Comparing Hybrid Heating and Conventional Furnaces in Ontario

Introduction: Heating Your Ontario Home

Ontario’s climate, marked by significant temperature variations and notably cold winters, necessitates robust and efficient home heating systems. Space heating constitutes a substantial portion of household energy consumption in the province, often exceeding 60% of total energy use. Consequently, selecting the right heating system is a critical decision for homeowners, impacting comfort, operating costs, and environmental footprint.

Historically, the conventional heating system choice for most Ontario homes, particularly those with existing ductwork, has been the natural gas furnace. Its prevalence stems from the wide availability of natural gas infrastructure, especially in urban and suburban areas, and its historically competitive operating costs compared to alternatives like oil or electricity. Other conventional options exist, such as oil furnaces, electric furnaces, boilers distributing hot water or steam, and electric baseboard heaters, but these are less common, often found where natural gas is unavailable or in specific building types.

In recent years, hybrid heating systems have emerged as a prominent alternative, driven by advancements in technology and a growing focus on energy efficiency and decarbonization. For the purpose of this comparison in the Ontario context, a hybrid heating system refers specifically to the combination of an electric Air-Source Heat Pump (ASHP) providing both heating and cooling, paired with a backup furnace, which is typically fueled by natural gas given its prevalence in the province.

This report aims to provide Ontario homeowners with a detailed comparison between these two primary heating solutions: the conventional high-efficiency natural gas furnace and the ASHP/natural gas furnace hybrid system. It will delve into their operating principles, efficiency characteristics, performance in cold weather, operating cost considerations based on current Ontario energy prices, environmental impacts, and key installation factors.

Regardless of the system chosen, achieving optimal performance, comfort, and longevity hinges on correct system sizing. In Canada, the standard methodology for determining a home’s specific heating and cooling requirements (loads) is outlined in the CAN/CSA F280-12 standard. This standard ensures that HVAC equipment is neither undersized nor oversized. Undersized systems struggle to maintain desired temperatures, leading to continuous operation, increased wear, and discomfort. Conversely, oversized systems suffer from “short cycling”—turning on and off frequently. This reduces energy efficiency, hinders dehumidification during cooling cycles, increases wear and tear on components (especially compressors), and can lead to uneven temperatures. While this report will not detail the F280 calculation process itself, its importance as the foundation for selecting any heating system cannot be overstated. Homeowners should ensure their HVAC contractor performs a proper F280 load calculation before recommending equipment.

Conventional Heating: The Natural Gas Furnace

The natural gas furnace remains the cornerstone of residential heating in many parts of Ontario.³ Its dominance is attributable to several factors: the extensive natural gas distribution network across the province, particularly in populated areas; a historical perception of natural gas being more cost-effective than electricity or oil for heating; and the prevalence of forced-air ductwork in Ontario homes, which simplifies furnace installation and integration.

How it Works

The operation of a natural gas furnace is based on controlled combustion. When the thermostat signals a need for heat, the furnace initiates a sequence:

1. Gas flows to the burner and is ignited, either by a standing pilot light (in older models) or, more commonly now, by an electronic ignition system.
2. Combustion occurs within a dedicated chamber, generating hot gases.
3. These hot combustion gases pass through a heat exchanger, a component typically made of metal tubes or plates designed to efficiently transfer heat.
4. The home’s air, drawn from the return ducts, is forced over the exterior surfaces of the hot heat exchanger by a blower fan.
5. The heated air is then pushed through the supply ductwork and distributed to various rooms via vents or registers.
6. The byproducts of combustion, including carbon monoxide (CO), water vapor, and carbon dioxide, are safely vented out of the house through a flue pipe or chimney system.

Modern furnaces incorporate different types of blower motors. Older or basic models often use Permanent Split Capacitor (PSC) motors, which operate at relatively fixed speeds and lower efficiency (around 60-65%). Newer high-efficiency furnaces predominantly use Electronically Commutated Motors (ECMs), also known as brushless DC motors.¹⁰ ECMs offer variable speed operation, quieter starts and stops, and significantly higher efficiency (around 80%), even at reduced speeds. Recognizing these benefits, the Ontario Building Code mandated the use of brushless DC motors in new furnace installations after December 31, 2014.

Efficiency Explained: AFUE

The primary metric for furnace and boiler efficiency is the Annual Fuel Utilization Efficiency (AFUE). AFUE represents the percentage of fuel energy consumed by the furnace that is converted into usable space heat over an entire heating season. For example, a furnace with an AFUE of 95% converts 95% of the natural gas energy into heat for the home, while the remaining 5% is lost, primarily through venting.

In Canada, furnaces often display a voluntary EnerGuide label showing the model’s AFUE rating and comparing it to similar models. AFUE ratings generally fall into these categories :

• Older/Low-Efficiency: 56% – 70% (often natural draft, continuous pilot light)
• Mid-Efficiency: 80% – 83% (typically induced draft, electronic ignition)
• High-Efficiency (Condensing): 90% – 98.5% (feature a secondary heat exchanger to extract more heat from combustion gases, often resulting in condensation)

Current Canadian federal regulations and Ontario practices mandate high-efficiency levels for most new installations. Gas furnaces must generally meet a minimum AFUE of 95%. These high-efficiency units are often referred to as “condensing” furnaces because they cool exhaust gases sufficiently to condense water vapor, capturing latent heat that would otherwise be lost up the flue. For context, the AFUE range for oil furnaces is typically 78% to 96%.

Performance Profile

The main strength of a natural gas furnace is its ability to deliver consistent and powerful heating, regardless of how low the outdoor temperature drops. This makes it a reliable choice for enduring Ontario’s coldest winter days. However, a furnace only provides heating. Homeowners require a separate central air conditioning unit for summer cooling.

Even with the advancements leading to 95%+ AFUE ratings and efficient ECM motors, conventional furnaces operate on the principle of combustion. This inherently means some energy is lost in the exhaust gases, placing a practical ceiling on their efficiency slightly below 100%. This contrasts with heat pump technology, which moves existing heat rather than creating it through combustion, allowing for efficiencies exceeding 100% under favorable conditions. While modern furnaces are far more efficient than their predecessors, this fundamental difference in operation remains.

Historically, natural gas has often been the most economical heating fuel in Ontario. However, the energy market is dynamic. While the removal of the federal carbon charge effective April 1, 2025, provides immediate relief on the carbon pricing component of natural gas bills , the underlying commodity cost of natural gas is subject to market fluctuations driven by supply, demand, and geopolitical factors. Recent analyses show that while the total bill impact for Enbridge customers decreased in April 2025 due to the carbon charge removal, the base commodity cost actually increased. This volatility makes long-term operating cost predictions less certain compared to the more regulated structure of electricity pricing.

Hybrid Heating: Combining Technologies

Hybrid heating systems represent an integrated approach to home comfort, combining two distinct technologies: an electric Air-Source Heat Pump (ASHP) and a conventional furnace, typically fueled by natural gas in the Ontario context. The ASHP component consists of an outdoor unit, visually similar to a central air conditioner, and an indoor coil installed within the home’s ductwork, connected by refrigerant lines. This setup allows the system to leverage the strengths of each technology under different weather conditions.

How the Air-Source Heat Pump (ASHP) Works

Unlike furnaces that generate heat through combustion, heat pumps operate on the principle of heat transfer. They use a refrigeration cycle to move existing thermal energy from one location to another.

• Heating Cycle: Even in cold air, thermal energy exists. The ASHP extracts this energy from the outdoor air using a refrigerant.
  1. A cool, low-pressure liquid/vapor refrigerant flows through the outdoor coil (evaporator). It absorbs heat from the ambient air, causing the refrigerant to boil and turn into a low-temperature vapor.
  2. This vapor is drawn into the compressor, which significantly increases its pressure and temperature.
  3. The hot, high-pressure vapor then flows to the indoor coil (condenser), located in the ductwork. Here, it releases its heat into the air being circulated through the ducts, warming the home. As it releases heat, the refrigerant cools and condenses back into a high-pressure liquid.
  4. The liquid refrigerant passes through an expansion valve, which reduces its pressure and temperature, preparing it to absorb heat outdoors again. This cycle repeats continuously.
• Cooling Cycle: The process is reversed. The indoor coil acts as the evaporator, absorbing heat from the home’s air. The refrigerant carries this heat outside, where the outdoor coil acts as the condenser, releasing the heat into the ambient air. In essence, the heat pump functions exactly like a central air conditioner in cooling mode.

While this report focuses on ducted hybrid systems common in Ontario homes with existing furnaces, it’s worth noting that ductless “mini-split” heat pumps are also available. These systems use one outdoor unit connected to one or more wall-mounted indoor units, providing heating and cooling without requiring ductwork.

ASHP Efficiency Explained: COP & HSPF

Heat pump heating efficiency is measured differently than furnace efficiency:

• Coefficient of Performance (COP): This is an instantaneous measure of efficiency, defined as the ratio of heat energy delivered by the heat pump to the electrical energy consumed to operate it at specific outdoor and indoor temperature conditions. A COP of 3.0 means the heat pump delivers 3 units of heat energy for every 1 unit of electrical energy consumed, equating to 300% efficiency.
• COP Variation with Temperature: A critical characteristic of ASHPs is that their COP decreases as the outdoor temperature drops. The colder it gets, the harder the heat pump must work to extract heat from the air, reducing its efficiency. Table 3 provides illustrative COP ranges at typical Ontario winter temperatures.
• • Heating Seasonal Performance Factor (HSPF/HSPF2): Because COP varies with temperature, HSPF provides a measure of average efficiency over an entire heating season. It’s calculated as the total heating output (in British Thermal Units, Btu) divided by the total electrical energy consumed (in Watt-hours, Wh) over the season. A higher HSPF indicates greater seasonal efficiency. The HSPF2 rating reflects updated testing procedures introduced by the US Department of Energy for greater accuracy. The minimum HSPF required in Canada (Region V) is 7.1, while high-efficiency models can reach 13.2 or higher. Cooling efficiency is measured by the Seasonal Energy Efficiency Ratio (SEER) or its updated version, SEER2.

  ASHP Cold Climate Performance

  Standard ASHPs face challenges in very cold climates like Ontario’s. As temperatures plummet, their ability to extract heat diminishes, reducing both their heating capacity (the amount of heat they can deliver) and their efficiency (COP). Below a certain temperature, often between -10°C and -15°C, a standard ASHP may not produce enough heat to keep the house warm, necessitating reliance on a backup heating source.

  Cold-Climate Air-Source Heat Pumps (ccASHP) are specifically engineered to overcome these limitations. They employ advanced technologies such as:

  • Variable-Speed Inverter-Driven Compressors: Allow the heat pump to adjust its output precisely to match the heating demand, improving efficiency and performance across a wider range of temperatures.
  • Enhanced Vapor Injection (EVI): Injects refrigerant at an intermediate point in the compression cycle, boosting heating capacity and efficiency at very low temperatures.
  • Improved Heat Exchanger Design and Controls: Optimize heat transfer even in frigid conditions.

  These features enable ccASHPs to operate effectively and efficiently at much lower temperatures, often down to -25°C or even -30°C, while maintaining a significant portion of their heating capacity and a reasonable COP.²²Organizations like the Northeast Energy Efficiency Partnerships (NEEP) maintain lists of ccASHP models that meet specific cold-climate performance criteria, such as maintaining over 70% heating capacity and a COP greater than 1.75 at 5°F (-15°C).²⁰

  How the Hybrid System Operates Together: The Switchover

  The defining feature of a hybrid system is its ability to intelligently switch between the ASHP and the furnace. The goal is to utilize the highly efficient heat pump during milder conditions and engage the powerful furnace only when necessary during colder periods. This transition is managed based on the concept of balance points :

  • Thermal Balance Point: This is the specific outdoor temperature at which the heat pump’s maximum heating output exactly matches the rate at which the house is losing heat. Below this temperature, the heat pump alone cannot maintain the desired indoor temperature, and supplemental heat from the furnace is required.
  • Economic Balance Point: This is the outdoor temperature at which the cost of producing heat with the heat pump (based on its COP at that temperature and the price of electricity) becomes equal to the cost of producing the same amount of heat with the furnace (based on its AFUE and the price of natural gas). Below this temperature, the furnace is the cheaper option to run, even if the heat pump could still provide some or all of the required heat.

  The switchover temperature is the outdoor temperature setting programmed into the system’s thermostat that dictates when the system transitions from heat pump operation to furnace operation. This temperature can be set based on either the thermal balance point (to maximize heat pump usage and potentially minimize GHG emissions) or the economic balance point (to minimize operating costs). Studies and homeowner reports from Ontario show a range of switchover temperatures being used, from as high as 1.7°C (likely for standard ASHPs or cost optimization with high electricity prices) to as low as -5°C, -8°C, or -9.4°C (more typical for ccASHPs or prioritizing heat pump runtime). The optimal setting depends on the specific equipment, energy prices, and homeowner priorities, and is typically configured by the installing contractor but can often be adjusted by the homeowner.

  Role of Smart Thermostats

  Modern hybrid systems rely heavily on smart thermostats (e.g., Ecobee, Nest, Honeywell, or manufacturer-specific controls) for effective operation. These thermostats go beyond simple temperature settings; they implement sophisticated control logic to optimize the switchover between the heat pump and furnace :

  • Outdoor Temperature Monitoring: They use built-in or external sensors (or internet weather data) to track the current outdoor temperature.
  • Efficiency Estimation: They often estimate the heat pump’s COP based on the outdoor temperature, using pre-programmed performance curves for the specific model.
  • Cost Calculation: They compare the estimated cost of running the heat pump (using the estimated COP and the current electricity price, considering Time-of-Use or Ultra-Low Overnight rates) against the cost of running the furnace (using its AFUE and the current natural gas price).
  • Automatic Switching: Based on the cost comparison (for economic optimization) or a pre-set temperature threshold (for thermal optimization or simpler control), the thermostat automatically selects the most appropriate heating source.
  • Advanced Features: Some thermostats allow for “smart factor” adjustments, enabling homeowners to prioritize GHG reductions by allowing the heat pump to run even if it’s slightly more expensive than the furnace, up to a certain percentage. They may also incorporate learning algorithms to optimize performance over time.

  Professional organizations like ASHRAE provide guidelines for optimizing HVAC control strategies, including those for hybrid systems, although the specific algorithms can be complex and proprietary.

  The selection between a standard ASHP and a ccASHP within a hybrid system framework has profound implications. A ccASHP’s ability to operate efficiently at much lower temperatures (down to -25°C or below) allows for the switchover temperature to be set significantly lower compared to a standard ASHP (which might switch over closer to the freezing point). This extended operating range for the heat pump translates directly into more hours of heating provided by electricity rather than gas, maximizing potential energy savings and greenhouse gas reductions.

  Furthermore, the concept of an economic balance point highlights a crucial dynamic: it is not a fixed value. Fluctuations in Ontario’s electricity rates (driven by TOU/ULO periods and OEB rate adjustments) and natural gas prices (influenced by market forces and regulatory changes like the carbon tax removal) constantly shift the relative cost-effectiveness of the two heating sources. Relying on a single, fixed switchover temperature determined at the time of installation for cost optimization is inherently limited. Achieving true, ongoing cost optimization necessitates either a smart thermostat capable of real-time cost comparisons or periodic manual adjustments by the homeowner based on current energy prices.

  Finally, while hybrid systems offer the advantage of redundancy – if one component fails, the other can potentially still provide heat  – it’s important to recognize that this introduces the complexity of maintaining two distinct systems. Both the heat pump (compressor, refrigerant lines, fans) and the furnace (burner, heat exchanger, blower, igniter, venting) have their own maintenance requirements and potential failure points.

  1. Head-to-Head Comparison in Ontario

  Choosing between a conventional natural gas furnace and a hybrid heating system involves weighing several factors specific to the Ontario context.

Energy Efficiency

Directly comparing the primary efficiency metrics – AFUE for furnaces and HSPF2 for heat pumps – is not straightforward as they measure efficiency differently. AFUE measures the percentage of fuel converted to heat, capped below 100%. HSPF2 measures the ratio of seasonal heat output to seasonal electricity input, reflecting the heat pump’s ability to move heat and achieve effective efficiencies well over 100% (COP > 1).

The key efficiency advantage of a hybrid system lies in its operational strategy. By utilizing the heat pump during milder temperatures when its COP is high (often 2.5 to 5.0+, see Table 3), it displaces the consumption of natural gas that the furnace would otherwise burn. The furnace only operates during the coldest periods when the heat pump’s efficiency significantly drops. This leads to lower overall energy consumption compared to a furnace operating alone throughout the heating season.

Additionally, the heat pump component of a hybrid system provides summer cooling, effectively replacing the need for a separate central air conditioner. Modern heat pumps often boast high cooling efficiency ratings (SEER2), potentially offering more efficient cooling than older, standalone AC units.

Operating Costs

The relative operating cost of a hybrid system versus a conventional furnace in Ontario is highly dependent on the fluctuating prices of natural gas and electricity, and the homeowner’s usage patterns.

• Ontario Electricity Rates (Effective May 1, 2025): Homeowners typically choose between Time-of-Use (TOU), Ultra-Low Overnight (ULO), or Tiered pricing plans set by the Ontario Energy Board (OEB). Rates vary significantly depending on the time of day (TOU/ULO) or total monthly consumption (Tiered). Delivery charges from the local distribution company (e.g., Hydro One) are added to these commodity rates.
• Ontario Natural Gas Rates (Effective April 1, 2025): Natural gas rates consist of the commodity cost (which fluctuates quarterly), delivery charges (set by the OEB, includes fixed monthly charge and variable charge per m³), and a facility carbon charge (related to Enbridge’s operational emissions). The federal carbon charge on consumption was removed effective April 1, 2025.
• Cost Comparison & Potential Savings: Hybrid systems aim to minimize costs by using the heat pump when electricity is cheaper (e.g., off-peak TOU, ULO overnight) or when the heat pump’s efficiency (COP) makes it more economical than the furnace, even at higher electricity rates. The removal of the federal carbon tax has made natural gas relatively cheaper compared to the 2019-2025 period, potentially reducing the operating cost advantage of heat pumps during certain times. Studies and real-world data show mixed results: NRCan suggests cost-comparability in low gas price regions like Ontario, while STEP analysis showed savings potential pre-carbon tax removal.¹⁴ Some users report savings, others report higher costs depending on rates and usage patterns. System-wide, hybrid systems are projected to reduce peak electrical load, potentially saving billions in infrastructure costs. The OEB bill calculator helps compare electricity plans but cannot directly compare the operational costs of different heating systems.

Environmental Impact

The primary environmental difference lies in greenhouse gas (GHG) emissions. Natural gas combustion inherently releases GHGs, primarily carbon dioxide (CO2), along with smaller amounts of methane (CH4) and nitrous oxide (N2O). Heat pumps, being electric, produce zero direct emissions at the home. Their operational emissions are indirect, associated with the generation of the electricity they consume.

Ontario’s electricity grid is one of the cleanest in North America, with over 90% of generation coming from non-emitting sources like nuclear, hydroelectric, wind, and solar power.¹⁵¹ This results in a low average grid carbon intensity. While values fluctuate, recent estimates place it around 67 gCO2e/kWh, though forecasts suggest potential short-term increases due to nuclear refurbishments before declining again.

Consequently, hybrid systems offer substantial GHG reductions compared to conventional gas furnaces. By displacing a significant portion of natural gas heating with low-carbon electricity, studies suggest annual GHG emission reductions of 30-40% or more are achievable. Lifecycle assessments (LCA), which consider emissions from manufacturing, transportation, and end-of-life disposal in addition to operation, generally show favorable results for heat pumps compared to fossil fuel systems due to the large impact of operational emissions over the system’s lifespan.

Installation Considerations

• Complexity: Replacing an existing furnace with a new one is typically the least complex option, assuming existing ductwork, venting, and gas lines are adequate. Installing a hybrid system involves adding the outdoor ASHP unit, installing the indoor coil (usually above the furnace), running refrigerant lines between the indoor and outdoor units, and integrating the controls. While more involved than a furnace-only replacement, it’s often comparable to installing a furnace and a separate central air conditioner.
• Ductwork: Most homes in Ontario with furnaces have existing ductwork. While generally compatible, this ductwork should be assessed by the contractor. Heat pumps sometimes operate with slightly different airflow requirements than furnaces, and modifications (like sealing leaks or adjusting register sizes) might be recommended for optimal performance, though often not strictly necessary. Ductless systems bypass ductwork entirely.
• Electrical Requirements: This is a critical consideration for retrofits. Heat pumps require dedicated 240V electrical circuits. Older homes, particularly those with 60-amp or 100-amp electrical panels, may lack the capacity to handle the additional load of a heat pump alongside existing appliances. In such cases, an electrical panel upgrade is necessary, which can add significantly to the project cost – typically $2,500 to $3,500 or more in Ontario. Assessing the home’s electrical service capacity early is crucial when considering a heat pump or hybrid system.
• Installation Costs: Costs vary based on equipment choice, home size, location, and installation complexity.

The potential need for an electrical panel upgrade represents a significant variable in the cost-benefit analysis of retrofitting a hybrid system into an older Ontario home. Unlike a straightforward furnace replacement that typically utilizes existing electrical infrastructure, adding a heat pump often demands more electrical capacity. This upgrade cost, potentially adding several thousand dollars, can substantially alter the financial payback period and overall feasibility compared to simply replacing the furnace. Therefore, an early assessment of the home’s electrical panel and service capacity is a critical step for homeowners considering a hybrid system.

Another financial consideration, albeit smaller, is the ongoing cost of maintaining a natural gas connection. Hybrid systems, by definition, require this connection for the backup furnace. This means homeowners continue to pay the fixed monthly customer charge levied by the gas utility (e.g., Enbridge), regardless of how little gas the furnace actually uses. While operational savings may still be realized, this fixed charge (around $30/month or $360/year) slightly reduces the net savings compared to an all-electric heating solution where the gas service could potentially be disconnected entirely.

Conclusion: Choosing the Right System for Your Ontario Home

Both conventional high-efficiency natural gas furnaces and hybrid heating systems (ASHP + gas furnace) represent viable options for heating homes in Ontario, each with distinct advantages and disadvantages.

• Conventional Gas Furnaces offer proven, powerful heating performance, especially reliable during Ontario’s coldest winter days. Their upfront installation cost is typically lower than hybrid systems, and their operation is straightforward. However, they only provide heating (requiring a separate AC), their efficiency is fundamentally capped below 100% (AFUE), and they directly produce greenhouse gas emissions through combustion.
• Hybrid Heating Systems offer the potential for significant energy savings and substantial greenhouse gas reductions by leveraging the high efficiency of an electric heat pump during milder weather. They also provide integrated cooling. However, they generally have a higher upfront installation cost, their operating cost savings are sensitive to fluctuating electricity and natural gas prices (especially with the recent removal of the federal carbon charge), and their performance relies on a more complex interplay between the heat pump, furnace, and smart controls. Installation, particularly in older homes, may require costly electrical upgrades.

Ultimately, the “best” choice depends on individual homeowner priorities and circumstances. Key factors to consider include:

• Heating Needs & Climate Tolerance: Is unwavering heat output in the absolute coldest temperatures the top priority, or is maximizing efficiency in milder conditions acceptable, relying on the furnace backup when needed?
• Budget: How sensitive is the decision to upfront installation costs versus potential long-term operating savings? Are financing options like the Canada Greener Homes Loan being considered? Are current provincial/utility incentives (which can change) a factor?
• Existing System & Home Condition: What is the age and condition of the current furnace and air conditioner? Does the home have suitable ductwork? Crucially, does the electrical panel have sufficient capacity for a heat pump?⁸⁹ How well-insulated and air-sealed is the home (better envelopes reduce the load on any system)?
• Energy Costs & Usage Patterns: What are the current local costs for natural gas and electricity? Is the homeowner on a TOU, ULO, or Tiered electricity plan, and are they willing/able to shift electricity usage (e.g., EV charging, laundry) to off-peak/overnight periods to maximize savings with a heat pump?
• Environmental Goals: How much weight is given to reducing the home’s direct greenhouse gas emissions?

The decision between a conventional furnace and a hybrid system involves navigating technical performance, economic uncertainties, and personal values. Hybrid systems represent a significant step towards decarbonizing home heating in Ontario, offering substantial environmental benefits and potential, albeit variable, cost savings. Conventional high-efficiency furnaces remain a reliable and often lower-upfront-cost option, particularly for homeowners prioritizing simplicity and guaranteed performance in extreme cold.

Regardless of the system chosen, homeowners are strongly advised to obtain multiple quotes from qualified, reputable HVAC contractors. Insist that any proposal includes a proper heat loss and heat gain calculation based on the CSA F280-12 standard to ensure the equipment is correctly sized for the specific home. This foundational step is essential for achieving optimal comfort, efficiency, and system longevity.