Furnace Efficiency

80% AFUE or high efficiency?

The EPA requires furnaces to have at least a 78% AFUE (annual fuel-utilization rating). This means that a minimum of 78% of the fuel consumed is directly converted to heat your home. The rest escapes through the flue. Currently, the most efficient furnaces you can buy have a 97% AFUE. If your furnace is more than 15 years old, it probably has an AFUE of only 65%, so improvements in energy conservation can have a direct impact on your fuel bill. Keep in mind that these energy efficiency ratings do not consider ducting. According to the Department of Energy and to other energy experts, 20% to 40% of heating energy ends up leaking through ductwork.

Expert posters to the HVAC-Talk forum acknowledge the importance of the AFUE rating in determining fuel consumption, but stress that contractor experience and warranty length are equally important. A high AFUE rating does not promise quality or satisfaction with the product after the furnace is installed. One contractor told us that a well-made 80% AFUE furnace can outperform a lower-quality 90% AFUE furnace.

James Dulley's latest report highlights the advantages of super-efficient two-stage condensing gas furnaces, which range from 92% to 96% AFUE. According to Dulley, the additional cost for these furnaces is offset by the decrease in heating bills which, when multiplied by the expected life of the furnace, can be a substantial savings. Units with a high efficiency rating make the most sense for those who live in areas with severe winters and high fuel prices. That's because these models can cost $1,000 more than 80% gas furnaces, and higher usage in cold climates means you'll be able to make the investment pay off sooner with decreased fuel bills. The other big reason to consider a 90% furnace is to cut down on wasted energy and help decrease the production of greenhouse gases.

Experts generally agree that an 80% efficiency furnace is acceptable if you plan to move within five years, or if you live in a milder climate where recouping the extra cost will take many years. Again, you'll need to ask a contractor to calculate energy costs in order to determine if the higher cost of a 90% unit will be worth it. Critics say you should ask the contractor to actually calculate energy costs using today's energy pricing to give you a relative idea of costs compared to what you're spending now. However, assuming that the costs of these finite natural resources continue to rise, your break-even return on investment will come sooner than projected.

The federal government offered a $150 tax credit to taxpayers who purchased a replacement gas or oil furnace or boiler with an AFUE rating of 95% or higher. That program expired December 31, 2007 and an extension failed to pass both houses of Congress. Congressional leadership still wants an extension. As we were preparing this report, Congress and the president have agreed on the core elements of a bill intended to increase consumer spending, and the final bill may include a rebate extension.

While we await resolution, many states and utilities offer their own tax credits or rebates for new high-efficiency furnace installation. See our Best Research section below for links. Though a tax break helps, most experts say there's not a huge performance gain from a 90% furnace to a 95% furnace, so you may be better off going with a less costly 90% model.

Although installing a more energy-efficient furnace can sound like a win-win plan for you and for the environment, there are some additional considerations. For one, replacing a low-efficiency furnace with a unit with over a 90% efficiency rating involves installing a vent that meets its needs, which can easily add hundreds of dollars more to the cost. While the difference between an 80% and a 94% AFUE furnace is noticeable, the difference between a 94% and a 96% AFUE is negligible, says Dave Hutchins, a 41-year HVAC veteran and owner and president of Bay Area Air Conditioning near Tampa, Florida.

Justin Crossen of D&R Heating & Air Conditioning in Canby, Oregon, maintains that a well-made 80% furnace can perform as well as some 90% furnaces. Several contractors told us that homebuilders install bottom-of-the-line models, regardless of brand. In fact, manufacturers often call them builder-grade furnaces. This is worth keeping in mind if you own a newer home with its original furnace. If you are faced with a repair-or-replace decision, any new furnace you buy is likely to provide a significant performance upgrade.

The American Council for an Energy-Efficient Economy recommends 90% furnaces, noting that they are much less likely to suffer from corrosion. That's because these high-efficiency models exhaust through a plastic pipe that exits through a side wall without using the chimney. Besides installation of a vent that meets the needs of a high-efficiency furnace, other appliances, such as a gas-fired water heater, may need modified venting, adding to total installation costs.

That said, the majority of contractors we interviewed, and articles and research papers we read, recommend furnaces with at least a 90% efficiency rating. An 80% furnace is fine for a rental property or for a homeowner on a budget, says Johnathan Youngs, owner of High Performance Heating & Air in Concord, California. "If it was in my house," he says, "I'd put in a 90%."

In summary, consider a high-efficiency furnace if you live in the Midwest or the Northeast, but realize that you may need to upgrade your vents and the long-term repair costs might be higher. In most cases, you should eventually recoup your investment in energy savings. The payoff period will be affected, however, by the climate, how well your home retains heat and the rates you pay for gas. On the other hand, if you live in a milder climate, an 80% furnace is a reliable, time-proven choice. Though your energy bills will be higher, the lower materials and installation costs might balance long-term costs, depending on how much energy costs rise and how many days per year you typically use your furnace.