Home Heating Options

What's it take to heat your home these days? Can you save money, be fuel-efficient, or at least be environmental? What makes sense depends on your present system, and the level of your cost, convenience, and environmental concerns. Your particular balance point may vary according to the pricing and fuel options available in your area.

NOTE: While heat pumps serve double duty as air conditioners, they aren't effective in really cold weather, and will not be discussed in this article.

Fuel and Furnace Costs

Winter heating can be a major expense. So, when that first, really big utility bill comes your way each year, do you wonder whether there's a better way? As with most problems, the answer is a resounding...maybe.

Regardless of the type of fuel, new 45,000+ British Thermal Units, or BTU, furnaces and stoves, big enough to heat an average home, cost about $2,000 and up, plus ducting and installation. Naturally, fancier, higher-tech options cost more. If you change systems before the one you have wears out, the payback time may be forever. On the other hand, spare parts and installation tend to be expensive. So, it makes sense to switch to a better furnace and fuel when repairing your old one gets too costly; but, what fuel would that be?

Using typical units for each fuel, Table 1 shows national average costs for home heating, plus my spot survey of fuel costs near five US cities. For apples to apples comparisons, I converted all units from Table 1 to therms, or 100,000 BTUs of heat. I also adjusted for heat output by fuel type and typical furnace efficiencies, which also differ with fuel type. This yields the more useful Table 2: Fuel Costs Per Effective Therm.

Table 1. Fuel Costs Per Standard Unit of Measure¹

Electricity Propane #2 Fuel Oil Coal Wood Pellets Natural Gas Dry Hardwood
$ per KW $ per gal. $ per gal. $ per ton $ per ton $ per therm $ per cord
US avg. 0.09 1.94 2.42 $242 210 1.19 275
Boston 0.08 2.32 2.31 ** 230 1.48 230
Madison 0.11 1.76 2.37 ** 224 1.61 180
Denver 0.05 1.58 ** ** 200 1.28 225
Phoenix 0.12 1.71 ** ** ** 1.11 225
Bellingham 0.07 1.77 ** ** 134 1.21 215

Table 2. Heating Costs per Effective Therm¹

Electricity Propane #2 Fuel Oil Coal Wood Pellets Natural Gas Dry Hardwood
US avg. $2.65 $2.65 $2.19 $1.68 $1.60 $1.49 $1.29
Boston 2.25 3.17 2.09 ** 1.75 1.82 1.89
Madison 3.21 2.41 2.15 ** 1.71 2.01 1.03
Denver 1.41 2.16 ** ** 1.53 1.61 1.29
Phoenix 3.46 2.32 ** ** ** 1.38 1.29
Bellingham 1.96 2.41 ** ** 1.02 1.51 1.23
Miami 3.13 ** ** ** ** ** **
Fuel Efficiency 100 80 80 60 80 80 60

Furnace efficiencies and prices supplied by the Energy Information Administration. Local cost figures supplied by spot checking Home Depot and Lowe’s prices around the country. Coal prices vary widely by local dealer. Coal and oil are not typical options beyond the northeastern states. Wood pellet prices could not be determined in the Phoenix area.

Table 2 shows even with the recent oil price spike that, as of winter 2005-06, average home heating costs remained in their usual order. Dry hardwood was least expensive, then natural gas, wood pellets, coal, #2 fuel oil, and propane, with electricity the most expensive. The average cost of electric heating is more than double that of hardwood per effective therm.

Trends and Anomalies

Table 2 also reflects some standard geographical trends. Coal and fuel oil are mostly East coast options. Because it's expensive, people use propane mostly at rural or semi-rural locations where natural gas is not an option. Electricity is only cheap where there's lots of hydro. The price of petroleum distillates varies regionally. Shipping costs mean wood pellets are a lot cheaper near a pellet mill. These are typical patterns, but there are also some outright anomalies.

For example, there's a pellet mill 175 miles northeast of Phoenix, but Lowe’s and Home Depot outlets around Phoenix don't stock wood pellets at all. Maybe Phoenicians are more concerned about cooling than heating. Then again, natural gas is costly in Boston but propane even more so, and so is dry hardwood at $300 per cord. This makes electric heating reasonable and pellet prices great in Boston. Up around Madison, Wisconsin, hardwood runs less than 1/3 the cost of electricity. Meanwhile, the price of fuels doesn't differ that much in Denver, and electricity beats everything else except hardwood. Given the hauling, stoking, and indoor pollution issues, you might wonder why any Denverite opts for hardwood. However, if cost is an issue, the best choice often depends on where you live.

Two Sample Scenarios

Let's say you live in a semi-rural area near Boston and you're halfway through your propane system's 20 year life span. With the recent petroleum price spike and no city utilities in sight, you think about switching to a wood pellet stove to save money. So, you plunk down $1,750 plus tax for a wood pellet stove, prep the installation yourself with minimal ducting alterations, and bring your new system online at only $2,500—a pretty good deal.

Maybe you burn 800 therms over the heating season. That's about $1,140 savings per year over your old propane system. If you assume that increases in future fuel costs match what you'd earn if you invest that $2,500 elsewhere, you'd reach the payback point for your new heating system in a little over 2 years. Sounds worthwhile—as long as you don't sell your home beforehand. If you do, keep in mind that the rule of thumb of a $.50 gain in market value per home improvement dollar may or may not apply here, depending on how a prospective buyer regards your pellet stove.

Here's a different scenario in Bellingham, Washington—a switch from electricity to pellets, with the same $2,500 replacement cost and a 600 therm heating season. Now the yearly savings is only about $560, meaning that the payback period extends to about 4.4 years. Still that's a lot better than break even, which would be the 10 years remaining on the life of your old furnace.

Keep in mind, though, that future fuel costs and availability may vary.

What’s Green?

Then again, what does environmentally green really mean? The range from clean to not runs something like: gas, propane, wood pellets, hardwood, then fuel oil, with coal at the bottom. While wood pellets produce far less smoke than hardwood, gas and propane produce no smoke to speak of, and fuel oil and coal contribute not only smoke and greenhouse gases, but sulphur as well. Electricity is locally clean but ranges widely by source, depending on whether the power plant that produces it runs on hydro, wind, or more typically by burning gas, oil, coal, or even nuclear fuel rods. The highly-efficient energy production at remote power plants is offset by huge transmission losses, typically 40% while getting it to your home.

Bottom Line

So, when it comes time to replace your heating system, read some articles, like this one and my companion piece on wood pellet stoves. Spot-check prices and outlooks on the US Energy Administration Website, and call your local appliance and hardware dealers, and your local utility company.

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Author: Ray Kamada