Should I add a heat pump to my propane-heated house?
Yes, for many rural Minnesota homes: a cold-climate heat pump beside the propane furnace (dual fuel) carries milder days and cuts gallons delivered. Savings depend on your propane price, electric rate and the heat pump's efficiency. Installed, heat pumps run $7,500–$14,500 with us.
Key points
- The usual conversion is dual fuel: the heat pump replaces the AC and the propane furnace stays as backup.
- One gallon of propane holds about 91,500 BTU; one kilowatt-hour is 3,412 BTU.
- Divide your price per gallon by your price per kWh and compare it with the table to see when the heat pump is cheaper.
- Your electric co-op's rebates and dual-fuel programs can change the math, so call before you choose equipment.
- Keep propane in the tank: the furnace is your backup for the coldest nights.
For many propane homes in rural Minnesota, adding a cold-climate heat pump next to the propane furnace is worth pricing. The heat pump carries fall, spring and milder winter days, the furnace covers the coldest stretches, and your own bills tell you whether it pays.
Past the edge of the gas mains, a lot of homes in our area heat with propane: farmhouses and acreage homes out toward Cokato and Watertown, McLeod County farm country, rural parcels in Scott County and along the northern edge of Anoka County, and newer houses built on land the gas company never reached. They pay propane prices and depend on a delivery truck in January.
Do you keep the propane furnace when you add a heat pump?
The usual conversion is dual fuel. The heat pump replaces the central AC (or goes in where there wasn't one), its coil sits on the propane furnace, and the thermostat hands off between them by outdoor temperature. The heat pump heats through fall, spring and the milder part of winter; the propane furnace carries the coldest stretches and backs you up if the heat pump ever needs service. Our dual-fuel guide covers how that switchover point is chosen.
Going all-electric and removing the propane furnace is possible in a tight house with a well-sized cold-climate system and electric backup strips. In a drafty farmhouse, we'd keep the furnace.
When is a heat pump cheaper to run than propane?
You can work out when the heat pump is the cheaper heat with your own bills and no rate forecasts:
- A gallon of propane holds about 91,500 BTU, the standard figure from the U.S. Energy Information Administration.
- A 95% furnace turns that gallon into about 86,900 BTU of heat; an 80% furnace, about 73,200.
- A kilowatt-hour is 3,412 BTU. A heat pump multiplies it by its COP, so at a COP of 2.0 you get about 6,800 BTU.
| Heat pump COP | kWh that match one gallon (95% furnace) | kWh that match one gallon (80% furnace) |
|---|---|---|
| 1.75 | about 14.6 | about 12.3 |
| 2.0 | about 12.7 | about 10.7 |
| 2.5 | about 10.2 | about 8.6 |
| 3.0 | about 8.5 | about 7.2 |
Divide your price per gallon by your price per kWh. If the answer is bigger than the table number for your furnace and the heat pump's COP at that outdoor temperature, the heat pump is the cheaper heat at that temperature. COP falls as it gets colder, so somewhere the answer flips; that temperature is your cost-based switchover point. ENERGY STAR's cold-climate label requires a COP of at least 1.75 at 5°F, and the NEEP cold-climate list shows 5°F figures for listed systems.
Use all-in prices: propane including any delivery or tank fees, and electricity including the energy charge and fuel adjustments. The fixed monthly charge on your electric bill doesn't change with usage, so leave it out.
What does a heat pump cost to install in a propane home?
Our installed range for a heat pump is $7,500–$14,500, and a ductless system for a house without ducts runs $4,200–$12,500. On a rural house the price moves with the electrical service (the outdoor unit needs its own 240-volt circuit, and backup heat strips need more on top of that), with where the outdoor unit can sit and how long the line set has to be, and with how much the ducts need. Our heat pump installation cost guide goes through each piece.
Distance doesn't change the price. A heat pump, or a furnace replacement in Watertown, costs the same out on a township road as it does in the city.
Does a heat pump keep heating below zero?
A cold-climate heat pump keeps making heat well below zero, though its capacity drops as it gets colder; Mitsubishi, for example, rates its Hyper-Heat models to run down to -13°F. In a dual-fuel setup that matters less, because the propane furnace takes the coldest nights. Our post on cold-climate heat pumps in Minnesota covers winter performance. On a rural lot, snow and wind matter more:
- Raise it. Set the outdoor unit on a stand or bracket above the usual snow depth and clear of roof drip, so defrost water drains away and snow can't bury the coil.
- Watch the drifts. Note where snow piles around the house in a normal winter and keep the unit out of those spots.
- Expect defrost. Frost on the coil and a burst of steam now and then are normal in winter; that's the defrost cycle clearing the coil.
When the dual-fuel setup acts up
| What you notice | Likely cause | What to do |
|---|---|---|
| The furnace runs on mild days | Switchover set too high, or a thermostat not set up for dual fuel | Have the switchover and thermostat settings checked |
| Outdoor unit caked in ice for hours | Blocked airflow, a drift or a defrost fault | Clear snow gently by hand; call if the ice stays |
| House falls behind on the coldest nights | The backup isn't taking over | Call before the next cold night |
| Furnace won't light when the heat pump hands off | A low tank, the regulator or an ignition fault | Check the tank gauge, then call your supplier or a technician |
Propane-specific things to plan for
- Read your propane contract. Buying fewer gallons can change pre-buy, budget-plan or tank rental terms with your supplier.
- Check the furnace's age. A new heat pump on a 22-year-old propane furnace means a second project soon. If the furnace is close to the end, replacing both together makes sense; a new furnace runs $4,500–$9,500 with us.
- Farmhouse ducts. Older farmhouses often have small or leaky ducts, and heat pump air is cooler at the register than furnace air. Ask the installer to confirm the far rooms will get enough.
- A boiler instead of a furnace. A propane boiler house has no ducts for a heat pump coil, so ductless heads are the usual route, with the boiler kept as backup.
Your co-op, rebates and credits
Many rural homes around the metro buy their electricity from a co-op, such as Wright-Hennepin, Connexus, Minnesota Valley, Dakota Electric or East Central Energy, and some towns have municipal utilities. Several co-ops run heat pump rebates and dual-fuel or demand-response programs. Co-ops such as Connexus and Dakota Electric list heat pump or dual-fuel programs, so ask yours which are current. Those programs can change what you pay for heat pump electricity, and they usually expect a backup such as your propane furnace, because the co-op can switch off the electric heat during peak periods. Call your co-op before you choose equipment. We don't quote their rates, because they change.
Xcel Energy electric customers can look at Xcel's heat pump rebates, and some require a registered contractor. CenterPoint Energy's heat pump rebate is for its natural gas customers, so propane homes don't qualify there. Minnesota's IRA home energy rebates had not launched as of mid-2026. On the Wisconsin side, around the Town of Oak Grove and River Falls, Focus on Energy's income-qualified HEAR program is open, and most of its rebates need an IRA Registered Contractor. Its rules for equipment that replaces fossil fuel appliances have been changing, so check the Focus on Energy site for current terms before counting on a rebate. The federal 25C tax credit ended for equipment placed in service after 2025.
Next step
Gather last winter's propane delivery tickets and your electric bills, and note your furnace's age. Then call 612-429-3465 any day from 7am to 9pm, and we'll look at the house, the ducts and the panel, run a load calculation and quote a cold-climate heat pump with the switchover set for your prices. Our post on propane heating costs covers the furnace side of the bill.
Common questions about heat pumps
Do I need to keep propane in the tank?
Yes. The propane furnace is your backup for the coldest nights and for any time the heat pump needs service, and it can't back you up on an empty tank. Keep automatic delivery or a set refill point, because a mild fall on the heat pump means fewer deliveries, and it's easy to go into January lower than you think.
Is a heat pump cheaper than propane in Minnesota?
It can be at milder temperatures. Divide your propane price per gallon by your electric price per kWh and compare the result with the table in this post for your furnace and the heat pump's COP. A COP of 2.0 against a 95% furnace needs roughly 12.7 kWh to equal one gallon. Below the switchover temperature, propane wins.
Will a co-op heat pump program change my plan?
It can. Some co-ops, such as Connexus and Dakota Electric, list heat pump or dual-fuel programs, and those may offer a lower electric rate in exchange for letting the co-op switch off electric heat at peak times. A propane furnace as backup usually fits that requirement. Ask your co-op for current terms before you pick equipment.
Does my propane tank or supplier contract need to change?
Check the contract before you install. Buying fewer gallons can change pre-buy, budget-plan, minimum-delivery or tank rental terms. Your tank and regulator stay in place for a dual-fuel system, because the furnace keeps running on cold nights. Tell your supplier you expect lower usage so the terms match.
Sources
- Focus on Energy focusonenergy.com
- ENERGY STAR energystar.gov
- NEEP Cold Climate Air Source Heat Pump List ashp.neep.org
- Xcel Energy Minnesota heating and cooling rebates mn.my.xcelenergy.com