There are two main types of gas furnaces: conventional and condensing. Within these two main types, furnaces are further classified as single stage, dual stage or modulating.
Conventional gas furnaces are an older, less efficient type of furnace. In this type, the exhaust gases are expelled before they have a chance to cool. As a result, the heat exchanger inside the furnace is unable to extract as much heat as it could, resulting in potential source heat escaping through the chimney flue. A condensing gas furnace extracts more heat from the combustion process by using two heat exchangers. This allows the furnace to make better use of available energy, with efficiency ratings approaching 98 percent.
Single-stage furnaces have one operating mode. They are either on at full power, or they are off. A dual-stage furnace has a second setting that is less than the maximum heat it can produce. It spends most of the time operating at this setting, which allows for more even heating and less severe temperature swings.
A modulating furnace can control its heat output with even greater precision. Paired with a variable speed fan, this type of furnace adjusts to changing conditions and is able to closely match the desired heat level as set by the thermostat.