Thursday, April 07, 2016

Fuel Cost Comparison, Part 3 | Blog | Sensible Energy

Fuel Cost Comparison, Part 3 | Blog | Sensible Energy

Cost Comparison: Gas vs. Oil vs. Electricity, Part 3

In Part 1 of this article, we calculated the approximate prices below for three popular types of heating fuel:

Cost of natural gas = $1.10 for 100,000 BTU
Cost of electricity = $2.93 for 100,000 BTU
Cost of heating oil = $2.50 for 100,000 BTU

In Part 2, we settled on a representative figure for the heating load of a moderate-size house in the Portland metro area with so-so insulation. You might need to add 60,000,000 BTU of heat per hear to this house to heat it adequately.

To finish out our comparison of the cost of heating with gas, oil, and electricity, we also need to talk about the efficiency of the equipment itself.

With gas, plenty of affordable models heat with an efficiency of 90% to 97%, though 80% AFUE models are still available. For comparison purposes here, let's us an efficiency of 90% with gas. Here is how we calculate the cost of heating our representative house with natural gas:

Annual energy required with natural gas = 60,000,0000 BTU / 0.90 = 66,666,667 BTU

Annual cost with natural gas = 66,666,667 BTU * $1.10/100,000 BTU

Annual cost with natural gas = $733

If you heat with oil, you may have an old burner that operates at 70% efficiency or worse, but newer models boast efficiencies above 85%. Let's go with 80% for oil.

Annual energy required with oil = 60,000,000 BTU / 0.8 = 75,000,000 BTU

Annual cost with oil = 75,000,000 BTU * $2.50/100,000 BTU

Annual cost with oil = $1,875

Things really get interesting with electricity, thanks to the heat pump. With electrical resistance heating such as wall heaters and baseboard heaters, you can assume an efficiency of 100 percent.

Annual cost with electrical resistance heating = 60,000,000 BTU * $2.93/100,000 BTU

Annual cost with electrical resistance heating = $1,758

With electric heat pumps, efficiency is actually well over 100 percent, thanks to a clever use of thermodynamics. (That's a blog post in the making, but the short explanation is that heat pumps are so efficient because they move heat from one place to another rather than generating it from energy.) Ductless heat pumps can approach 300 percent efficiency, but to be conservative, let's run the numbers using an efficiency of 250%.

Annual energy required with ductless heat pump = 60,000,000 BTU / 2.5 = 24,000,000 BTU

Annual cost with ductless heat pump = 24,000,000 BTU * $2.93/100,000 BTU

Annual cost with ductless heat pump = $703

Ranked from less expensive to more, then, here's where we ended with annual heating costs for our representative moderate-size, mid-efficiency Portland home:

Electricity with ductless heat pump:           $     703
Natural gas with 90% AFUE furnace:           $     733
Electric resistance heating:                              $ 1,758
Oil with 80% AFUE burner:                               $ 1,875

Now we have a pretty good comparison of the cost of providing 60,000,000 BTU of heat with two types of electric equipment, a 90% AFUE gas furnace, and an 80% AFUE oil furnace. Continue on to the final installment of this article—Part 4—for some final thoughts about applying this information in the real world. 

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Posted by Don on Nov 19th, 2013

Looking to install a heat pump. Currently heating with a oil fired 10 year old hot water boiler. Contractor says electric back up is more efficient than oil. Do you agree?

Posted by Mitt Jones on Nov 19th, 2013

Hi, Don. The scenario you mention brings a few questions to mind about your specific situation. For instance, am I right to assume that you heat with hot-water radiators now? If so, are you adding a ductless heat pump or installing a duct system along with a conventional, unitary heat pump?

Regardless, to answer your question: Based on the analysis we walked through here, electric resistance heating should be marginally less costly to operate than an 80% AFUE oil-fired heat source, and strictly speaking it would also be more efficient. Also, the oil-fired system would require maintenance that electric resistance backup heat would not.

That said, there is expense and energy use involved any time you replace a piece of equipment. If there is a practical way to use your existing oil-fired system as a backup heat source and if you like the idea of keeping it, then that's a perfectly valid choice.

Hope this helps. -- Mitt

Posted by Nick on Aug 27th, 2014

The gas and oil options also have an extra cost which is the electricity used to run blowers (for forced air systems) and pumps (hydronic systems). This extra cost isn't huge but it does add up to something worth considering and could be pivotal in the gas-vs-ductless comparison.

Posted by Mitt Jones on Sep 21st, 2014

Hi, Nick. The air handlers definitely use some energy, which is not factored into the efficiency ratings. On the other hand, this energy use would have to be factored in for conventional, unitary heat pumps, electric forced-air furnaces, gas furnaces, or oil furnaces, so it's a common additional cost.

Unitary heat pumps need to move more air across the heat exchanger to deliver the same amount of heat, and with today's high-efficiency, ECM fan motors, having to push more air results in significantly higher power requirement, so adding the energy usage of the air handler impacts unitary heat pumps more than the other choices. If you're heating with a furnace older than about 10 years or so, your system likely still uses a PSC fan motor, which uses a good bit of energy regardless of the required airflow.

We'll address air handler energy use in a future blog post -- there is a lot to discuss here -- but an ECM fan motor in a typical residential gas furnace might use 80 to 100 watts of power when the furnace is on. It's not a huge additional expense, but it's there.

Thanks for posting your comment!

Posted by Rob on Nov 19th, 2014

Hi Mitt,

I appreciate this blog and the data you've posted, but I'm very curious about historical price data. I was on a local oil delivery company's web site, and they claimed that oil heat has been cheaper than natural gas for home heating for 5 of the last 7 years. Of course, I understand they have a huge bias, but I'd love to see the facts for myself. Maybe a longer term set of data would be nice to look at. Do you have any light you can shed on the subject? My googling is not revealing too much. I did find some historical prices on the eia web site (, but it's not quite what I want. (It doesn't give price per BTU, for one thing, but rather per gallon.)

Much appeciated,

Posted by Mitt Jones on Nov 22nd, 2014

Hi, Rob. I don't know of another source for historical data. Maybe one of our readers will chime in a with a good suggestion. It sounds like there are more issues for you with the EIA data than pricing units, but in case this helps a gallon of oil equates to roughly 140,000 BTU.

Thanks for posting your question1

Posted by Zulikha on Feb 13th, 2015

HI Mitt Jones,

Thanks for this helpful information. I am sure most readers already have heard that deregulation of Gas and Electricity has passed in congress and its just taking time for several states to abide and allow other energy service providers such as Fatah Energy Solutions (powered by Ambit) to offer cheaper rates to their residents

I own Fatah Energy Solutions. We service many zipcodes in many states, the delivery method of how gas and electricity is connected to your home is not changed, thus there are two names on each bill, one is your delivery company and one is your service provider. If you do not see two names on your bill it possibly means that your state has not conformed yet to the deregulation or you have chosen not to shop around for a better rate. - is the website to see if we offer gas and electricity service in your area. visit our website at Learn how you can save money or even get your electricity and gas for free month after month. Many of my customers have save $60 per month on their bill and others are paying nothing at all. Contact us and we will show you how to read your bill and what you are truly getting charged for. Consultation is free, Fatah Energy Solutions.

Posted by BILL SCHNEEBELI on Mar 5th, 2015


Posted by DUFFY HEARRELL on Apr 23rd, 2015

My wife and I bought a home in January, 2015. We now have a pool. I am going to buy a heater for the poo.
I am trying to figure out whether to go with electric or propane? I have both on the property. I have done the research on both and can't make up my mind, for long term???? HELP...


Posted by th on Sep 6th, 2015

Your 9 cents/Kwh is before obama, it's close to double that in the largest populated areas, for most people resistance heat is the worst choice by far, ductless and cold climate heat pumps are expensive up front and many heating contractors except for the northern US actually discourage their use.
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In Part 3 of this article, we calculated the annual heating costs for a moderate-size, mid-efficiency Portland-area home:

Electricity with ductless heat pump:          $    703
Natural gas with 90% AFUE furnace:          $    733
Electric resistance heating:                             $ 1,758
Oil with 80% AFUE burner:                              $ 1,875

These numbers are probably pretty close for a house with all of its ducting in a basement or internal walls. If your ducts run through an unconditioned attic or crawlspace, you should factor in at least a 10 percent loss in efficiency for the gas and oil furnaces. If your duct system is more on the leaky side, the efficiency of your system as a whole could be 20 to 30 percent less than our assumed efficiency here.

Let's say your ducts run through your crawlspace and are kind of leaky. If we estimate overall system efficiency at 75% with a gas furnace, including duct losses, your estimated annual fuel cost would be $880.

On the other hand, a ductless heat pump with a only one or two heads—which is the recommended configuration—may well require backup heat in some areas of of the house, especially during extreme weather. Let's say two thirds of your 60,000,000 annual heating load could be provided by a ductless heat pump and the other 20,000,000 will be provided by electric resistance heating. This would bump up your estimated heating costs for the year to about $1,055.

For most people, the right answer to what type of system to install flows fairly naturally from a few basic questions:

1) Do you already have a reasonably sound duct system?
2) Is natural gas available in your area?
3) Do you need air conditioning?

If your answer to question 1 is yes, then sticking with a ducted system probably makes sense. A natural gas furnace should prove much less expensive to run and is also typically easier to maintain. And you don't have to worry about running out of oil.

To keep things simple (sort of), so far we've ignored another popular electrical heating choice—the conventional, air-source heat pump. If you have a duct system but don't have access to natural gas, then a ducted heat pump system may be just what you need. A ducted heat pump is also a good option if air conditioning is a priority. One caveat: Not all duct systems are big enough to handle the higher airflow requirements of heating with a heat pump. Another: Conventional air-source heat pumps lose efficiency as temperatures drop, and the great majority of installations will require some sort of back-up heat to kick in when temperatures drop much below freezing.

To ballpark annual heating costs with a conventional heat pump, assume an overall efficiency of about 230 percent before duct losses. (To calculate the heating efficiency of a given heat pump, divide the HSPF by 3.413.) That would give you an estimated cost per year of $764 for our hypothetical Portland house.

Installation cost is often a deciding factor, all else being equal. For instance, while you might be able to replace your furnace with a high-efficiency gas model for around $5,000, installing a conventional heat pump might cost twice that. And if you don't already have a duct system, installing one will be pricey—probably $3,000 to $5,000.  

Join The Discussion

Posted by Clzwld on Dec 16th, 2013

Couple of comments.
Not sure of the time as I read the links?
Nice webstie. Very crisp and uncluttered. Easy to navigate and just a pleasure to use.
I'm in Utah and not sure of the timeline on your examples but looking at my gas bill I'm ? pretty pissed at thinking about it.
The current therm rate is 8.64. So with that # it puts lots of stuff out of balance. I do think the true cost per therm to the Gas co is ? 1.40-1.80 per therm. But if at 1.50 we are talking 576% margin. OUTRAGIOUS!

Posted by mzdda on Jun 4th, 2014

I believe you are looking at a decatherm cost. I am in Utah as well and the cost for a dth (decatherm) is $8.50442 which equates to $.8

Posted by mzdda on Jun 4th, 2014

Sorry, that is $.85 per therm

Posted by Rachel Heagney on Mar 2nd, 2015

I couldn't disagree with your post. I however, use ducted heating system at home and so far I see no reason to have it change and/or replace. Thanks to this blog it gives me a clearer idea now

Posted by dokkk on Sep 6th, 2015

لامپ کم مصرف

Posted by kare gallagher on Sep 14th, 2015

i am in a class and could not figure out what the difference between the fuel price/mill BTU and fuel cost/mill btu

Q.# 2: this is the question the average home in ohio uses 70 million BTU per year. approx. how much does it cost to heat with fuel ole for one year? if the fuel oil price is 2.89 per gallon how doe you figure this problem our:
fuel oil 2.89 per gallon , fuel price 20.84 per mill btu, fuel cost 26.72 per mill. btu

Posted by robert on Oct 2nd, 2015

Wondering & almost stressed out about this . Presently have oil furnace with ducts throughout house that was built in 1949. Water tank is also heated by oil. Now oct 2 2015 & where we live here in nfld island canada we have long cold winters. from nov to april. Thinking of converting from ducted oil to ducted forced air electric furnace with electric hot water furnace because oil here is now down to 70 cents a litre & i have outside 200 gal (canadian) oil tank that is due to be replaced in march of 2016 with new regulations at a cost of $2800 canadian where as my furnace is only 10 years old & in perfect condition & my water heater is only 4 yrs old with 6 yrs left on warranty. I was & still am worried by oil leak outside of home & wondered if less risk with electric furnace which will cost me $ 5000 can. to install. Used $3200 can last year for oil which includes furnace protection which covers any problems for year with furnace plan which covers. House is 1200 total sq ft with basement & main floor & top floor with 2 bedrooms . Presently installing new vinyl siding with styro foam with r5 factor under siding & house being old is not 100% factored for insulation but maybe 75% . New electric furnace would be 18 kw which would be around 27000btu,s i think. Am desperate looking for info on way to go. Would appr. reply asap on your opinion. Thanks so much . "BOB".
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