Is a Heat Pump Worth It in Arizona?
Last updated June 27, 2026 · based on Arizona energy prices
In Arizona, where residential electricity averages about 14¢/kWh and natural gas about $1.75/therm, switching from a gas furnace can save roughly $240/year on heating. Arizona has a mild-to-moderate heating climate, which means a heat pump runs at a seasonal efficiency (COP) near 3.3 here.
Arizona heating cost comparison (average 2,000 sq ft home)
| System | Estimated annual heating cost |
|---|---|
| Gas furnace (95% AFUE) | $737 |
| Heating oil | $1,523 |
| Heat pump | $497 |
If you currently heat with oil, the picture is much stronger: a heat pump could save around $1,026/year versus heating oil at Arizona prices. Against electric baseboard heat, a heat pump cuts heating energy use by about two-thirds, so the savings are even larger.
What this means for Arizona homeowners in 2026
The federal heat pump tax credit expired December 31, 2025, so a 2026 install in Arizona carries the full upfront cost unless you qualify for a state or utility rebate. Because Arizona's climate is mild-to-moderate, the strongest financial case is when you're replacing both an old furnace and an aging air conditioner at once — the heat pump does both jobs with one system. With meaningful running-cost savings on top of combined heating and cooling, the payback math in Arizona is favorable for most homes.
Arizona rebates
Check whether Arizona has launched its HEEHRA home-electrification rebate program (worth up to $8,000 for income-qualified households) and confirm it still has funding before counting on it — availability changes month to month. Also check your local electric utility, which may offer its own heat pump rebate of a few hundred to a couple thousand dollars. See our 2026 rebate guide for details.
Estimates based on Arizona average energy prices and a simplified model; your results will vary. Energy prices and incentives change frequently. Not financial advice.