How Does A Heat Pump Work and Why To Make the Switch

“How does a heat pump work?” is a common question that stems from their unique ability to heat and cool homes. Heat pumps can heat or cool because they operate differently than conventional heating systems. Most heaters generate heat from a fuel source, but heat pumps transfer heat. Whether heating or cooling, heat pumps are more similar to air conditioners than furnaces.

Air-source, ground-source, dual-fuel, absorption, and reverse-cycle chiller heat pumps have individual attributes, but they all operate using the same principle of heat transference. The way heat pumps operate gives them myriad benefits, such as low operating costs, energy efficiency, sustainability, stable energy costs, and financial incentives. You might be compelled to switch from a conventional HVAC system to a heat pump once you learn everything heat pumps offer

What is a heat pump?

A heat pump is a high-efficiency heating and cooling system that transfers heat between a home and the air or a geothermal source. Heat pumps are used year-round to move heat inside in winter and move heat outside in summer. One heat pump system can replace a furnace and AC.

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How do heat pumps work?

Heat pumps don’t generate heat like furnaces. Instead, they utilize refrigerants to absorb and move heat like air conditioners. Each heat pump style operates differently, but they all depend on a law of thermodynamics that heat tends to move from higher temperature areas to lower temperature areas.

How Air-Source Heat Pumps Work

Air-source heat pumps, the most common type, transfer heat between buildings and the outside air. Most air-source systems have an outdoor heat pump condenser and an indoor air handler, but some are contained in a single package.

Refrigerant lines connect the two main components of a split system. The refrigerant circulates between the units’ coils to absorb and expel heat. In cooling mode, the refrigerant absorbs heat from the home’s air and displaces it outside. In heating mode, the refrigerant absorbs heat from the outside air and brings it inside. The reversing valve allows the heat pump to reverse the refrigerant’s flow and perform both functions.

ground source heat pump illustration

How Ground-Source Heat Pumps Work

Ground-source heat pumps transfer heat between buildings and the ground, while water-source heat pumps transfer heat between facilities and bodies of water. These geothermal heating and cooling systems circulate refrigerants or water through pipes buried in the ground or below the water’s surface. Consistent temperatures below ground and water surface levels make geothermal systems highly efficient.

dual fuel heat pump illustration

How Dual Fuel Heat Pumps Work

A dual-fuel heat pump or hybrid system includes an electric heat pump and a gas furnace. The heat pump is the primary heater until temperatures drop too low for the heat pump to be efficient, and the gas furnace takes over heating the home. Dual-fuel heat pumps allow people in cold climates to reap the benefits of heat pumps when temperatures are mild and the advantages of furnaces when the weather is cold.

how an absorption heat pump works illustration

How Absorption Heat Pumps Work

A gas absorption heat pump is an air-source unit powered by natural gas, propane, solar-heated water, or geothermal-heated water instead of electricity. Absorption heat pumps use a mixture of ammonia and water to transfer heat instead of conventional refrigerants.

reverse cycle chiller (RCC) heat pump

How Reverse Cycle Chiller Heat Pumps Work

A reverse cycle chiller (RCC) is a hydronic heating system that integrates with an air-source heat pump for added efficiency. The heat pump heats or cools the chiller’s water tank, and the water warms or cools the home. An RCC can work with central air and radiant floor systems.

Reverse cycle chillers are more efficient in cold weather than air-source heat pumps alone and eliminate the need for backup systems, primarily because they use larger heat pumps capable of extracting more heat from the environment.

How does a heat pump work in cold climates?

If heat pumps transfer outdoor heat, how does a heat pump work in winter? Ground-source heat pumps are not affected by outdoor temperatures. Some air-source units become inefficient below 40°F and require an auxiliary heat system, yet the current outstanding air-source models perform efficiently below -10°F.

Costs, Efficiency and Sustainability

Heat pumps are favored over traditional heating and cooling systems for energy efficiency, reduced operating costs, stable energy costs, and sustainability.

Energy Efficiency

Heat pumps are highly efficient and can provide three times more thermal energy than electricity used to operate. Ground-source heat pumps are the most efficient. In many cases, air-source heat pumps are more efficient than furnaces.

Operating Costs

Heat pumps generally cost less to operate than other heating and cooling systems. Electric rates, climate, heat pump size, efficiency rating, and other variables determine operating costs. Heat pumps cost about fifty cents per hour to work in heating mode and thirty-three cents per hour in cooling mode. Use a heat pump calculator to input tonnage and other specifications for an accurate assessment.

Stable Energy Costs

While fuel prices are rising, electricity rates in grids that don’t derive electricity from fossil fuels have remained relatively stable. Electric heat pumps alleviate homeowners fluctuating fuel costs impacting their utility bills.


Heat pumps are more eco-friendly than other heating systems because they don’t rely on fossil fuels and have lower carbon emissions. Heat pumps can be paired with solar panels for additional sustainability and self-sufficiency.

Financial Incentives

Heat pumps typically have higher upfront and installation costs than furnaces. While the initial costs deter some people, homeowners who install new heat pumps are eligible for financial incentives to offset some of the costs.

The Inflation Reduction Act (IRA) passed in August of 2022 allocates over ten billion dollars in rebates, market incentives, and federal tax credits to motivate homeowners to make high-efficiency home upgrades. Programs like HEEHRA and HOMES offer point-of-sale discounts and post-installation rebates for qualified heat pumps and measured efficiency improvements. The Energy Efficient Home Improvement Tax Credit (25 C) and the Clean Energy Tax Credit (25D) allow homeowners to claim 30% of qualified heat pump installation costs up to $2,000.

State and local governments also provide incentives for heat pump installation. As of publication, it is still being determined how state initiatives can be combined with federal initiatives. It will be up to the discretion of each state or the Department of Energy. Search the DSIRE database for your area’s local offers.

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“How do heat pumps work?” is an excellent question. Heat pumps work like air conditioners; the main difference is heat pumps can run in reverse when heating is needed. Heat pumps can heat and cool because they transfer heat. They can move heat outside of a house in summer and inside in winter. Heat-absorbing refrigerants running through the system make heat transference possible.

Air-source, ground-source, dual-fuel, absorption, and reverse-cycle chiller heat pumps operate differently and have their own features. Air-source heat pumps are the most common type, ground-source pumps are the most efficient, dual-fuel pumps are the best for cold climates, absorption pumps are powered by alternative energy sources, and reverse cycle chillers include a hydronic component. Yet, every heat pump works by transferring heat.

Homeowners switch to heat pumps for their heating and cooling needs because they are highly energy efficient and have reduced operating costs. In addition, homeowners appreciate stable energy prices and sustainable, eco-friendly climate control. The higher upfront costs of heat pumps can be a disadvantage, but homeowners can capitalize on federal, state, and local rebates and tax credits to offset some of the costs.

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