For homes in climates where cooling and heating requirements are moderate, heat pumps can be a strong energy-saving alternative to conventional forced-air furnaces and air conditioners. Using refrigeration technology instead of using fuel combustion to provide warmth and cooling, conventional heat pumps move heat from cold to warm spaces--and vice versa--to cool a warm house in the summer and heat a cool house in the winter. By transferring heat instead of producing it, they can do their cooling or heating far more efficiently than furnaces and air conditioners.

An air-source heat pump, the most common type, does this work by transferring heat between a house and the outdoors. In moderate climates where electricity is used for heating, energy bills can be trimmed by as much as 30 to 40 percent. This efficiency drops off significantly at low temperatures because not enough heat can be extracted from the ambient air to provide significant warmth. In this situation, auxillary heat from non-efficient heating elements in the system is usually necessary.

Air-source systems require ductwork like that used in a typical forced-air system. Homes without ductwork can be heated and cooled by mini-split heat pumps.

An entirely different type of heat pump is the geothermal (ground-source or water-source) heat pump. This transfers heat between the ground or a nearby water source to your house. Though this type can be costly to install, it operates very efficiently even in climate extremes.