Central Air Conditioner efficiency is measured by the Seasonal Energy Efficiency Ratio (SEER). The higher the SEER the more efficient the unit. Units with a SEER of 10 or above are considered high-efficiency; 17 is the highest available as of this writing.

Furnace efficiency is measured by the Annual Fuel Utilization Efficiency (AFUE) rating. The colder the climate and the higher the local utility rates, the higher the AFUE of the furnace should be. Furnaces with AFUE ratings of 80% for non-condensing furnaces and the mid 90s for condensing furnaces are considered high-efficiency; 96.6% is the highest currently available. Condensing furnaces remove water from the combustion exhaust gases.

As furnace efficiency increases, so does the money saved on home heating bills. With an 80% mid-efficiency gas furnace, savings increase by 20% over a standard-efficiency furnace. With a 95% high-efficiency gas furnace, there is only 5% heat loss. That means up to 35% is saved on heating costs when upgrading a standard efficiency gas furnace. Even more can be saved by converting from oil or electric heating to clean, efficient natural gas. (Efficiency ratings for furnaces or boilers compare the amount of heat available in the fuel with the amount of heat actually reaching the house. A rating of 75% for example, means that three-quarters of the available energy has been converted into usable heat. A seasonal efficiency rating tells how well the system performs over a typical heating season.)

Heat Pump cooling efficiency is measured by a SEER rating; a heat pump's heating efficiency is measured as the Heating Seasonal Performance Factor (HSPF). A heat pump with a SEER of 12 or higher and an HSPF of at least 8 is considered high-efficiency.

Room Air Conditioner efficiency is measured by the Energy Efficiency Ratio (EER), which is the BTU/hr output divided by the watts of electricity the unit uses. It basically tells how much heat is coming out of the unit compared to how much electricity is being put into it. The higher the EER, the less electricity the air conditioner will use.

Further reduction on energy costs can be achieved by converting electric hot water heaters to economical, clean, natural gas—sometimes saving 50%.

Natural gas is the most energy efficient, cleanest burning and cost effective of all the major residential energy fuels. Energy experts predict that natural gas will continue to be the most cost effective heating source in the future.

Heating
Energy costs can be reduced by improving the efficiency of the current heating system by converting to a new mid- or high-efficiency natural gas system. An old standard-efficiency gas furnace typically operates at 60% seasonal efficiency. This means only 60% of the heat generated is used to heat a home. The other 40% goes up the chimney—that's 40 cents of every dollar wasted.

Cooling
Today, central air-conditioning or room units that can quickly cool a broiling bedroom, a sticky family room, or other hot spots in a house, can be found for a reasonable price. If the climate in an area does not warrant whole-house air-conditioning, individual units put the cooling where it is wanted, when it is needed. Current models are also up to 30% more efficient than those of a decade ago and now carry up to 5-year warranties.

Matching the air conditioner to the room should be the first consideration. If the unit is too small, it simply will not cool the space. If it is too large, it will cool the space so quickly that the thermostat will shut the unit down before it can lower the humidity level in the space. The result is a cool room that feels damp and clammy. This also applies to whole house air conditioners.

Room air conditioners are "sized" according to their cooling capacity. This is expressed in BTUH (British Thermal Unit of Heating) per hour. The rating can be found on the packaging, in the literature, or by asking the installer. Typically, it ranges from 5,000 BTUH to 25,000 BTUH.

This is a rule-of-thumb guideline only. The following is a simple chart to help understand the correlation between the size of the space to be cooled with the BTUH of the unit: