If you need to replace or add equipment, it’s important to make the right decisions about what to buy and who to hire to install it. How well a new system performs, and how much it costs, depends heavily on its design and the quality of installation work.

Use our ratings of area heating and air-conditioning contractors to identify several top-rated candidates and invite them to your home to offer written proposals. Ask each to explain whether you need more than one separate heating or cooling system and more than one thermostat, and whether you’d benefit greatly from features such as variable speed blowers. You’ll also want to know how ducts will be run, where and how a condenser unit and the blower will be mounted, plus how to access equipment for maintenance and filter replacement.

Their advice and your choices affect how noisy the system is, how quickly and uniformly your home is cooled or heated, how easy it is to maintain, energy consumption, and how disruptive the installation process will be. You’ll also want to ask how much closet, attic, or outdoor space the system requires, and how disfiguring the ducts and air-supply registers will be.

Ask each company which makes and models of equipment it will install, and their capacity, energy efficiency, and sound ratings. Most companies can offer equipment at several different quality levels; ask about their pros and cons.

Size Matters

Make sure that the equipment you buy is the right size for your home. Undersized units won’t efficiently heat or cool spaces; oversized units cost more and cycle on and off constantly, thus boosting utility bills, making more noise, requiring more frequent maintenance, and dying sooner.

The size of heating and cooling units is called capacity. For furnaces and heat pumps, capacity is the amount of heat a unit can generate as measured in British thermal units (Btu). For air conditioners (and heat pumps operating in cooling modes), capacity is measured in Btu but expressed as the amount of heat the units can remove. The capacity of cooling units is usually described in “tons,” where one ton equals 12,000 Btu—for example, a 36,000-Btu air conditioner is a “three-ton unit.”

If you have expanded your home, finished a previously un-air-conditioned space, or your old equipment didn’t sufficiently heat or cool all parts of your home, companies should perform a load calculation to determine the right size of equipment to install. (If you are only replacing old equipment that had adequately heated and cooled your home, new calculations probably are unnecessary.)

Energy Efficiency 101

The energy efficiency of heating and cooling equipment is measured in a number of ways:

  • Furnaces are rated by annual fuel utilization efficiency (AFUE). AFUE ratings for new furnaces range from 90 to about 98, higher being more efficient. Simply said, a furnace with an AFUE rating of 90 uses 90 percent of its fuel efficiently and wastes 10 percent.
  • The efficiency of both air conditioners and heat pumps in cooling mode is measured by seasonal energy efficiency ratio (SEER). For new central air conditioners and heat pumps, SEER ratings range from 13 to about 21, higher being more efficient.
  • The efficiency of air-source heat pumps in heating mode is measured by heating seasonal performance factor (HSPF). New heat pumps range from 7.7 to about 10, higher being more efficient. The efficiency of heat pumps falls as outside temperatures fall; when the outside temperature drops below 33°F or so, the energy efficiency of most new models is usually low enough to require another heat source to maintain the desired temperature inside the home. One solution is to equip the heat pump with a backup electrical resistance heater, even though this means that when it’s cold you’re in effect heating your house with a very large electric space heater, and your electricity bill could skyrocket. An alternative is to back up a heat pump with a furnace. These configurations, referred to as “hybrid” systems, rely on a heat pump to heat the home until it can no longer do so efficiently, at which point a furnace takes over.
  • The efficiency of ground-source heat pumps (sometimes called geothermal heat pumps in heating mode is measured by their coefficient of performance (COP), which indicates how much more efficient the heat pump is than (not very efficient) electrical resistance heat. In cooling mode, efficiency is measured by energy efficiency ratio (EER), which is similar to the SEER measure used for conventional heat pumps. For both the COP and EER, the higher the number the more energy efficient the unit. Ground-source heat pumps have COP ratings ranging from 2.8 to over 5.0 and EER ratings from 13 to over 30.

More efficient equipment costs more money. For example, a highly efficient 98 AFUE gas furnace costs about $1,500 more than an 80 AFUE model. For many homeowners, concern for the environment is sufficient reason to pay extra. But other factors provide additional motivation: Lower power bills and rebates from utility companies. At the end of this article, we list rebates available at the time of this writing in the Twin Cities area.

It’s difficult to calculate exactly how much you’ll save with more efficient equipment. Every home is different, and any formula has to take into account issues like square footage, insulation levels, temperature settings, and many other factors. It is possible to perform these calculations using available software after entering a lot of details—more work than most contractors providing free installation estimates are willing to do.

Contractors can help by estimating what percent off utility bills you’ll save with various types and models of equipment. You can then roughly calculate your energy bills for the year and determine how much you’d save with say, Furnace A versus Furnace B.
If you want more precise estimates to know exactly how much you’d save with a more efficient unit, several software tools can help. Two are fairly user-friendly and provide meaningful analysis, no MIT degree required: Home Energy Saver, a program of the Lawrence Berkeley National Laboratory, and REM/Design. The latter costs $500, but (as of this writing) a full free 14-day demo version was available.

Below, we show, for an illustrative home in the Twin Cities area, our estimates of how energy costs are affected by the purchase of new equipment with varying energy efficiency ratings. Cost figures are based on recent energy prices and available utility rebates; they don’t take into account inflation or foregone interest on money invested in equipment.

In this area, because the resulting energy savings and available rebates from utility companies quickly “pay off” the extra cost, it makes sense to pay extra for a more efficient furnace, compared to buying a minimally efficient 80 AFUE model. Including Xcel Energy’s $200 rebate, a 95 AFUE furnace usually actually costs less than what you’ll pay for a 90 AFUE model. And the energy savings you’d get from installing a very efficient 98 AFUE model would pay off its extra $1,350 cost in less than 10 years.

But in the Twin Cities area it usually doesn’t make financial sense to pay more for a highly energy efficient air conditioner rather than a basic unit.

Ground-source heat pumps provide the lowest annual heating and cooling bills, but these systems are extremely expensive to purchase and install—typically more than $25,000, even after factoring in generous available tax and utility company incentives. But because of the energy savings and long life spans (about twice those of conventional equipment), it makes financial sense to consider them if you know you’ll be in your house for a long time.

When comparing equipment, it’s important to understand that features such as variable-speed blowers and two-stage burners that reduce energy usage won’t be reflected on their models’ efficiency ratings. That’s because ratings are determined while equipment operates at full capacity. A variable-speed blower, for example, usually runs at a constant low speed to maintain the correct temperature, increasing speed and energy use only as needed. If you are comparing the energy efficiency of two different units with similar energy-efficiency ratings—one with variable-speed capability and the other without—the one that can run at variable speeds will use less energy. The same is true when comparing furnaces that have one- or multiple-stage burners. It’s difficult to assess exactly how much energy these features save, but a reasonable rule of thumb is to assume that two-stage burners and variable-speed blowers each decrease furnace energy waste by about 10 percent and increase corresponding SEER/HSPF ratings by 1.0 to 1.5.

If you’re planning an addition or seeking to improve heating or cooling conditions for one room or an upper floor, consider getting a ductless system. These units, common in Europe and in hotel rooms, allow you to control temperatures in just one space. And because they use very little electricity and don’t lose a lot of energy transmitting air through ductwork, they are highly energy efficient.

Getting Quiet

The sound rating of equipment is measured in bels or decibels, with lower ratings being quieter. Compared to equipment made 20 years ago, most are very quiet.

Getting Dependable Equipment

Consumer Reports used to provide ratings of manufacturers of major heating and air-conditioning equipment for reliability based on repair histories it obtained from its member surveys. It ceased collecting and reporting those data, but in its last report for furnaces it found few manufacturer-to-manufacturer differences. For example, it found the two largest manufacturers, Carrier and Trane, had about the same repair rates.

Manufacturer-to-manufacturer differences were more apparent for central air conditioners and heat pumps. Consumer Reports estimated that the average failure rate for five-year-old units was more than 20 percent for central air conditioners and more than 35 percent for heat pumps.

For central air conditioners, the best-performing manufacturer was American Standard (20 percent failure rate); the worst-performing was Amana (30 percent rate). Carrier (24 percent) and Trane (21 percent) scored just slightly worse than top-rated American Standard.
For heat pumps, American Standard scored best for failure rate (31 percent), and York rated worst (50 percent). Carrier (38 percent) and Trane (37 percent) again scored fairly well.

But before committing to one brand, ask top-rated companies for their recommendations; after all, good companies won’t want to install equipment that breaks down often.

And know that it’s widely agreed in the industry that the quality of equipment is much less important than the quality of its installation. As one contractor told us, “It just doesn’t matter too much. If I take the time to install the equipment properly, I can put in the biggest-piece-of-junk furnace and make it hum for 20 years.”

Rebates and Tax Incentives

More efficient heating and air-conditioning equipment costs more, but often these extra costs can be reduced by tax credits and utility company rebates. Below are the incentives we could identify when we checked. Check with your utility company and the Database of State Incentives for Renewables & Efficiency (DSIRE) for up-to-date information.

Tax Credits

Until 2017, the federal government offered tax credits of $150 for installing an energy-efficient furnace, $300 for an air conditioner or heat pump, and $50 for a circulating fan. Unfortunately, those tax credits expired. But there’s still a hefty federal tax credit for ground-source heat pumps: Through the end of 2019, the credit is 30 percent for equipment and installation costs. Beginning in 2020, the credit gets reduced to 26 percent, then in 2021 it drops to 22 percent.

Local governments periodically offer incentives or low-interest loan programs. Although incentives are usually for new construction, they sometimes apply to HVAC replacements.

Utility Rebates

At the time of this writing, Xcel Energy offered several rebate programs for HVAC installations; we’ve described some of them below. Note that some programs require homeowners to work with utilities’ “approved” contractors or to file paperwork before installations occur to get rebates. Other rebates may be available for insulation and air-sealing improvements. Check www.xcelenergy.com/programs_and_rebates for updated info and more details.

  • Furnaces—$200 rebate for units with 95 AFUE; $300 for 96 AFUE; $400 rebate for 97 AFUE or better.
  • Central air conditioning—$150 rebate for units with SEER 13.0 to 14.9; $350 rebate for units with SEER 15.0 to 15.9; $450 rebate for units with SEER 16.0 or better.
  • Ductless mini-split heat pumps—$200-per-unit for approved systems.
  • Electronically commutated motors—$100 rebate.
  • Ground-source heat pumps—$150-per-ton rebate for units with 14.1 EER or better.
  • Smart thermostats—free thermostat and installation.