Heat Pumps
Can a New AC Lower Energy Costs?
By Tom Moor•April 24, 2025
Truth is, upgrading your air conditioning system might feel more like a hassle than a win at first. Between the upfront cost, the installation process, and the time it takes to choose the right system, it’s easy to put it off until your old unit completely gives out. But here’s the good news: investing in a new AC can save you money in the long run.
How is that? Well, most older air conditioners are significantly less efficient than today’s models. That means they use more energy to cool your home which you feel every month when your utility bill arrives. If you’re wondering whether a new air conditioner can lower your energy costs, the answer is likely “yes.” Let’s break down why.
New AC Units Are More Efficient and Can Save You Money
HVAC technology has improved dramatically over the past several years. Today’s air conditioners are designed to cool your home more efficiently, which means they use less electricity to get the job done.
According to ENERGY STAR, upgrading to a high-efficiency air conditioner can reduce your cooling costs by up to 20%, especially if your current system is over 10 years old and your new unit is properly installed. That can translate to hundreds of dollars saved every year depending on your home’s size, location, and how often the unit is used.
The older your current system is, the more likely it’s draining your energy and your wallet. Most units installed just 10 to 15 years ago are well below the efficiency standards set today, and they’ve likely lost even more efficiency through wear and tear.
Why Are New Air Conditioners More Efficient?
A big part of the answer lies in one simple number: SEER rating, or Seasonal Energy Efficiency Ratio. This rating tells you how efficiently an air conditioner converts electricity into cooling power. The higher the SEER rating, the more efficient the unit.
As of 2023, the minimum SEER2 rating for new air conditioners is:
- 13.4 SEER2 in northern states
- In the Southeast and Southwest (where cooling loads are higher), split system air conditioners must meet a SEER2 rating of at least 14.3 for units with a capacity under 45k British Thermal Units (BTUs), and at least 13.8 for those with a capacity of 45k BTU or higher.
Many modern systems go well beyond that, with high-efficiency models reaching SEER2 ratings of 18 or more.
If your current AC was installed before 2010, it might have a SEER rating as low as 8 or 10 – meaning it’s using far more energy to cool your home. Even the lowest-efficiency AC units on the market today are more efficient than those older models.
What About ENERGY STAR-Rated Air Conditioners?
If you’re looking for an easy way to identify energy-efficient cooling systems, start with the ENERGY STAR label. These units meet strict efficiency standards set by the U.S. Environmental Protection Agency (EPA) and are roughly 15% more efficient than standard models.
To qualify for the ENERGY STAR certification, central air conditioners must meet the following minimum efficiency ratings under the newer SEER2 and EER2 metrics:
Split System Air Conditioners
- SEER2 of at least 15.2
- EER2 of at least 12.0
Packaged Air Conditioners:
- SEER2 of at least 15.2
- EER2 of at least 11.5
Are There Rebates for Installing a New AC?
Yes! If you’re looking to upgrade your central air conditioner with a more energy-efficient unit, you may be worried about the higher price tag. However, you could offset some of the upfront cost of a new air conditioner through rebates and tax incentives. These can come from:
- Federal programs (like the Inflation Reduction Act of 2022)
- State and local utility companies
- Manufacturer promotions
Under the Inflation Reduction Act, homeowners may be eligible for federal tax credits for installing high-efficiency HVAC systems that meet ENERGY STAR criteria. Additional rebates or discounts may be available in your area, depending on your utility provider.
To qualify, you’ll usually need to:
- Install a split system central air conditioner that meets SEER2 ≥ 17.0 and EER2 ≥12.0. Packaged central air conditioners must meet SEER2 ≥16.0 and EER2 ≥11.5 to be eligible.
- Choose a certified ENERGY STAR unit
- Work with a licensed HVAC contractor
Always ask your installer to help identify available rebates. Many contractors are familiar with local programs and can walk you through the process.
Signs It’s Time to Upgrade Your Air Conditioner
Still not sure if it’s time to replace your AC? Here are some signs that it may be time to consider a new system:
1. Your Energy Bills Keep Climbing
If your summer electricity bills have been steadily increasing, your air conditioner could be losing efficiency. This can happen due to aging equipment or a lack of maintenance.
2. Your System Is Over 10-15 Years Old
Most AC systems last about 12-15 years with proper maintenance. If yours is older than that, it’s likely past its peak and it may be worth replacing.
3. Frequent Repairs
If you’ve called for AC repairs more than once in the past year, or you’re facing a major repair bill, a new unit might be more cost-effective. The $5,000 rule is a simple guideline homeowners use to decide whether to repair or replace their HVAC system. You multiply the cost of the repair by the system’s age in years. If the total exceeds $5,000, replacement is usually the more cost-effective option.
4. Uneven Cooling or High Humidity
Older systems can struggle to maintain consistent temperatures across an entire home or remove humidity, a sign they’re not working at full capacity.
5. Your AC Uses R-22 Refrigerant
Units with R-22 (Freon) are outdated and expensive to service since this refrigerant has been phased out in the U.S.
Is a New AC Worth It?
If you’re tired of high utility bills and an underperforming system, a new AC might be one of the smartest home investments you can make. While it does come with a higher upfront cost, the long-term savings, increased comfort, and improved energy efficiency are often well worth it. And with today’s incentives and more efficient technology, there’s never been a better time to upgrade.