (before rebates)
- Rebates: -$3,500 (federal + NJ)
- Net installation: $5,500
- Heating costs: $807 × 10 years = $8,070
- Cooling costs: Included (same system)
- Maintenance: $175 × 10 years = $1,750
- Total 10 years: $15,320
- Per year average: $1,532
SAVES $7,030 over 10 years compared to gas furnace + AC
Electric Resistance + AC (Not Recommended)
- Installation: $2,000 (resistance) + $4,000 (AC) = $6,000
- Heating costs: $2,419 × 10 years = $24,190
- Cooling costs: $300 × 10 years = $3,000
- Maintenance: $50 × 10 years = $500
- Total 10 years: $33,690
- Per year average: $3,369
COSTS $18,370 more over 10 years than heat pump. Avoid for primary heating.
Winner for Total Cost of Ownership:
Heat pump offers the lowest 10-year total cost at $15,320, saving $7,030 compared to gas furnace + AC system. While gas has lower operating costs ($97/year less), the heat pump's 2-in-1 capability and substantial rebates make it the best financial choice over the long term.
When to Choose a Gas Furnace
Despite heat pumps having lower total costs, gas furnaces remain an excellent choice in certain situations:
Choose Gas Furnace If:
- ✅ You already have a gas line to your home (no expensive connection needed)
- ✅ Very cold climate - though modern heat pumps work well in NJ, gas furnaces work at any temperature
- ✅ Low upfront budget - gas furnace alone costs $4,000-8,000 vs $9,000-12,000 for heat pump
- ✅ Already have working AC you don't need to replace (no need for 2-in-1 system)
- ✅ Comfortable with combustion heating and annual safety inspections
- ✅ Want fastest heating - gas furnaces heat air faster than heat pumps
- ✅ Prefer lowest operating costs - $97/year less than heat pump for heating
Best for: Traditional homeowners, existing gas infrastructure, limited upfront budget
When to Choose a Heat Pump
Choose Heat Pump If:
- ✅ Need both heating AND cooling - one system does both jobs
- ✅ No gas line to home - avoid $1,500-2,000 connection cost
- ✅ Want lowest total cost - saves $7,000+ over 10 years vs gas + AC
- ✅ Prioritize environmental impact - most efficient option, gets cleaner as grid improves
- ✅ Safety conscious - no combustion, no CO risk
- ✅ Long-term thinker - planning to stay 10+ years to maximize ROI
- ✅ Want to maximize rebates - up to $4,500 available in NJ (2025)
- ✅ All-electric home or want to eliminate gas service entirely
Modern heat pumps work efficiently to -15°F, well beyond Union County's typical winter lows of 10-25°F
Best for: New construction, all-electric homes, environmentally conscious, long-term investors, anyone replacing both heating and cooling
When to Choose Electric Resistance
Choose Electric Resistance Only If:
- ✅ Supplemental heat only - not primary home heating
- ✅ Small spaces - garage, workshop, bathroom, enclosed porch
- ✅ Rarely used areas - seasonal use, occasional heating
- ✅ Very low upfront budget - under $2,000
⚠️ DO NOT choose for primary home heating
Operating costs are 241% higher than gas furnace and 200% higher than heat pump. The low upfront cost is quickly erased by massive energy bills.
NJ Rebates and Incentives (2025)
New Jersey and federal programs offer substantial rebates that significantly reduce heat pump costs:
Heat Pump Rebates
- Federal Tax Credit: 30% of installation cost (up to $2,000 maximum)
- NJ Clean Energy Program: $1,000-$2,500 (varies by efficiency rating)
- PSE&G Customers: Additional instant rebates available
- Income-Qualified Programs: Up to 100% coverage for eligible households
- Total Available: Up to $4,500
Example Rebate Calculation:
- Heat pump installation cost: $9,000
- Federal tax credit (30%): -$2,000
- NJ Clean Energy rebate: -$1,500
- Net cost after rebates: $5,500
At $5,500 net cost, the heat pump is now cheaper upfront than gas furnace + AC combination ($11,000) while providing the same heating and cooling capability.
Gas Furnace Rebates
- High-efficiency models (95%+ AFUE): $300-$500
- Federal tax credit: Up to $600 for 97%+ AFUE units
- Total available: $300-$1,100 (more modest than heat pump rebates)
How to Apply for Rebates
- Work with qualified contractor (Dimatic Control is pre-qualified)
- Apply BEFORE installation in most cases (some programs allow post-installation)
- Keep all receipts and documentation
- Submit federal tax credit when filing annual taxes
- Receive NJ rebate within 4-8 weeks of application approval
Dimatic Control Handles Your Rebate Paperwork
We're experienced with all NJ energy rebate programs and will handle the entire application process for you. We'll ensure you receive every dollar you're entitled to and that paperwork is submitted correctly the first time.
Learn About Our Heating ServicesUnion County Climate Considerations
New Jersey's climate is well-suited for both gas furnaces and heat pumps. Here's what you need to know about how each performs in Union County:
Union County Winter Temperatures
- Average winter low: 25-30°F (December-February)
- Extreme cold snaps: 5-10°F (occurs just a few days per year)
- Heating season: October through April (7 months)
- Typical daily lows: Above 20°F for 90% of winter
Heat Pump Performance in NJ Climate
Modern cold-climate heat pumps are rated to operate efficiently down to -15°F. Since Union County rarely drops below 10°F even during extreme cold snaps, heat pumps work excellently in our climate.
- ✅ At 30°F: Heat pumps operate at 100% efficiency (COP 3.0+)
- ✅ At 20°F: Heat pumps maintain 90-95% efficiency
- ✅ At 10°F: Heat pumps maintain 80-85% efficiency
- ✅ At 0°F and below: Efficiency drops but system continues heating
- ✅ Backup heat: Most systems include electric resistance backup for extreme cold
Bottom line: Heat pumps work great in Union County's climate 99% of the time.
Gas Furnace Performance
- ✅ Consistent heating regardless of outdoor temperature
- ✅ Heats quickly during sudden cold snaps
- ✅ Proven technology with decades of reliability in NJ homes
- ✅ No performance degradation at extreme low temperatures
Recommendation for Union County Homeowners
- Heat pump: Excellent choice. Works efficiently throughout NJ winter, lowest total cost, includes cooling, substantial rebates available.
- Gas furnace: Also excellent choice. Proven reliable, lowest operating costs, works at any temperature, good if you have existing gas service.
- Electric resistance: Avoid for primary heating. Operating costs are prohibitively expensive for whole-home use.
Both heat pumps and gas furnaces are excellent choices for Union County homes. Your specific situation determines which is best for you.
Making Your Decision: Quick Decision Tree
Use this simple decision tree to determine the best heating system for your home:
1. Do you have a gas line to your home?
- YES → Gas furnace is easiest and lowest-cost option for heating only
- NO → Heat pump is better choice (avoid $1,500-2,000 gas line installation)
2. Do you need cooling too?
- YES → Heat pump provides best value (2-in-1 system)
- NO → Gas furnace for heating only (if you rarely need AC)
3. Is upfront budget tight?
- YES → Gas furnace has lower initial cost ($4,000-8,000)
- NO → Heat pump offers better long-term value (especially with rebates)
4. Are you environmentally conscious?
- YES → Heat pump is most efficient and cleanest option
- NEUTRAL → Either gas or heat pump works well
5. Planning to stay in home 10+ years?
- YES → Heat pump offers best ROI over long term
- NO → Either option works; consider resale value in your area
Both gas furnaces and heat pumps are excellent choices for Union County homes. The decision comes down to your specific situation: existing infrastructure, budget, cooling needs, environmental priorities, and timeline.
Get Expert Advice for Your Specific Home
Every home is different. While this guide provides general cost comparisons, your actual costs will depend on:
- Your home's size, insulation, and construction quality
- Your specific comfort preferences and temperature settings
- Your current heating and cooling equipment condition
- Your available utility services (gas line, electrical capacity)
- Your budget for upfront investment vs long-term savings
- Available rebates and incentives you qualify for
At Dimatic Control, we provide free consultations where we assess your specific situation and provide customized recommendations. We'll calculate your projected costs for each option, help you understand available rebates, and present all choices without pressure.
Schedule Your Free Heating System Consultation
Let's discuss your specific situation and find the most cost-effective heating solution for your Union County home.
Serving all of Union County, NJ | Licensed & Insured | 30+ Years Experience