The recent shifts in energy prices have reduced the electric/natural gas cost ratio, RC, from a previous U.S. average of over 5 in 1973 down to 4 in 1981. This continuing trend and lower off-peak electric rates are making electric heat pumps to be economically viable retrofits in more U.S. locations than before. This paper presents findings on conditions and limits for possible operating and life-cycle cost savings. We analyzed the achievable savings with add-on heat pumps by taking into account the furnace/boiler losses during prolonged periods of stand-by and other losses analyzed previously by the HFROST and HFLAME simulation models. Analysis on the basis of Operating Cost Efficiency showed that:

--Add-on heat pump operating cost savings may accrue if R_C, the dimensionless electric to natural gas cost ratio, is below 2.5 to 3.5, depending on heat pump and furnace efficiencies and system sizing.

--The R_C value for which add-on heat pumps showed positive operating cost savings was independent of the furnace draft control air flow or the heat pump size.

--Milder climates accrued savings at a higher (seasonal) percentage rate than colder ones, although savings started (= switch-over point) at very similar R_C values.

--Optimum switch-over temperature was found to be strongly dependent on R_C; the slope was determined to be about 44°C (80°F) for each R_C unit.

--Increasing furnace system efficiency (e.g., by adding as tack damper or a power burner) shifted the R_C value at which savings accrue to a lower value. Increasing heat pump efficiency shifted this RC value to higher values. For buildings with good internal communication with the furnace room, stack damper savings were large compared to those achievable with an add-on heat pump system.

R_C value and climate are the major regional factors that, together with the heat pump cost and reliability determine the potential benefits of add-on heat pumps. Our analysis showed that installation of add-on systems generates life-cycle cost savings for locations with R_G<=2. Local and off-peak rates need to be incorporated into the switch-over control for economic operation.