Is a Heat Pump Worth It in Colorado?
Last updated June 27, 2026 · based on Colorado energy prices
In Colorado, where residential electricity averages about 15¢/kWh and natural gas about $0.95/therm, a heat pump may actually cost a bit more to run than cheap natural gas here — the case is strongest if you're also replacing an aging AC. Colorado has a cold heating climate, which means a heat pump runs at a seasonal efficiency (COP) near 2.6 here.
Colorado heating cost comparison (average 2,000 sq ft home)
| System | Estimated annual heating cost |
|---|---|
| Gas furnace (95% AFUE) | $750 |
| Heating oil | $2,857 |
| Heat pump | $1,268 |
If you currently heat with oil, the picture is much stronger: a heat pump could save around $1,588/year versus heating oil at Colorado 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 Colorado homeowners in 2026
The federal heat pump tax credit expired December 31, 2025, so a 2026 install in Colorado carries the full upfront cost unless you qualify for a state or utility rebate. Because Colorado's climate is cold, 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. Since cheap gas keeps running-cost savings modest here, lean on the combined heating-plus-cooling replacement and any available rebates to justify the switch.
Colorado rebates
Check whether Colorado 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.
Frequently asked questions
Is a heat pump cheaper to run than a gas furnace in Colorado?
It's close. At Colorado's typical energy prices, a heat pump costs about $1,268/year versus about $750/year for a 95% efficient gas furnace, so running costs are roughly comparable. The strongest case is replacing your heating and cooling at once, since one heat pump does both jobs.
Do heat pumps work in Colorado's climate?
Yes. Colorado has a cold heating climate, and modern cold-climate heat pumps maintain a seasonal efficiency (COP) of about 2.6 here — meaning every unit of electricity delivers roughly 2.6× as much heat.
Is there still a heat pump tax credit in Colorado in 2026?
The federal heat pump tax credit (Section 25C) expired December 31, 2025. In 2026, check whether Colorado's HEEHRA rebate program (up to $8,000 for income-qualified households) is live and funded, and ask your electric utility about its own rebates.
Estimates based on Colorado average energy prices and a simplified model; your results will vary. Energy prices and incentives change frequently. Not financial advice.