Heat pump or gas furnace on the Peninsula
Heat pump or gas furnace? It depends.
Neither is right for every house, and some cities now decide part of it for you. Here are both side by side, with the city rules and the rebates, each from its source. Last checked October 2026.
Should I replace my gas furnace with a heat pump?
Not because a rule says you must: a working gas furnace doesn't have to come out. The Bay Area Air District's zero-NOx rules apply when existing equipment burns out and is replaced, and the furnace rule, Rule 9-4, carries a 2029 compliance date and is still under review.
What decides it is your house: the ducts and gas line you have, your electrical panel, what your city asks for when the AC is replaced, and the rebate you would get. Running cost depends on your gas and electric rates, so look at your own bills before trusting a rule of thumb.
Source: Bay Area Air Quality Management District, Rules 9-4 and 9-6 Building Appliances, checked 2026-10-17
Full electric, gas or hybrid: what does each mean for a Peninsula home?
A full electric heat pump replaces both the furnace and the AC with one system, gas keeps a furnace and a separate AC, and a hybrid pairs a heat pump with a gas furnace as backup.
| Option | What it is | Rebates | Worth knowing |
|---|---|---|---|
| Full electric heat pump | One system that heats and cools on electricity, ducted or ductless. | Eligible where the utility offers a rebate. Peninsula Clean Energy pays $1,500 per heat pump condensing unit, or packaged unit, that replaces a gas heater or furnace. | A replacement heating system may not use electric resistance as its main heat source, except in the narrow cases the Energy Code lists. |
| Gas furnace and AC | A gas furnace for heat and a separate AC for cooling. | The heat pump rebates below don't apply to it. | The Air District's furnace rule applies on burnout, with a 2029 compliance date still under review. Menlo Park lets an existing furnace be replaced with either a gas furnace or a heat pump. |
| Hybrid dual-fuel | A heat pump with a gas furnace kept as backup heat. | Doesn't qualify for the Peninsula Clean Energy or Silicon Valley Clean Energy heat pump rebates. | It keeps gas in the house, which is why the rebates pass it by. |
Source: California Energy Commission, 2025 Single-Family Residential Compliance Manual (June 2025), checked 2026-10-17
Do I have to install a heat pump when my AC is replaced?
In some cities, yes. These are the ones in our sources, and the details differ:
- Menlo Park: a heat pump goes in instead of a new AC condensing unit when a project replaces or upgrades an existing AC condenser. It is waived when the extra cost of the heat pump exceeds 20% of the cost of construction, with an Unreasonable Hardship Form filed with the permit.
- Mountain View: its Reach Code, for permits submitted from 2026 on, adds AC to heat pump replacement requirements.
- Portola Valley: a heat pump goes in when an AC condenser is installed or replaced, and the gas furnace stays for now.
- Los Gatos: AC to heat pump replacement requirements apply to existing single-family homes under its adopted codes.
Menlo Park lets an existing furnace be replaced with a gas furnace or a heat pump, and Portola Valley allows a furnace to be replaced like for like. If your city isn't listed, ask us or the city before the outdoor unit is chosen.
Source: City of Menlo Park, 2025 CalGreen: Replacing A/C Condenser with Heat Pump, checked 2026-10-17
Source: City of Menlo Park, Furnace/Air Conditioner Replacement Submittal Requirements, checked 2026-10-17
Source: City of Mountain View, Green Building and Reach Codes, checked 2026-10-17
Source: Town of Portola Valley, Green Building and Building Electrification FAQs, checked 2026-10-17
Source: Town of Los Gatos, Current Adopted Codes, checked 2026-10-17
Does a dual-fuel system qualify for a rebate?
Not at the programs that say. Peninsula Clean Energy's heat pump rebate covers any fully electric system, ducted or ductless, but a hybrid dual-fuel system with gas backup heat does not qualify. Silicon Valley Clean Energy asks you to remove the original gas appliance, and dual-fuel systems do not qualify. Palo Alto Utilities' rebate only applies when the heat pump replaces a gas or other fossil fuel home heater.
San Jose Clean Energy and Redwood City's own program don't address dual-fuel on the pages we read, so ask before you buy.
Source: Peninsula Clean Energy, Home Upgrade Rebates Terms and Conditions (updated May 18, 2026), checked 2026-10-17
Source: Silicon Valley Clean Energy, Home Rebates Participant Agreement, checked 2026-10-17
Source: City of Palo Alto Utilities, Rebate Hub, checked 2026-10-17
Which rebates apply, utility by utility?
Each program has its own terms, and most want the application before the equipment goes in.
| Program | Who it covers | What it asks | Timing |
|---|---|---|---|
| Peninsula Clean Energy | San Mateo, Hillsborough, Burlingame, Belmont, San Carlos, Menlo Park, Redwood City and Portola Valley homes | Pays $1,500 per heat pump condensing unit, or packaged unit, that replaces a gas heater or furnace, with a limit per electric account. Fully electric systems only. | Current terms; see the notice above. |
| Silicon Valley Clean Energy | Los Altos, Los Gatos and Mountain View homes | The original gas appliance must be removed. Dual-fuel systems don't qualify. | Apply before the equipment is installed. After an emergency replacement, contact SVCE. |
| Palo Alto Utilities | Palo Alto | The heat pump must replace a gas or other fossil fuel home heater. | Reserve first. Approved funds are held for up to 120 days. |
| San Jose Clean Energy | San Jose | The EcoHome rebate for heat pumps. | Approved before installation begins. Funds are reserved for 120 days. |
| Redwood City Public Works | Redwood City | The city's own Building Electrification Rebate Program for heat pumps. | Call (650) 780-7464 to confirm eligibility before buying and installing. |
Last checked October 2026. Rebates and funds change, so confirm with the program before you buy.
Source: Silicon Valley Clean Energy, Home Rebates, checked 2026-10-17
Source: City of Palo Alto Utilities, Rebate Hub, checked 2026-10-17
Source: San Jose Clean Energy, EcoHome Rebate, checked 2026-10-17
Source: City of Redwood City, Environmental Initiatives Rebates, checked 2026-10-17
Weighing a heat pump against a furnace?
Call and tell us your city and what you have now, or book a visit online.
Are the state heat pump incentives still available?
Not right now. As of our check in October 2026, TECH Clean California's single-family heat pump HVAC incentives are reserved statewide. BayREN reports that funding for the California Energy-Smart Homes incentives, which include heat pump heating and cooling, is fully subscribed as of April 2026.
Source: TECH Clean California, single-family incentives, checked 2026-10-17
Source: Bay Area Regional Energy Network, find incentives, checked 2026-10-17
How do I check an HVAC contractor before the work starts?
The state licensing board tells homeowners to confirm, before an HVAC system is installed, that the contractor holds an active HVAC licence in good standing. Ours is CSLB licence #1155755, C-20 Warm-Air Heating, Ventilating and Air-Conditioning, under AD Mechanical Services Inc. and its owner, Adlan Cherkesbiev.
Source: Contractors State License Board, HVAC upgrade information for consumers, checked 2026-10-17
Tell us what it's doing. We'll take it from there.
Call and describe the problem: the noise, the smell, the room that never warms up. Or book a visit online.
