How to Compare Heat Sources For Cost Effectiveness

This article is based on Ross Trethewey’s energy comparison sheet for fuels at select efficiencies and costs. All tables and their respective data belong to him. Ross Trethewey is the founder and lead engineer of TE2 Engineering and has served as the Home Technology Expert on “This Old House.” You can find a PDF file of his energy comparison sheet at the end of the article.

With colder days ahead, it’s time to start thinking about heat sources. Unfortunately, it’s easy to lose track of the units involved in calculating energy usage. It gets even more complicated when dollars and cents enter the equation, and everybody wants to get the best deal!

Luckily for us, Ross Trethewey of TE2 Engineering is here to help. He’s created a worksheet for calculating the costs and efficiencies of heat sources. His worksheet translates each heat source’s costs per unit to the standard pricing unit of electricity: cost per kilowatt-hour ($/kWh).

In his worksheet, Trethewey compares the costs and efficiencies of electricity, natural gas, oil, propane, wood pellets, and pine cords. He presents the prices per kilowatt-hour ($/kWh), evaluates efficiency in terms of a percentage (% Eff.) or the coefficient of performance (COP, electricity only), and measures the energy output in British thermal units (BTUs) per unit of measure (gallon, therm, etc.).

Energy content conversions

Trethewey presents us with an approximate conversion of BTUs per unit at the top of the worksheet. The table below shows these conversions. Take note of the measurement units. Liquid sources will have their BTUs calculated per gallon. The BTUs of natural gas are derived from a therm (as opposed to cubic feet). Pellets are measured in pounds, and large quantities of wood are measured in cords.

There are a few things we should note about this table.

The table might make us think dry pine has the highest energy output by far (14.3 million BTU per cord). However, a cord has a much greater physical volume than the other units on this chart. To put this into perspective, the volume of a cord is roughly equivalent to 957.5 liquid gallons.

A simple conversion chart does not address a few other variables. How much does a cord of dry pine cost compared to a gallon of oil? Is the efficiency percentage worth it?

In short, not necessarily. Unless you are willing to haul cords of wood from the bed of your truck to your furnace or fireplace every few days, wood is an impractical option for most people. However, we will discuss practicality and other factors later. Let’s look at approximate costs for now.

Costs: per unit vs. per kilowatt-hour

Unit prices vary by heat source. A single therm of natural gas may only cost $1-3, but a cord of dry pine may cost up to $400. Natural gas must be the way to go in a situation like this, right? Not necessarily. A therm is a much smaller unit than a pine cord. So, how can we compare heat source prices in terms of a single common unit?

Trethewey’s worksheet converts the costs of all heat sources to the standard pricing unit for electricity, cost per kilowatt-hour. Just so we’re clear, a kilowatt-hour is the measure of energy usage equivalent to 1,000 watts per hour. A watt is a measure of energy transfer equal to one joule per second. Trethewey’s charts also take efficiency and energy content into account. (Remember the BTUs we mentioned earlier?)

The first chart shows pricing for various utility rates and COP of electricity. Electric resistance heaters have a COP of 1. Air source pumps generally have COPs ranging from 2-4. Geothermal ground source pumps have COPs ranging from 4-5.

This chart is straightforward and sets the tone for the other graphs to follow. The set prices per unit (already in price per kilowatt-hours) go down the left side, and the efficiencies (in COP) are across the top. A heat pump with a COP of 3 and a utility rate of $0.17 per kilowatt-hour will end up costing you just under $0.06 per kilowatt-hour.

The other charts that follow only differ in the cost per unit on the far left side. However, Trethewey provides price per kilowatt-hour equivalents based on efficiency percentages (roughly equal to COP).

Let’s take a closer look at wood pellets and oil. Unsurprisingly, a gallon of oil is cheaper than a ton of wood pellets. However, in terms of cost per kilowatt-hour, the two aren’t too different from each other:

Even though a ton of wood pellets costs more than 100 times the cost of a gallon of oil, the standard prices per kilowatt-hour are quite close (assuming similar efficiency levels). One ton of wood pellets and one gallon of propane both cost about $0.05 per kilowatt-hour. Does this mean that there isn’t a significant price difference between using wood pellets and oil? Not exactly.

But what do those costs mean for you?

The answer is a little different for everybody. Costs vary on location and availability of resources.

To determine the best value heat source, you will want to look up the local costs per unit and find its approximate value on Trethewey’s chart. You can generally find these on utility bills and some government or company websites.

Let’s use the pellets and oil example again to see which one is better from a price standpoint. For example, one ton of wood pellets could cost $234.00 per pound, and oil could cost $2.16 per gallon. Find the closest number to those prices on the table and see how much each heat source will cost you per kilowatt-hour.

According to Trethewey’s tables, you would save slightly more money by using pellets as a heat source instead of oil.

Other factors to consider

Several factors come into play when evaluating the value of a heat source. Even if wood heat sources might save a few bucks annually, many people won’t want to install an expensive wood furnace, deal with a rise in homeowner’s insurance, and inhale air pollutants in their own homes. It doesn’t make sense in terms of personal and monetary value. So, what are the top things to consider?

I reached out to Scott Ranck, Energy Conservation Manager in Florida. He gave me a list of factors to consider when choosing a home heating system. He recommends thinking about the climate zone, your purpose for heating, comfort, concern for the environment, and fuel availability. From a cost standpoint, you will want to consider installation costs and annual fuel costs. Energy goals, especially for reducing waste, are another critical factor. Natural gas from a direct source wastes a lot less energy than fossil fuels for electricity and liquid fuel sources.

Ross Trethewey agrees that comfort and energy goals are major variables. He also says that you have to consider site conditions, “future-proofing” capabilities, and whether the heat source will also power your domestic hot water (sinks, baths, etc.). Even though geothermal ground source heat pumps are becoming a popular source of green energy, some sites do not permit their construction. Many residential lots are too small and did not take future energy systems into account when they were built.

What do some of the experts think?

Scott Ranck weighed in on the topic. Citing Lawrence Livermore National Laboratory’s energy flow chart, he recommends against using fossil fuel-based electricity and fuel oil. “Many wrongly assume electricity is ‘clean energy,’” Ranck says, “in reality, most electricity is generated by burning fossil fuels with 2/3 of the energy wasted.” By contrast, natural gas delivers 92% of its original energy.

Ranck says electric heat pumps work well and are cost-effective in moderate climates, but they have limitations in colder climates. Natural gas furnaces do well in cold temperatures and are cleaner overall. In his experience, natural gas furnaces also tend to provide more comfort than other options.

Ross Trethewey does not believe there is a winner-take-all solution, but he believes that geothermal ground source or air source heat pumps could be the way to go. Oil and propane do not require changes to a building’s electrical service, but they have several drawbacks. Some of these include price volatility, odor, carbon monoxide in the home, on-site storage, and small explosion risk.

Trethewey agrees that natural gas furnaces are a good supplement to heat pumps in cold climates. Natural gas is abundant and cheap in those regions. Heat pumps may struggle in cold temperatures and sometimes require a building’s electrical service to be reconfigured. Still, air source and geothermal ground source heat pumps are efficient, clean, and inexpensive beyond installation costs. All things considered, Trethewey thinks air source and geothermal ground source heat pumps will be America’s future.

Air source and geothermal ground source heat pumps are already gaining traction in the market, even in colder climates. Heat pumps as a whole are becoming more popular in cold areas. Hyper-heat systems can be 100% effective in temperatures as low as 5 degrees Fahrenheit. Dana Fischer of Portland, Maine, used to rely on oil and recently installed a 9,000 BTU heat pump. His heat pump has taken on 95% of his entire heat load.

Fischer has also documented the trend of heat pump installation in Scandinavian countries. At Norway's peak heat pump installation, HVAC techs installed around 100,000 heat pumps per year. The Northeastern USA is following a similar trend to Norway, with Vermont nearly matching Norway's growth rate (albeit for a much smaller population). Homes tend to have better insulation nowadays, and today's more efficient heat pumps can perform a lot better and cost a lot less than heat pumps several years ago.

So, what is the ideal heat source?

I know this is the moment you’ve been waiting for. But really, there isn’t a uniform solution for everybody.

In general, natural gas is likely to be less detrimental to the environment than oil and propane. These options will probably be safer and more practical than burning wood pellets or logs in a home wood-burning system. Some experts swear by heat pumps because they are cost-effective and reliable in most moderate climates. Newer technologies also make heat pumps a cleaner and cheaper energy source even in climates that dip well below zero.

In the end, it is best to use Trethewey’s charts and your own priorities to determine the ideal solution for your situation and location. Although there are plenty of factors to consider, only you can choose the best value option for yourself.

Just for the record, we like heat pumps best, but we are Floridian… so what do we know?


Check out HVAC School's podcast featuring Ross, Richard, and Evan Trethewey: 

Click here to download Ross Trethewey's energy comparison sheet for fuels at select efficiencies and costs: Ross_Trethewey_Energy_Comparison_worksheet



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