There are two important things to consider when thinking about the efficiency of your HVAC system. The first is technology. Since central residential systems became commonplace in the 1970s, their energy efficiency has increased dramatically thanks to improvements in the technology involved (just think about how other types of technology have improved since then!). The second important thing to consider is what energy source you plan to use, particularly for heating. There are significant differences in both efficiency and cost that can make a big difference to your total costs, depending on the climate where you live.

To help consumers choose an appropriate level of efficiency, the US government assigns these ratings to heating and cooling equipment: AFUE (Annual Fuel Utilization Efficiency) for furnaces and other dedicated heating systems, HSPF (Heating Seasonal Performance Factor) for the heating aspect of air-source heat pumps, and SEER/EER ([Seasonal] Energy Efficiency Ratio) for air conditioners and the cooling aspect of heat pumps. We’ll tackle SEER first below, then move on to discuss AFUE and HSPF.

Cooling Efficiency: SEER Ratings

SEER, or the Seasonal Energy Efficiency Ratio, is the most commonly used measurement of efficiency for air conditioners. It measures how efficiently a cooling system will operate over an entire season of standardized temperatures designed to mimic an average US summer. You might sometimes see “EER” mentioned as well — It’s not necessarily a typo. It measures how efficiently a cooling system will operate when the outdoor temperature is at a specific level (95 degrees F).

Make sure you’re consistent in using the same measures together to avoid comparing apples to oranges. Our focus here will be on SEER, because it can give you a closer approximation to how efficiently your unit will work in an actual summer.

Most systems in use in the US now are rated at SEER 9 or above, as less efficient units from the past continue to be replaced with more modern ones. Any central air conditioning units manufactured after 2005 and sold in the US must comply with the federal minimum SEER rating of at least 13. If these units are installed in any of the Southeast states since the beginning of 2015, including North Carolina, they must be at least SEER 14. Many available heat pumps today have SEER ratings of between 17 and 20. And other types of air conditioners can reach over SEER 30.

As you would expect, higher SEER ratings cost more money. These systems are more complex and involve more expensive technology. Some allow variable refrigerant flow and variable supply air flow, in addition to having larger coils and multiple compressors than minimum SEER type units.

So it makes sense to consider your own expected usage. If you live in a climate zone where air conditioning is rarely needed, a minimum SEER unit might be fine, as you wouldn’t get much benefit from the additional efficiency. This reality is reflected in the new regional SEER requirements: If instead you live in a place with long, hot, humid summers, such as North Carolina, you will likely use your HVAC system in cooling mode more often and thus you would have more to gain by choosing a unit with greater efficiency.

Upgrading to a more efficient system can bring you significant energy savings. For example, if your old air conditioning unit was SEER 9 and your new system is SEER 15, you would use 40% less power after the upgrade (get this by dividing the old SEER by the new SEER and subtracting from 1, in this case, 1 − 9/15 = .4). The dollar value of your savings would of course depend on your particular usage rate and cost of electricity, but you could easily see savings of up to $210 in a single North Carolina summer.

While SEER is designed to measure cooling efficiency and not the heating ability that heat pumps also bring to the table, in climates with moderate winters there is a correlation between a higher SEER and greater heating efficiency in a heat pump. But as the outdoor temperature gets colder, heat pumps work less well and then eventually can’t keep up. Supplemental heat is then required, which is often generated with expensive electricity. To get a better idea of a heat pump’s overall heating efficiency, look at the HPSF measure, discussed below.

The table below can give you some idea how equipment has improved in efficiency over the years and how the efficiency is related to annual operating cost. The table below uses the average cost of residential energy from Duke Energy for North Carolina as of February 2016. It assumes a 2,300 sq. ft house located in Raleigh, NC (where electricity is relatively cheap), with average insulating properties, a summer indoor temperature of 72, and a winter indoor temperature of 68.

As the table shows, your savings will depend on how much electricity you are already using, as well as how much your electricity costs. Keep in mind that this example demonstrates only the benefit of upgrading a central air conditioner — Upgrading a furnace at the same time or installing a heat pump rather than a new central A/C unit will likely increase savings proportionally more than the extra replacement cost, causing the payback period to go down.

Also keep in mind that your home might be better – or worse – than the average set of assumptions above. If you have a smaller, well-insulated house and you like to keep it a bit warmer at 75 degrees in the summer, it would take you much longer to recoup the cost of upgrading to a higher SEER unit. So maybe you wait until there’s a serious problem rather than upgrading just to save electricity.

Or maybe your house is closer to 4,000 sf, it’s got hardly any insulation, and you keep the thermostat set at a cool 65 degrees. Let’s also say that you’ve got a big, old 6 SEER central air conditioner. Your summer cooling bill could easily be $1,310 in Raleigh right now, and your winter heating bill is probably pretty hefty as well. Putting in an 18 SEER unit would save you $874 per summer, with a payback period of only 6 years. Even going with a much more efficient but more expensive 23 SEER unit would pay for itself in 8 years, with a savings of $968 per year in cooling. And that’s before you consider adding some insulation, accounting for the winter benefits of getting a heat pump, and maybe using a smart thermostat.

If you don’t know which part of the range your situation falls in, a good contractor can talk you through the specifics of your own home.

Heating Efficiency: AFUE and HSPF

The efficiency measure you use to compare equipment will depend on what type of heating system you plan to get. For heating systems that burn their fuel, such as furnaces or boilers, the relevant measure will be AFUE, or Annual Fuel Utilization Efficiency. Air-source heat pumps use electricity plus natural temperature differences, so they are measured instead in HSPF, the Heating Seasonal Performance Factor.

Both measures are seasonal, like SEER, in that they average the results of an entire season of different outdoor temperatures for a more realistic picture of how each machine would function in your home. For instance, warming up a furnace for just a few hours of heat in the spring or a heat pump using auxiliary heat on the coldest winter days both result in less than maximum efficiency, and that is reflected in each respective measure.

AFUE measures the ratio of useful heat output to energy input. The result is a percentage. For example, a furnace that runs on natural gas and has a 92% AFUE means that, on average over the course of a year’s worth of heating, it will send 92 BTUs of heat into your home for every 100 BTUs it uses in natural gas. It also means that 8 BTUs out of those 100 BTUs that you paid for went out into the air rather than making your home warmer. So the higher the AFUE percentage, the better. Top-of-the-line furnaces can get over 98% AFUE, while that old furnace in your basement, even if it appears to be running fine, might be less than 60% AFUE. It does cost money to replace a furnace, but potential savings of almost 40% per heating month could make that investment pay off relatively quickly.

HSPF is the ratio of the amount of heating done by an air-source electric heat pump during an entire season divided by the total electrical energy used to do so. The result is a number of watt-hours, and again the higher the number the better. You can look for an HSPF of at least 8-9 for the cheaper models of air-source heat pumps. Or pay a bit more for up to 13 HSPF if you live in a colder climate.

Another thing to keep in mind is that both of these measures only represent the efficiency of the heating equipment itself, not the whole system. If heated air passes through an uninsulated duct in your cold attic on its way to your bedroom, AFUE or HSPF will not capture those heating losses. To improve the efficiency of your system as a whole, discuss with your contractor whether ENERGY STAR home sealing (insulation and air sealing) or duct sealing would make sense for your home.

Fuel Type

The cooling aspect of the vast majority of heat pumps and air conditioners in the US now uses electricity (though on-site solar is beginning to provide some of this electricity). With recent low natural gas prices, however, some people are returning to the natural-gas fired types of air conditioners that were popular half a century ago. There are cost savings and other benefits, but the upfront costs are pretty significant. If you are doing new construction of a particularly large home, it might be worth looking into, but for the rest of us, electricity is still the usual choice to run the machines that cool our homes.

For heat, on the other hand, there are many more viable choices for fuel type. The following table lays out various options along with the associated technology and the expected AFUE (Average Fuel Utilization Efficiency) for each, along with estimated fuel costs as of January 2016 in North Carolina.

As you can see from the first column of numbers in the table, there is quite a range of efficiencies available. But remember that efficiency isn’t the only thing — These energy sources all have different costs per unit of heat provided. For example, direct electric heating has the highest efficiency (with the exception of heat pumps, see below). But as you can see from the last two columns, it is one of the most expensive fuels right now.

The costs can also depend on your particular situation. For instance, if you have a significant amount of excess solar energy available in the winter (that you can’t sell back to the utility company), your electrical heating would be free. Or if you have piles of nice dry firewood plus the time and inclination, you’d spend the least money just building yourself a fire every morning.

The numbers for the heat pump in the table are not a mistake – An AFUE range is not included in this table because their heating efficiency is measured in HSPF instead, due to their mix of electricity, temperature differentials and occasional backup heat from one of the other sources on the table. But you can expect an ordinary air-source heat pump to be around 250% efficient in typical North Carolina winters, bringing your heating costs far below the other choices to only $1 per 100,000 BTU of heating output.