The US federal government isn't doing much to improve home heating furnace energy efficiency.

Under the new rule, the US Department of Energy (DOE) in 2015 will require nonweatherized gas-fired furnaces – the kind most used for home heating – to be 80 percent energy efficient. That's up from the current mandate of 78 percent.

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But that slight uptick won't have much impact on natural gas use since 99 percent of furnaces sold are already at that level, industry data show.

The manufacturers didn't want to be forced to a higher minimum standard since that would make the cheapest gas burning furnace more expensive. That would cause them to lose some sales to heat pumps, oil furnaces, and other heat generators. Well, the industry got its way.

My guess is a higher standard would have been cost justifiable. I especially suspect that since I expect natural gas prices to go up faster than the overall rate of inflation.

Under the DOE's new efficiency standards, consumers will save $700 million and prevent 7.8 million metric tons of carbon dioxide from wafting into the atmosphere, over 24 years, DOE says. Had DOE instituted a 90 percent standard, consumers would save at least $11 billion and prevent the release of 141 metric tons of CO2 over the same time period, according to separate analyses from the American Council for an Energy Efficient Economy as well as Dow Chemical and the Natural Resources Defense Council.

Some states (at least Maryland, Vermont, Massachusetts, and Rhode Island) impose higher standards. So how much more do gas furnaces cost in those states?

Various heating devices come at more than one efficiency level. For example, heat pumps from the same manufacturer come at different efficiency levels. So if you want to get a new furnace or heat pump make sure you compare and consider how much efficiency you gain in the more expensive models.

I found a web calculator page for comparing cost effectiveness of different heating methods. Note that their default values for the energy sources are from a few years back and you need to put higher costs in for just about every energy source. For electricity use 10 cents per kwh or use the number for your state in that chart or check your electric bill. At the time of this writing heating oil in the US is averaging $3.21 per gallon. For propane the cost is $2.43 per gallon. At those prices a ground source (geothermal) heat pump is about a fourth the cost of oil or propane per BTU of generated heat. At least in the Baltimore area natural gas is going for about 92 cents per therm. That makes natural gas less than a third the cost of oil for heating. Geothermal heat pumps produce the most heat per dollar spent on energy inputs than other sources. But geothermal heat pumps also cost the most for initial installation ($18,000.00 to $35,000.00).

In colder climates where natural gas is not available the geothermal heat pumps already pay back quickly enough. Plus, since heat pumps run off of electricity their operating costs won't go up as fast as oil or natural gas. Natural gas prices are going to rise as US and Canadian natural gas production declines and as more users of oil shift to natural gas. But I do not expect the inflation rate for electricity to be as high as the inflation rates for oil or natural gasl. Electricity has a long run cost ceiling that isn't much higher than the cost of electricity today because nuclear power only costs about 2 cents a kwh more than coal. Though electricity prices can go higher when fossil fuels start running out and before a lot of nuclear plants and wind towers can get built. But once oil production starts declining the cost advantage of using electricity to drive heat pumps will become much bigger.

Space heat and hot water account for about 4.9% of US oil usage. So a replacement all oil furnaces by geothermal and air heat pumps would reduce US oil usage by almost 5%. This is a shift that will pay for itself in dollars saved.

Update If you are considering putting in a wood boiler furnace regulatory risk should be a consideration. Many municipalities are restricting or banning wood boilers as heat sources due to air quality concerns.

Concerned about air quality and neighborhood disputes, Hampden joined a growing number of communities nationwide setting their own rules on the increasingly popular wood boilers, which are not federally regulated. The U.S. Environmental Protection Agency recommends emissions and air quality standards, but does not regulate where and when the wood-fired burners can be installed or used.

Rules are patchy on the state level, too.

Some states, including Connecticut and Maine, have regulations and let their municipalities adopt even stricter limits or ban the boilers altogether. Massachusetts has considered statewide rules but has not enacted them, while Michigan offers a model ordinance that local governments can adopt in the absence of statewide standards.

More sparsely populated rural areas are less likely to regulate the use of wood for heat. So if you have few neighbors you probably have minimal regulatory risk from spending $10,000 to $15,000 on a wood furnace. Though once fossil fuels production declines the rising demand for wood for both heating and biomass energy conversion will probably drive up prices of wood. My guess is electricity doesn't face as much upside price risk as wood.

Update: Migration of heating to geothermal heat pumps should be treated as an urgent matter. Why? See the October 23, 2007 CalTech lecture by Matthews Simmons "Is The Future Of Energy Sustainable" (PDF format). The production of oil is going to go into steep decline. We need to shift in advance as many processes as possible away from oil before that decline becomes steep and highly disruptive.

Update II: Also read the excellent Simmons Bermuda presentation (PDF format).