Short answerIn Southeast Michigan the best answer for most gas-connected homes is dual fuel: a heat pump that heats efficiently down to roughly 25 to 35°F and a gas furnace that takes over below that. A heat pump alone works with cold-climate equipment and a tight house, but on DTE rates a furnace is usually cheaper below freezing. All-electric makes the most sense where there is no gas line.
What a heat pump is, in one paragraph
A heat pump is a central air conditioner that can run backward. In summer it moves heat from inside the house to outside, exactly like your current AC. In winter a reversing valve flips the cycle and it pulls heat out of the outdoor air, even air at 20°F, and delivers it inside through the same indoor coil and ductwork. Because it is moving heat rather than making it, a heat pump can deliver two to three units of heat for every unit of electricity it uses, which is where the efficiency claims come from. The catch is that the colder it gets outside, the less heat there is to move and the harder the compressor works, so capacity and efficiency both fall as the temperature drops.
The three ways to set it up
Furnace only. What most of Ypsilanti, Westland and Canton has today: a gas furnace for heat, a separate AC condenser for cooling. Simple, cheap to run on DTE gas, no dependence on the electric grid for heat beyond the blower.
Dual fuel (hybrid). A heat pump replaces the AC condenser and sits on top of a gas furnace. Above a set outdoor temperature, the balance point, the heat pump heats the house. Below it, the thermostat switches to the furnace. The heat pump never runs electric resistance backup because the furnace is the backup. This is the configuration we recommend most often for gas-connected homes in our area.
All-electric heat pump. A heat pump with an electric air handler and resistance strip heat as backup, or a cold-climate heat pump sized to carry the load on its own. The only option in homes without a gas line, and increasingly chosen by homeowners who want off gas entirely.
Where the balance point lands on DTE rates
The economic balance point is the outdoor temperature below which gas heat costs less per BTU delivered than heat pump heat. It depends on three numbers: the price of gas per therm, the price of electricity per kilowatt-hour, and the heat pump's coefficient of performance at that temperature. On DTE Energy's residential rates over the past few years, with gas relatively inexpensive and electricity on the higher side for the Midwest, a standard heat pump's economic balance point has sat somewhere in the 30s. A cold-climate heat pump with a better COP at low temperature pushes that down into the 20s. Below the balance point, you are paying more to heat with the heat pump than with the furnace, even though the heat pump is still working.
A dual-fuel thermostat lets us set the switchover, and we usually set it a few degrees above the economic balance point so the furnace handles the deep cold where the heat pump's capacity is also falling. Across a Southeast Michigan winter, roughly 60 to 70 percent of heating hours are above 30°F, so the heat pump does most of the hours and the furnace does most of the hard nights. The split in actual BTUs is closer to half and half because the cold nights need more heat.
What the polar vortex does
Every few winters we get a stretch at minus 10 to minus 20. A standard heat pump at that temperature produces a fraction of its rated capacity and spends much of its time in defrost. A cold-climate heat pump rated to minus 13 or minus 22 still produces useful heat but at reduced capacity and a COP that is not far above resistance heat. In a dual-fuel system, none of this matters; the furnace is running and the heat pump is off. In an all-electric house it matters a great deal: the strip heat is carrying the house at a COP of 1, the electric bill for that week is large, and if the system was sized to the heat pump's capacity at 5°F rather than minus 15, the house loses ground. Cold-climate heat pumps in Southeast Michigan goes deep on capacity at low temperatures.
Grid reliability is the other factor. A gas furnace needs a few hundred watts for the blower and controls, which a small generator or battery can cover during a DTE outage. An all-electric heat pump needs kilowatts. In the ice-storm outages that hit Washtenaw and Wayne County every couple of winters, that difference is the difference between a cold house and a frozen one.
The comfort difference
Heat pump air at the register runs 85 to 95°F, warm but not hot, and it runs for long cycles. Furnace air is 120 to 140°F in short bursts. People used to furnaces sometimes describe heat pump heat as "the vents feel cool," even though the house is holding temperature; it is a steady, even kind of warmth. In a 1990s Saline two-story with a bedroom that was always cold under the furnace, the long cycles of a heat pump often even that out. In a drafty 1920s Ann Arbor house, the lower supply temperature can leave rooms feeling cooler at the same thermostat reading.
Heat pumps also run the indoor coil in winter, which means a whole-home humidifier mounted on the supply side needs to be plumbed and controlled a bit differently. We address that during installation.
Who should choose what
Choose dual fuel if you are on DTE gas, your AC is due for replacement anyway, and you want lower shoulder-season bills, better cooling, and a hedge against either fuel's price. The heat pump replaces the condenser you were going to buy, the furnace stays or gets replaced if old, and the incremental cost over a plain AC is moderate. Federal 25C credits and DTE heat pump rebates both apply to qualifying units and make the premium smaller.
Choose an all-electric cold-climate heat pump if you have no gas (parts of Augusta, Sumpter, Salem and Lodi townships on propane are the clearest case, because propane costs far more per BTU than natural gas and the heat pump wins outright), if you are electrifying by choice, or if you have solar. Size it for the heating load at a low design temperature, keep the strip heat for the worst nights, and plan for the electric service upgrade if the panel is 100 amps.
Keep the furnace plus AC if the furnace is new, the AC is new, or the budget only covers one piece. There is nothing wrong with the arrangement; it is the cheapest to run below freezing on DTE's rates and the simplest to service.
What it costs, in market terms
For typical market pricing in Washtenaw and western Wayne County, swapping an AC condenser for a dual-fuel heat pump of the same tonnage adds a premium over a plain AC that runs from the high hundreds to a couple of thousand depending on efficiency tier, and the full installed system lands in the mid-four-figures to low-five-figures. A cold-climate all-electric system with a new air handler runs higher, into the low-to-mid five figures for a whole-house install. Those are market ranges; a heat pump installation estimate from us is free and specific to the house, the panel and the ductwork. Heat pump installation cost in Michigan breaks the ranges down further.
The honest summary. A heat pump is not a replacement for a furnace in Michigan; it is a replacement for an air conditioner that also heats most of the winter. Pair it with the furnace you already have and you get the best of both. Go all-electric with cold-climate equipment if gas is not an option or you have decided to leave it, and size it for a real Michigan January. Either way, the equipment matters less than the load calculation, the balance-point setting and the install, and we will walk through all three before we quote.