Is a Heat Pump Worth It in Tennessee?
Last updated June 27, 2026 · based on Tennessee energy prices
In Tennessee, where residential electricity averages about 12.5¢/kWh and natural gas about $1.25/therm, switching from a gas furnace can save roughly $82/year on heating. Tennessee has a mild-to-moderate heating climate, which means a heat pump runs at a seasonal efficiency (COP) near 3.3 here.
Tennessee heating cost comparison (average 2,000 sq ft home)
| System | Estimated annual heating cost |
|---|---|
| Gas furnace (95% AFUE) | $526 |
| Heating oil | $1,523 |
| Heat pump | $444 |
If you currently heat with oil, the picture is much stronger: a heat pump could save around $1,079/year versus heating oil at Tennessee 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 Tennessee homeowners in 2026
The federal heat pump tax credit expired December 31, 2025, so a 2026 install in Tennessee carries the full upfront cost unless you qualify for a state or utility rebate. Because Tennessee'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 Tennessee is favorable for most homes.
Tennessee rebates
Check whether Tennessee 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 Tennessee?
Yes, on average. At Tennessee's typical energy prices, a heat pump costs about $444/year to heat an average 2,000 sq ft home versus about $526/year for a 95% efficient gas furnace — roughly $82/year in savings.
Do heat pumps work in Tennessee's climate?
Yes. Tennessee has a mild-to-moderate heating climate, and modern cold-climate heat pumps maintain a seasonal efficiency (COP) of about 3.3 here — meaning every unit of electricity delivers roughly 3.3× as much heat.
Is there still a heat pump tax credit in Tennessee in 2026?
The federal heat pump tax credit (Section 25C) expired December 31, 2025. In 2026, check whether Tennessee'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 Tennessee average energy prices and a simplified model; your results will vary. Energy prices and incentives change frequently. Not financial advice.