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Comparing Fuel Costs

Posted November 15, 2012 01:55 AM by Alex Wilson
Related Categories: Energy Solutions

An easy-to-use online Fuel Cost Calculators lets you compare different fuels in terms of today’s energy costs.

BuildingGreen's online Fuel Cost Calculator—shown here with current Vermont costs for heating oil and electricity and assumptions on how those energy sources are used. Click to enlarge.
Photo Credit: BuildingGreen, Inc.

If there’s one thing that we can predict with certainty about fuel costs, it’s that they fluctuate a lot. That wasn’t always the case. The price of electricity, natural gas, propane, and heating oil were remarkably stable for decades—up until the 1970s.

Since then, prices of most fuels have gyrated wildly, driven by political unrest in some parts of the world, periods of greater or lower demand driven by periods of strong economic growth or contraction, resource limitations (real or perceived), and the situation in China and other parts of this increasingly connected world.

With regulated energy sources (particularly electricity), there is often less volatility, because regulators have to approve changes in pricing.

What does this mean for you as you compare one heating option to another or try to figure out whether to buy a pellet stove this winter? How does oil compare with propane or electricity as a heating source? Those sound like simple enough questions, but it’s actually fairly complicated.

For starters, different fuels are sold in different units. Heating oil, kerosene, and propane are sold by the gallon; natural gas by the hundred cubic foot (ccf) or therm (defined as 100,000 Btus); firewood by the cord; wood pellets and coal by the ton; and electricity by the kilowatt-hour (kWh).

Second, different fuels have different energy densities. According to The Engineering Toolbox (a great source of facts related to energy), a gallon of propane contains 91,330 Btus, while a gallon a #2 heating oil contains 139,600 Btus. Pellets contain 16.5 million Btus per ton, and natural gas contains 950 to 1,150 Btu per cubic foot.

Third, the amount of useful heat obtained from a given fuel depends on how efficiently it’s burned. Combustion efficiency varies widely—from as low as 30% for the worst of the outdoor wood boilers to over 95% for a top-efficiency, condensing gas boiler. Baseboard electric-resistance heat is 100% efficient—since the electrons you’re paying for in the electric current are converted entirely into heat, while heat pumps typically deliver two to three units of heat energy for every unit of electric energy consumed (these can be thought of as 200% to 300% efficiency, though it’s really a coefficient of performance, not efficiency). Note that these electric heat efficiencies don’t account for the “upstream” energy costs of electricity generation, such as the waste heat at a coal or nuclear power plant—but for the purposes of comparing your heating costs, that doesn’t matter.

To further complicate fuel cost comparisons, a fourth factor is how efficiently heat is distributed. With electric baseboard radiators, the heat is produced right in the room, so the distribution is 100% efficient. Baseboard hot water (hydronic) heat is also usually very efficient, though uninsulated hot water pipes running through an unheated basement can lower that efficiency to some extent. With a forced-air furnace and ducts to carry the heat, however, the distribution efficiency can be quite low, especially if poorly insulated, leaky ducts run through an unheated attic or crawl space—distribution efficiency as low as 50% is not uncommon.

To calculate the actual delivered efficiency of your heating system, you have to multiply the heat content of the fuel by the combustion efficiency and by the distribution efficiency. For example, if you have a 78% efficient propane furnace and an average duct system running through an unheated attic (65% efficient distribution), your overall efficiency of delivered heat is just over 50% (.78 x .65)—meaning that only half of the energy you’ve paid for is actually being used to keep you warm!

Finally, to compare different fuels (sold, as described above, in different units), you have to convert the costs to an equal basis so you’re comparing apples to apples. The most common standard is dollars per million Btus of delivered heat. The easiest way to do this is with an online calculator like the Heating Fuel Cost Calculator our company provides.

This allows you to enter the cost for a particular fuel, your heating system efficiency, and its distribution efficiency. The end result is a figure in dollars per million Btu that reflects your real costs of delivered heat and allows you to compare that with other options. Say you heat with oil and pay $3.77 per gallon (the average retail price in Vermont last week), using an Energy Star boiler (83% efficient) and hot water baseboard distribution (98% efficient). Your cost of delivered heat with these assumptions will be $33.42 per million Btu.

By comparison, electric baseboard heat at the current Green Mountain Power rate of 16.9¢/kWh converts to $49.53 per million Btu of delivered heat—that’s 48% higher than the oil option above. Using a heat pump with a coefficient of performance of 2.25 (225% efficient) and ducts fully within the insulated house envelope drops the cost of delivered heat to $22.46 per million Btu (33% less that the oil-heat option). And firewood, at $250/cord burned in an EPA-compliant wood stove (70% efficient), converts to just $16.23 per million Btu of delivered heat (see image). The beauty of an online calculator is that you can quickly and easily vary any of the inputs to compare lots of fuels and heating options.

Keep in mind that energy costs are volatile. It doesn’t make sense to replace an oil boiler with a propane boiler based only on the heating cost savings given today’s rates, since they could change dramatically tomorrow. But if you’re thinking about replacing equipment anyway, you should consider the fuel costs of the alternatives.

Alex is founder of BuildingGreen, Inc. and executive editor of Environmental Building News. He also recently created the Resilient Design Institute. To keep up with Alex’s latest articles and musings, you can sign up for his Twitter feed.

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