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.
Estimates based on Tennessee average energy prices and a simplified model; your results will vary. Energy prices and incentives change frequently. Not financial advice.