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Q&A Spotlight

Energy Upgrades on a Budget

A homeowner looks to replace a water heater and HVAC system as part of an efficiency overhaul

Time for an upgrade: This circa 1990s gas furnace and its companion air conditioning system is due for replacement. The homeowner wonders whether to chose another gas furnace, or go with an all-electric HVAC system. Photo courtesy of Andrew Bennett.

Andrew Bennett is giving his 1991 home in eastern Tennessee an efficiency upgrade, as time and budget permits. He has a long list of improvements he’d like to make—new windows, sealing and insulating the crawlspace, more air sealing around the house—but he’s also realistic enough to see it will not happen overnight. “As most normal people,” he says in a recent Q&A post, “I’m on a budget and it will take time.”

For now, he’s focused on the best way to replace an old gas water heater and his HVAC system. The 1900-square-foot house is currently served by a single-zone, 3.5-ton HVAC system with a gas furnace. Bennett has found a contractor who’s made some recommendations for new equipment.

“It took a while to find someone who actually knows how to size things and they are looking at a 2-ton unit with a variable speed blower,” Bennett writes. Plans call for a second thermostat upstairs, but budget constraints are forcing Bennett to reuse existing ducts even if they aren’t suited to the smaller HVAC system.

“My question on HVAC is should I go all electric or stay with gas heat?” Bennett asks. “I don’t have solar and have no plans or budget for going solar for electricity generation.”

Second, Bennett wonders what to do about his gas-fired water heater. Although it still gets water hot, it also “intermittently spews out a black, oily residue.” Should he simply replace it with another gas water heater? He’s not convinced that heat-pump water heaters will last 10 or more years without significant repairs along the way, and he’s leery of tankless heaters for the same reason.

That’s where this Q&A Spotlight get started.

Suggestions for a heat pump

David Barnes tells Bennett of his own successful experience of replacing a 5-ton air conditioner and 100,000 Btu furnace operating at 80% efficiency with a Rheem heat-pump water heater and a 3-ton heat pump.

“I’m very happy with the performance and especially the comfort,” he writes.

“We have 4 kids at home so we did the 80-gallon Rheem with higher COP of 3.7 and able to handle large family in heat pump only mode,” Barnes condinues. “RP17 is a 3-stage in cooling, 3-stage plus overdrive in heating, inverter compressor heat pump. It is a good value for a multi stage 18 SEER system.”

This is Andrew Bennett’s home in eastern Tennessee.

Barnes says a two-story house should be equipped with zone dampers, but adds that a bypass duct to maintain air flow or to lower static pressure should never be used.

Yes, says Akos, Bennett is in a part of the country where heat pumps work very well. Even without cheap electricity, he says, the operating cost of a correctly sized heat pump in milder climates should be less than that of a gas-fired appliance.

“I would get somebody other than the HVAC company do your heat calcs,” Akos adds. “I would question that a 2000 sq ft house with single pane windows in your climate needs a 2 ton unit.”

Bennett should not, however, worry much about the over-sized ducts. Akos says they will reduce the velocity of the moving air, so they are quieter and the furnace blower uses less power.

Comparing electricity and gas costs

Show me the numbers, says Walter Ahlgrim.

“I would be interested to see the math that will show a heat pump can cost less than a 96% gas furnace for a house,” he writes, when gas prices are at the 2019 average of $2.57 per million Btu, and electricity costs in Tennessee average 10.79 cents per kWh.

If gas is that cheap, meaning less than a penny per kWh equivalent, Akos replies, “then no way.”

In his case, natural gas works out to around 4 cents per kWh equivalent. A heat pump with a COP of between 3 and 4 would cost less to operate than a furnace using natural gas.

Akos thinks a 2-ton Carrier Greenspeed would easily hit those COP numbers in a warmer climate.

“There is also a benefit to higher efficiency heat pumps when it comes to cooling,” Akos adds. “For example, for me, the cooling costs are about 40% less compared to a standard non-modulating AC.”

Bennett pays a monthly customer charge of $16.67 to his electric utility plus 8.9 cents per kWh. For gas, there’s a monthly customer charge of $10.27, a “facility charge” of 9% and a kWh charge of about 6.5 cents. Akos reads this to mean that gas is just slightly less expensive than electricity for Bennett.

“If this is the case, then a heat pump is a no-brainer,” he says. “It will be much cheaper to run.”

Barnes explains it this way:

A coefficient of performance of 3 means that the unit moves $3 worth of heat for $1 of electricity.

“So if [natural] gas was 3 times cheaper than electricity, the cost of heat produced by a heat pump with a 3.0 cop would be equal to a 100% efficient furnace,” he says, “which the most efficiency offered now is 98% I think. So if electricity is twice the price of gas, but you have a heat pump with a cop of 3.0, it would be cheaper to use the heat pump.”

Steve Knapp suggests Bennett read this article on comparing costs by former GBA editor Martin Holladay.

What to do about that water heater

Bennett might start by flushing out the hot water tank, Tom May advises.

“Replacing the tank if and when it starts to leak is probably your best and cheapest option,” he adds. “That black residue may be coming from the piping itself. Try turning off your water main, draining down the system and then turning it back on a couple of times to loosen up and flush any debris that may be in the pipes.”

When it comes to replacement, GBA editor Brian Pontolilo says he has yet to hear anything but positive feedback on heat-pump water heaters. “I installed one in my own home and it performed great,” he says. “I sold the house after having it for 4-5 years, so can’t comment on long-term durability.”

The crawlspace project

Bennett’s long-term plans include continued work in the crawlspace where ducts for the first floor are located (second-floor ducts run through the floor joists between the first and second floors).

In the crawlspace, Bennett says, “encapsulation is in process.”

“Encapsulation is a buzzword that pushes my buttons,” Ahlgrim says. “You can vent a crawl space or condition it. Encapsulation implies the crawlspace is somehow separated from both the indoors and the outdoors. It seems likely your ducts will leak enough [to] condition your crawl space.”

What Bennett means by “encapsulation” is that a vapor barrier on the ground will run up the sides of the crawlspace and sealed to the concrete block, while seams in the vapor barrier will be sealed with Huber Zip tape.

“Eventually I plan to seal the crawl space vents, insulate the perimeter, and put in a dehumidifier,” Bennett adds. “Not everybody insulates or puts in a dehumidifier, but cest la vie. I’m not done, but I’m out of masks and its pretty dirty and dusty down there so until I can get some more it is what it is.”

A word from our expert

GBA Technical Director Peter Yost has these comments:

My first impulse was to seriously question the following:

  1. Work on HVAC system before the building enclosure: Isn’t it hard enough to get reasonable load calculations done for the existing enclosure much less get predicted load calculations done for post-building enclosure retrofit?
  2. Reuse existing most-likely oversized PA ducts: If ACCA Manual J is about getting the enclosure loads right, what about the benefits of Manual D—getting the duct runs and sizing done correctly?

My second impulse was to call my good friend, colleague, and mechanical engineer, Dan Cautley of Slipstream in Madison, Wisconsin. Dan had the following insights:

So long as the new HVAC system is multi-stage or modulating, that takes a lot of pressure off the needed level of accuracy for the load calculations and sizing. The main thing we want to avoid with over-sizing is short-cycling that leads to reduced comfort in heating and cooling, and poor dehumidification in cooling. Even for space cooling with a heat pump, it’s more about over-cycling than it is over-sizing (with modulating systems).

A big key to energy efficiency is deep nighttime setback so the new system needs to be configured/sized to accommodate this.

I’m in complete agreement with Akos on the acceptability of reusing the ducts. Undersizing can be a real problem, but oversizing has benefits if they are oversized for the new system. Indeed, the results are likely more than acceptable.

Another way to deal with lack of zoning and correct duct sizes is to seasonally adjust dampers at the delivery registers. In Dan’s own home he maintains comfort year-round by opening upstairs registers and throttling back downstairs registers in the summer and reversing the process in the winter.

Dan and I agree that with the HVAC unit being in the garage and ducts currently in a vented, unconditioned crawlspace, the insulation and air sealing of the system should be a top priority.

Dan used to hold high-efficiency natural gas as the all-around best approach to forced-air space heating, but his opinion on that has evolved as we move to more reliable and more efficient heat pumps that align more of our loads to all-electric and renewable energy.

Dan saw no real reason to connect the domestic water heating replacement issue with the HVAC system. Dan is currently engaged in a study of heat-pump water heaters that will attempt to tease out the impact on HVAC operation of HPWHs when they are both in the basement (how much is “Peter robbing to pay Paul” in the winter and reverse in the summer—depending on just how the basement is used). But he cautions that HPWH in a garage will challenge system efficiency during the winter.

Finally, Dan and I both thought that Bennett should take into consideration radon as part of his work, given the in-transition crawlspace and the general levels for many counties in Tennessee (it’s difficult if not impossible to predict indoor radon levels as a function of soil levels and also before-after retrofit impact on indoor radon levels).

-Scott Gibson is a contributing writer at Green Building Advisor and Fine Homebuilding magazine. “Our Expert” is Peter Yost, GBA’s technical director and founder of a consulting company in Brattleboro, Vt. called Building-Wright


  1. Josh Durston | | #1

    That COP explanation is overly simplistic. COP compared to combustion efficiency isn't really relevant. You are comparing a physical heat gathering process (HP), to a chemical combustion process. IMHO, COP isn't the way to do this.

    $1 worth of heat from electricity resistance, is a way different BTU number than $1 worth of heat from natural gas. You may get 4x the heat for $1 of gas, versus electric resistance.
    Which means a COP of 3-4 is probably where you start to break even with gas depending on rates.

    This is totally dependent on utility prices but in my experience, you need a heat pump COP between 3 and 4 to have approximately the same heat per dollar as a decent NG furnace.. It used to be closer to 3, but is creeping towards 4 as electricity prices are climbing faster than NG.

    Personally regardless of rates I'm on a road to electrification. As you tighten and insulate a house more you become less sensitive to utility prices since you consumption is a lot lower overall. So it doesn't really matter if you theoretically pay a little more to heat with a heat pump than NG.

    If rates really skyrocket that will incentivize self production (solar) and storage (batteries).

    Around $25/month just to have a gas meter adds up too, $300 a year on you gas bill for zero btu's. That can offset some of the difference.

  2. User avater
    Jon R | | #2

    "A big key to energy efficiency is deep nighttime setback"

    Not true, but would be interesting to see Dan's numbers anyway.

  3. User avater
    Peter Engle | | #3

    "Dan saw no real reason to connect the domestic water heating replacement issue with the HVAC system. "

    One good reason is so that you don't have an orphaned water heater. This happens when the furnace is removed from a chimney/vent system and the water heater is left behind. The chimney/vent can easily be too large for the water heater, resulting in backdrafting (safety hazard) and condensation inside a masonry chimney (destroys the chimney). You're really supposed to reline/resize a chimney when changing the appliances. If you apply the cost of relining towards a new HPWH, the HPWH starts to look a lot more attractive.

    1. User avater
      Jon R | | #4

      In a non-orphaned case, why doesn't the safety hazard occur all Summer? Or during those frequent Winter periods when the furnace isn't running but the water heater is?

      I only skimmed the GAMA venting rules, but it looks like a lined masonry flue can be 7x oversized, so up to 8x8" nominal is OK for a water heater with a 3" vent. Evidently an orphaned water heater isn't always a problem.

      1. User avater
        Peter Engle | | #5

        Not sure about your math. The area of a 3" round vent collar is 7 The area of an 8x8 masonry vent is 64, therefore, 9x the vent collar area. Not OK. Most 40 gallon water heaters have 3" vent collars, and few masonry chimney liners are smaller than 8x8, so this is a common issue. Also, the I-code series has removed masonry chimneys as allowable venting systems for single naturally-drafted appliances. Only B-vent is now allowed for venting single appliances, or listed relining systems installed in a masonry chimney.

        In winter, masonry chimneys are heated by air escaping from the house and from the periodic firing of the furnace. Few masonry chimneys will completely cool off between furnace firings - at least in the past. With tighter houses and more efficient furnaces, that's changing and venting even combined appliances can get dicey. You're right that, in the summer, the furnace doesn't run at all. But the chimney is warmer in the summer, so less risk of internal condensation. More risk of backdrafting, though, since the temperature difference between the exhaust and outdoor air is lower. Just more reasons to move away from naturally-drafted water heaters.

        1. User avater
          Jon R | | #8

          > Not sure about your math.

          The math works when you use the interior dimension, which GAMA lists as 6 3/4 x 6 3/4".

          1. User avater
            Peter Engle | | #10

            By George, you're right. Just below 7x. Not great, but not bad. Still doesn't help with the prohibition on masonry flues for single appliances though. What edition of the GAMA tables are you looking at? I'm only able to find editions from the early 1990's in my quick search.

          2. User avater
            Jon R | | #12

            I was looking at this one, which is old. I have no idea what rules/code one needs to follow if they are simply removing some equipment.


        2. User avater
          Jon R | | #15

          > I-code series has removed masonry chimneys as allowable venting systems for single naturally-drafted appliances

          I'm interested in a link to that if you have one. IMC 801.18 sees to permit continuing use in the case of a removed furnace or water heater.

      2. User avater
        Dana Dorsett | | #6

        >In a non-orphaned case, why doesn't the safety hazard occur all Summer?

        Because the average temperature of the idling flue is already a lot warmer in summer even without the additional BTU inputs of the space heating appliances, with a greater amount of natural stack draw.

        The warmer average summertime flue temps is also why flue condensation risk from the water heater exhaust are lower when there is little or no space heating load, even though the heating appliances running at a very low (or zero) duty cycle.

        1. User avater
          Jon R | | #9

          Drafts are stronger in Winter, when the delta-T is greater. As Peter said in #5 above.

          Your second paragraph makes sense.

          1. User avater
            Dana Dorsett | | #11

            In winter the flue (especially on an exterior chimney) is full of cold dense air that will be sinking unless/until an burner is putting hot exhaust into it.

          2. User avater
            Jon R | | #13

            It's worth mentioning that the GAMA rules I was lookin at only apply to interior flues. Which in my experience, rise in the Winter.

  4. User avater
    Dana Dorsett | | #7

    [deleted double-post]

  5. Andrew Bennett | | #14

    This is the home owner. I wanted to give an update. I still don't have the system replaced yet. My usual HVAC contractor simply refuses to put in a 2 ton unit. I decided to pay for an independent manual J and used It turns out the guy who does the calcs is right here in East TN as well as has a house about the same size as mine...and has a 2 ton unit and he says it's fine.

    So he did the manual J. We fudged some numbers as I'm planning on more insulation, windows, etc long term. His calcs came out with a 2 ton system as well. Based on the comments of Akos on the original post I decided to have the Carrier guy come out and give me a price on a Greenspeed unit.

    He took a look at the Manual J and said it all looked pretty good except for the indoor and outdoor temps he used at 75 degrees inside and 90 outside. He knew off the top of his head how many cooling days we had the last two years that were well over 90 and wondered if the 75 degree indoor temp was really what would keep me comfortable (and I do like to sleep in a cold house).

    So...I emailed back and asked him to raise the outdoor temp to 95 and drop the indoor to 70. That was enough to bump things to 2.5 tons. As you know 2.5 ton systems are only available in single speeds. If I want a multi speed system I'd have to go to 3 tons. The Carrier guy also says that the Greenspeed system won't work with my ducts. He says there's some sort of sensor that checks the static pressure and mine would be (I really don't remember if it was too high or too low, but it wouldn't be right) off and the system just wouldn't run right.

    I think he gave me some good insight on the furnace part of the deal. If I am running a heat pump the furnace just isn't going to be on much at all so having a modulating, multi-speed system might not make a lot of sense from a cost perspective based on how little it would run.

    As far as the heat pump portion of it I could go with a 2.5 ton single speed system where the ductwork would need a bypass or a 3 ton multi-speed (I don't remember if it would need a bypass or not to keep the duct pressure in the right range...remember currently I have a single zone for the whole house, but am planning on putting in another thermostat and dampers to have 2 zones).

    The 3 ton would have a nice dehumidification feature that the 2.5 ton would not...but it would add about significantly to the price for the multi-speed unit.

    This is making me want to pull my hair out. I wish I had the money to do all the energy upgrades I want up front and maybe get the manual J back down to 2 tons, but I just don't have the budget.

    To address Peter Yost's comments about why I'm doing the HVAC first before working on the building enclosure...we've lived in the house for 5 years. The condenser has gone out every single year and both I and my wife are sick of that. So the replacement has to come first.

    Any additional input is gladly appreciated. Thank you all. Andrew

  6. David Piranesi | | #16

    (Dan Cautley) "So long as the new HVAC system is multi-stage or modulating, that takes a lot of pressure off the needed level of accuracy for the load calculations and sizing."

    More than one HVAC installer has pushed back at me when I have suggested this. "Call me when you finish air sealing and windows" is a familliar refrain.

    I can't really blame them since they are the ones on the hook for warranty service. Even if I finish air sealing floors and ceilings first and then do HVAC, as planned, I would hope to do windows gradually. I still hold out hope that modulation will give the house both comfort and room to improve. Any opinions on how to proceed?

    Just as I favor the idea of having an independent professional Manual J, I thought of using an independent designer. But not sure how the designer would get along with the contractor. If anyone thinks this is a good way to go, I wonder if there are any words of wisdom about managing the project so that the contractor willingly provides warranty support, not grudgingly.

  7. Andrew Bennett | | #17

    This is the homeowner again. Here's where things landed. We are going with a Carrier 14 Seer Single speed 2.5 ton heatpump and a 92% gas furnace to have a dual fuel system. I doubt the furnace will be used much, if at all. In the long term the gas just isn't used then we'll just have the gas turned off so that we don't have the monthly fee.

    That will also be facilitated by moving to an electric water heater, likely a Marathon by Rheem. We had one of these in a past house and it seemed to work fine and be as efficient as an electric tank water heater could be.

    The water heater won't get replaced for another month or two so I'll still be researching the HPWH's to see if I can be convinced of their efficiency and durability. The installation of said water heater will be in the garage where the current unit is. I've gotten mixed messages about HPWH garage installations so any input there would be appreciated as well.

    I do want to note that in general the replacement of the water heater is in no way related to the HVAC system. They are just both original to the house (1991) old, worn out, and I happen to have the budget to do both at the time.

    Thank you all for the input.


  8. Andrew Bennett | | #18

    We finally have the new unit in! Right away the house has become much, much more comfortable. It's not real hot yet so we will have to wait and see what cycle times are for the new unit, but regardless the house just feels better. With the old unit we ran the fan 24/7 because if we didn't it just felt schmarmy within a few minutes of the unit cycling off.

    We obviously didn't get top of the line equipment and in retrospect I'm glad we didn't.

    Think about the "pretty good house" concept. It's about putting things together well in proportion. High efficiency equipment works best in a high efficiency home. A regular home needs regular equipment.

    I will work, over a period of time, to make the home a "pretty good house" and by the time it gets there maybe it willbe time to get pretty good equipment to go with it. For now...the house is more comfortable and I bet my utility bill will drop some too.

    Thank you all for your input

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